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Report: EU investigating Google-Yahoo ad deal

European competition agency joins U.S. in probing what effect the Google-Yahoo ad deal could have on the market for search ads.

Updated 3:15 p.m. PDT with newspaper group opposing the deal.

Antitrust regulators in Europe are following in the footsteps of their U.S. counterparts and looking into a proposed advertising deal between Google and Yahoo, Reuters reported on Monday.

The European Competition Commission decided in mid-July to open a preliminary investigation into the deal's potential effects on competition in the European market, Jonathan Todd, a spokesman for European Competition Commissioner Neelie Kroes, told Reuters.

Under the agreement signed in June, Google will provide Yahoo with ads that will run on Yahoo's search site.

Meanwhile, sources say U.S. officials are debating whether to challenge the Google-Yahoo revenue-sharing ad deal, or broaden their investigation into Google's overall dominance in the search advertising market.

A Google spokesman provided this comment via e-mail: "The agreement is limited in scope to Yahoo's U.S. and Canadian Web sites, and it will not have any significant effect on Europe. We are of course co-operating with the Commission and are confident that they will reach the same conclusion."

European Competition Commission officials did not immediately respond to e-mails seeking comment.

Also on Monday, the World Association of Newspapers (WAN) came out in opposition to the deal, saying it would weaken the competition for search marketing between Google and Yahoo and lead to higher prices and less revenue for newspapers who rely on the companies for a significant portion of their online advertising revenue and on the search engines to drive traffic to their sites.

"The upshot is that the deal will force newspapers to become even more dependent on Google than they are today. By handing Google control of up to 90% of paid search and content advertising, Google will exert tremendous power over both newspapers' ability to reach readers and their ability to generate online advertising revenue," the group, which represents 18,000 newspaper titles around the globe, said in a statement. "Perhaps never in the history of newspaper publishing has a single, commercial entity threatened to exert this much control over the destiny of the press."

Meanwhile, the Newspaper Association of America, which is a member of the WAN and repersents more than 2,000 newspapers in the U.S. and Canada, issued a statement of its own, saying its board had taken no position on the proposed Google-Yahoo ad partnership.