Microsoft's top lawyer said that a tentative agreement with Brussels announced earlier Wednesday could potentially allow the software maker to move out of the regulatory crosshairs, perhaps paving the way for regulators to shift their attention elsewhere.
"It's important for us to get closure in Europe on issues that have obviously been controversial for over a decade," General Counsel Brad Smith said in an interview. "Today's decision takes us an important step closer to doing that."
Smith
(Credit: Microsoft)Microsoft initially took a much different approach to the European Commission's assertion that the inclusion of a browser in Windows violated antitrust law. The company had initially proposed just stripping out the browser from Windows 7 entirely, leaving users the prospect of trying to get a browser on their own. The software maker eventually backed down after indications that that approach was unlikely to fly.
While not final, Microsoft's moves would appear to resolve all of its outstanding regulatory issues with the Commission and were greeted warmly by regulators on Wednesday.
Although most of the early attention focused on the agreement around a browser "ballot screen," Microsoft also announced on Wednesday an agreement around product interoperability. Under that deal, a 10-year commitment by Microsoft, the software maker agrees to publish communication protocols and adopt certain standards as part of Windows, Windows Server, Office and other high market share products. Companies could also purchase for 5,000 euros a warranty that would subject Microsoft to court oversight and monetary penalties if it doesn't live up to its commitments.
Smith said that the approach Microsoft took with regard to interoperability was designed to adopt methods that Nellie Kroes, commissioner for competition, had outlined in a speech last year for how companies with high market share products should behave.
"I actually think this in effect implements the model that the Commission has been advocating," Smith said. Moreover, he said it is a model that other software companies should pay attention to, he said, noting that there are lots of companies that have high market share. He noted that Google has 78 percent of the paid search market and IBM has 100 percent of the mainframe market, while Adobe also has dominant positions in certain areas, such as Photoshop.
"It is important we believe to create a level legal and regulatory playing field," Smith said. "Everyone that has a high market share needs to respect the same set of rules. I think a number of these rules are likely to be applicable to other companies and other products."
Settling now with Brussels also could help Microsoft in its effort to win approval for its search deal with Yahoo, Smith said.
"This certainly isn't going to hurt when it comes to the Yahoo-Microsoft agreement," he said. "It's not necessarily going to make a huge difference. We didn't feel a particular step was needed to help it along."
Microsoft is in the process of trying to ascertain whether the deal needs approval from Brussels or from individual European antitrust authorities. It also needs approval from U.S. regulators, who have asked for more information on the deal.
The U.S. Department of Justice has furthered its investigation into the proposed search engine deal between Microsoft and Yahoo by asking both companies to provide more information.
The two companies received an additional request for information earlier this week as expected, Microsoft spokesman Jack Evans told CNET News. He said he couldn't reveal the specifics of the request, citing it as a confidential inquiry from the Justice Department. But he said Microsoft is in the process of providing the requested information.
Yahoo spokesman Adam Grossberg also confirmed to CNET News the Justice Department's request. He couldn't comment on the specifics either but added that Yahoo is cooperating fully.
"We confidently believe the information we'll provide will confirm that the deal is not only good for Yahoo and Microsoft, but also good for advertisers, publishers, and, ultimately, consumers," said Grossberg.
The request for additional information doesn't come as a surprise to either Microsoft or Yahoo.
Under the Hart-Scott-Rodino Act, mergers or other business deals that meet certain requirements must be reviewed by the government before they can close. Companies have to file the necessary paperwork with the government and then wait 30 days before given clearance to move forward. In some cases, the government requests additional information before making a decision.
Both Microsoft and Yahoo were anticipating a close review of the deal given its scope, said Evans. At a press conference when the deal was announced, the companies said the review would be a matter of months, not weeks, taking it through the fall.
Despite the Justice Department's request for more details, both Microsoft and Yahoo are hopeful the deal will close as expected in early 2010.
Still, the Justice Department is only one battle. The agreement may also require regulatory clearance by the European Commission, which has been tough in its current probe of Oracle-Sun and in past probes of both Intel and Microsoft. Microsoft is currently trying to determine what formal notification, if any, needs to occur in Europe.
But a Microsoft-Yahoo search combination may be seen as less of a competitive threat in Europe where Google enjoys a 90 percent share of the search engine market versus its U.S. share, which ranges anywhere from 63 percent to 72 percent based on recent estimates.
Yahoo and Microsoft announced the deal in July, under which Bing's search engine technology would power Yahoo Search, and Yahoo would sell ad space next to search results, with the two companies splitting the sales.
Internet companies and privacy experts will appear before a Congressional subcommittee later on Thursday to discuss the privacy implications of behavioral advertising.
Representatives from Google, Yahoo, and Facebook will appear before two subcommittees of the U.S. House of Representatives' Committee on Energy and Commerce to discuss behavioral advertising, or the practice of tailoring Internet ads to a Web surfer's behavior on a particular Web site. In order to do that, Internet companies have to collect personal data, and members of Congress as well as privacy advocates are interested in hearing more about how that data is being handled.
Such ads have been contentious in the past, and it seems a new session of Congress wants to take a fresh look at the practice.
Yahoo and Google both plan to explain how their privacy policies work with respect to the data collected through behavioral advertising. Yahoo's Anne Toth said Wednesday she will emphasize that the company has introduced a plan (that it said won't be fully complete until 2010) to remove identifying links to personal data after 90 days and has taken steps such as linking one's decision to opt out of this type of ad serving to their Yahoo account, rather than a cookie.
Google will discuss similar measures, also pointing to the benefits of serving relevant ads--rather than random ads--to Web surfers, according to a copy of the prepared testimony submitted by Google's Nicole Wong, deputy general counsel.
But privacy activists such as Princeton University's Ed Felten, who is also the director of the Center for Information Technology Policy, will emphasize how many different parties have access to the data gathered through behavioral advertising, and the technical barriers that those parties can choose to erect around their data if they choose.
The hearing is supposed to begin at 7 a.m. PDT, and six speakers are expected to appear.
Updated 4:05 p.m., with comment from Yahoo.
A Department of Justice probe into hiring practices among high-tech firms appears to have stretched out to include some of the best-known names in the industry.
The Washington Post first reported the story on Tuesday evening, listing Apple, Yahoo, Google, and Genentech as among the companies that were being looked at. Microsoft and Intel are also believed to have received requests for information, according to sources as well as to a New York Times report.
to The issue is believed to center on whether certain companies agreed not to hire from one another.
Microsoft, Apple, Google, and Intel all declined comment. Late on Wednesday, Yahoo confirmed it had received an inquiry from the government "a while ago."
"We have been contacted (by the DOJ), and we are cooperating," A Yahoo representative said.
Word of the probe took some in the tech industry by surprise, given several prominent cases of tech firms suing one another over worker poaching. Two of the companies said to be involved in the probe--Microsoft and Google--waged a fierce, multistate court battle after Microsoft executive Kai-Fu Lee was hired by Google. (The two sides eventually settled.)
More recently, Apple and IBM duked it out after Apple hired IBM executive Mark Papermaster. He eventually took up work at Apple, but only after a lawsuit and eventual settlement. IBM also sued over a recent Dell hire, David Johnson.
CNET News' Tom Krazit contributed to this report.
Yahoo is in yet another sticky situation as a result of a canceled advertising deal.
Digital media company DivX on Monday filed a lawsuit against Yahoo because the search company backed out of a two-year advertising agreement the companies reached in September of last year. DivX said the canceled deal will hurt its revenues.
Under the terms of the agreement, consumers who downloaded DivX video software tools were offered a co-branded version of the Yahoo toolbar as well as a version of Internet Explorer 7 with other Yahoo services. Before the Yahoo agreement was reached, DivX had a search tools deal with Google.
DivX filed suit in California Superior Court in Santa Clara County, seeking damages and specific performance under the agreement from Yahoo. In light of Yahoo's decision to back off the deal, the company adjusted its 2008 revenue estimates from a range of $95 million to $97 million to range of $90 million to $92 million.
Yahoo said in a statement the two companies have been working to restructure the toolbar distribution agreement but could not reach a resolution.
"Yahoo is disappointed with DivX's decision to pursue legal action rather than renegotiate this agreement," the statement said. "We intend to vigorously defend ourselves in court, but will reserve further comment until we've had an opportunity to review the suit."
The lawsuit comes just two weeks after Google backed out of an advertising deal with Yahoo, which would have brought in substantial revenue for Yahoo.
In theory, antitrust law helps foster competition. In reality, politically connected companies sometimes use it to bludgeon competitors and boost their own bottom line, as soon-to-be former Yahoo CEO Jerry Yang learned the hard way.
Yang had lent his prestige and the weight of his position to the proposed Google-Yahoo advertising deal, in part as an alternative to being gobbled up by Redmond, and in part as a way to get an easy $800 million a year in additional revenue.
When that proposed deal unceremoniously ended earlier this month--thanks to Microsoft's take-no-prisoners lobbying efforts in Washington, D.C., and a credulous Justice Department--Yang's time as CEO did too.
What a change. Back in the late 1990s, when Microsoft was busy fending off hordes of government antitrust lawyers, the company took a remarkable step: it actually asked Congress to reduce funding for the Justice Department's antitrust division.
That was then. Now, Microsoft has realized that spending money on antitrust lobbyists can pay off handsomely. Morality aside, that's an ROI that Warren Buffett would envy.
Consider the numbers: from February 1, 2005, and November 17, 2005, Microsoft spent $11.99 million on lobbyists, according to financial disclosure documents filed during that time. During that same period in 2006, the figure was $13.95 million. In 2007, it was $13.8 million.
But between the announcement of the Yahoo deal on February 1, 2008, and Monday, Microsoft's lobbying spending zoomed upward to $24.72 million.
Not only would that be a remarkable increase in any year, but it's especially notable during a time this year during which Congress has been quiescent on technology-related legislation. The figure also doesn't include money spent on public affairs firms and lobbyists who don't fit the relatively narrow legal definition and are not required to register with the government. (The numbers do include some spending that took place earlier than the February-November date range and was reported during that period.)
In return for millions of dollars distributed to Washington insiders, Microsoft could save billions on an eventual Yahoo purchase. Yahoo shares closed at $28.38 on February 1, the day the bid was announced, and at $10.63 on Monday. Even taking into account the market's overall fall in share prices, Microsoft may save billions by shoving Yahoo into a corner and eliminating its options.
One Redmond technique involved what's called astroturfing. CNET News reported in August about how anti-Google coalitions-one example was the American Corn Growers Association's sudden interest in the intricacies of online advertising and competition policy appeared immediately after Microsoft hired a secretive lobby firm called the LawMedia Group. Because LMG specializes in faux grassroots lobbying efforts, its efforts to sink the Google-Yahoo deal are not subject to disclosure requirements. Neither are funds spread around through trade associations.
(To be sure, Google is no saint. It tried to hamstring its Washington state rival by lodging a fanciful antitrust complaint about Windows Vista desktop search and tossed around terms like "illegal influence" when Microsoft was courting Yahoo earlier this year.)
What's odd is that the Bush administration took Microsoft's arguments about Yahoo's partial outsourcing seriously. This is the same group of antitrust bureaucrats who, along with President Bush's appointees over at the Federal Communications Commission, approved a long list of actual mergers with nary a word: XM and Sirius; Sprint and Nextel; AT&T and SBC; Verizon and MCI; and AT&T and BellSouth.
"The Bush administration has apparently never seen a telecommunications merger it didn't like," Rep. Edward Markey, a Massachusetts Democrat who leads the House Energy subcommittee on telecommunications, said earlier this year, according to the International Herald Tribune. Yet the Justice Department threatened Google and Yahoo with a lawsuit and even hired an outside attorney to run the show.
Another option for the Bushies would have been encouraging a kind of legal self-help. If Microsoft had truly believed that the Google-Yahoo deal was dodgy, it didn't need to run to Washington. It could have filed a private antitrust lawsuit instead. Redmond knows firsthand how this works: Sun Microsystems filed a private antitrust suit that Microsoft settled for $1.95 billion in 2004.
While that's not a perfect solution, it does force businesses to foot the bill for their own lawsuits, as opposed to pressuring the Justice Department to spend taxpayer dollars on a trial that could take years to resolve.
All of this should be a lesson to President-elect Barack Obama, whose campaign platform pledged to "reinvigorate antitrust enforcement" and "step up review of merger activity." He once complained to the American Antitrust Institute that "the current administration has what may be the weakest record of antitrust enforcement of any administration in the last half century."
If a supposedly weak Republican administration is so antitrust-hostile to business deals in Silicon Valley, imagine what a "reinvigorated" Obama administration will be willing to do.
Disclosure: the author is married to a Google employee.
See also:
• Yahoo CEO Yang to step down
• Yahoo's ultimate search: A new CEO
• Yang's travails: A Yahoo timeline
• A pity for Yahoo that John McCain didn't win
• Jerry Yang memo to staff about stepping down
• Microhoo revisited: Would it be a search-only deal?
Caption: Results for a search of soccer star Diego Maradona on Yahoo Argentina only bring up news results and a notification that the search has been filtered.
If an Argentine sports fan tried searching Yahoo Argentina for one of his country's most beloved athletes--soccer star Diego Maradona--these days, he'd be out of luck.
Both Yahoo and Google are locked in a legal battle with dozens of fashion models and other public figures like Maradona over whether the Internet companies should have to censor search results relating to those persons' names.
The result so far: since last year, Internet users have been left with abbreviated search results from Yahoo Argentina and Google Argentina, as a result of temporary restraining orders handed down by Argentine judges.
The restraining orders against Google and Yahoo mean the search companies must censor search results from their Argentine sites for information about the plaintiffs, such as their names. The court orders do not apply to the U.S. sites Google.com and Yahoo.com.The move effectively holds the search companies responsible for content on other Web sites, a legal maneuver that would not be possible in the United States or the European Union, according to a Google representative. In the United States, federal law generally says that search engines are not responsible for the content of pages they index.
Google first received an injunction to block references to the individuals on its Argentina search engine in mid-2007, after refusing to do so voluntarily, said Alberto Arebalos, Google's director of Latin America global communications and public affairs. A group of about 70 fashion models, represented by the same lawyer, initially asked the Internet company to block all search results with their names with the intent of blocking pornographic sites that used the models' pictures. Google responded that it would only block specific problematic links, provided it could notify users, Arebalos said.
The matter was taken to court, and judges in Argentina have so far sided with the models. Other public figures--including Maradona and Judge María Servini de Cubría--have in recent months sought out the same lawyer to successfully block search results about them on Google and Yahoo as well.
The move amounts to a class action suit against the Internet companies, although there's technically no such thing as a class action suit in Argentina. The lawyer representing all the plaintiffs, Martin Leguizamon Peña, has sought damages between 100,000 and 400,000 pesos for his clients (about $30,000 to more than $121,000).
Both Google and Yahoo have unsuccessfully appealed the restraining orders and are now complying with them while the underlying lawsuits filed by Peña's clients are pending.
Peña probably "thought we'd make a deal out of court, but we don't want to do that because it's not a good deal," Arebalos said. "We will fight because we think this is a good fight."
Multiple restraining orders have been filed for some individuals. In some cases, the restraining orders require the search engines to censor results for certain keywords or URLs. In other instances, however, they call for broad restrictions such as censorship of "scandalous material."
Such broad restraining orders compelled Yahoo to remove all search results for certain plaintiffs such as Maradona, the soccer star. A search for "Diego Maradona" on Yahoo Argentina brings up only news results and a notification that--translated from the Spanish--reads, "On the occasion of a court order sought by private parties, we have been forced to temporarily remove some or all of the search results relating to it."
The notice was implemented early this week, according to Yahoo representative Tracy Schmaler, after it was engineered into the search results.
Arebalos said Google is appealing the court orders because it amounts to "censorship if we block all references to a person, because a lot of those can be lawful."
"Our position always has been we are not going to be the censor of the Internet," Arebalos said. "If you go to a newsstand and tell the owner he's responsible for reading every paper and finding the articles that could impact somebody, that doesn't make any sense. We are the newsstand."
While laws in the U.S. and E.U. make it clear that whoever posts content to the Internet is responsible for it, Arebalos said, no such laws exist in Argentina.
Google is working with Argentine government officials and the congress, Arebalos said, to fill the "legal vacuum" that allows for Internet companies to be held responsible for content. Other Latin American countries, such as Chile and Colombia, have made progress on that front, he said.
Arebalos said he did not know of any other cases in which a search engine had been asked by an individual to censor search results with his or her name. Searches have been limited in some other countries, however. German law, for instance, has forbidden searches for neo-Nazi material, and in France, auction sites have been barred from allowing the sale of Nazi memorabilia. In the U.S., copyright holders have forced Google to remove search results.
Google and Yahoo recently joined forces with other companies and human rights groups to create the Global Network Initiative, a framework for communications technology companies to follow in response to laws in various countries that may interfere with an Internet user's privacy or freedom of expression. The guidelines are intended for these types of situations, Schmaler said, and encourage principles such as transparency when complying with local law.
CNET's Declan McCullagh contributed to this report.
Companies including Yahoo, Google, and Microsoft on Tuesday joined with human rights groups to launch an initiative aimed at protecting free expression and privacy on the Internet on a global scale.
The Global Network Initiative will provide guidelines for communications technology companies to follow in response to laws in various countries that may interfere with an Internet user's privacy or freedom of expression. Members of the initiative have agreed to ensure that their activities and business operations reflect the principles it aims to protect.
"These principles provide a valuable road map for companies like Yahoo operating in markets where freedom of expression and privacy are unfairly restricted," said Yahoo CEO Jerry Yang. "Through the collective efforts of industry, advocates, and government we will continue to see technology and the Internet as a way to improve people's lives."
Internet companies have come under fire for their operations abroad. Politicians roundly criticized Yahoo for its role in the imprisonment of Chinese dissident journalists. Lawmakers have also assailed Google for its China policies.
The new initiative is supported by human rights groups including Human Rights First, the Committee to Protect Journalists, Human Rights Watch, and Human Rights in China. The process of creating the initiative was facilitated by the Center for Democracy and Technology and Business for Social Responsibility.
The initiative's Web site, www.globalnetworkinitiative.org, will go live on Wednesday.
Thanks to tech and multimedia companies like Yahoo and the Politico, the traditional grandstanding of the Democratic and Republican conventions will no longer be limited to audiences of political insiders.
The two organizations announced Monday they will be partnering with traditional newspapers to host public forums at both the Democratic National Convention in Colorado and Republican National Convention in Minnesota. Both Yahoo News and Politico will make the forums available online.
There will be eight public breakfast panels, which according to a press release, "will set the tone for each day of the convention." The panels will be moderated by editors from Politico and the host newspapers.
The Denver Post will work with Yahoo and Politico to host the forums during the August 25-28 Democratic Convention in Denver, while The St. Paul Pioneer Press will help facilitate the events at the Republican Convention in Minnesota from September 1-4.
"Our newsmaker breakfast series will provide a fresh perspective from this year's cast of political players and give Yahoo users a unique peek behind the curtain of America's electoral process," Alan Warms, vice president and general manager of Yahoo News, said in a press release.
In response to a Congressional inquiry about targeted advertising, Yahoo announced Friday that consumers will be able to opt out of customized advertising on Yahoo.com.
The news comes one day after Google announced the addition of DoubleClick ad tracking across its sites with an opt-out capability for users.
The House Energy and Commerce Committee on August 1 sent a letter to 34 companies about concerns that privacy protections already in place for consumers may not be applicable to customized advertising. The letter asked the companies to respond to 10 questions about their targeted ad policies, including, "If your company did not specifically or directly notify affected consumers of the opportunity to opt out, please explain why this was not done."
In its response to that question, Yahoo said, "Yahoo has a long history of providing clear notice to our users via our Privacy Policy and is always exploring additional avenues for enhanced notice."
In its response letter, the company also expounded on the benefits its customized ads bring to customers. It noted that "consumers have and continue to respond strongly to Internet products and services that are customized to their interests."
In the corresponding press release, Anne Toth, Yahoo head of privacy and vice president for policy, said, "Yahoo strongly believes that consumers want choice when customizing their online experience and they have also demonstrated a strong preference for advertising that is more personally relevant to them."
Yahoo's letter argued that targeted ads not only enhance users' experience with more relevant ads, but also support "a diversity of voices on the Internet."
"Bloggers or families who want to occasionally post content are generally subsidized by the advertising business model through free or reduced-cost hosting, and also through the ability to have text, graphical and even video ads appear on the site," the letter says. "This ability to make money while sharing views increases the number of viewpoints that can be taken in public debates, and surely enriches our public conversation as a nation and as a global society."
Jeff Chester, executive director of the Center for Digital Democracy, called Yahoo's description of the benefits of targeted ads "disingenuous and self-serving."
"No one is saying that there can't be targeted marketing," he said, "but individual users should have the right to decide what information can be collected and how it can be used for online targeting."
Chester said Yahoo's new opt-out option was likely in response not only to the letter from Congress but also to the Justice Department's review of Yahoo's advertising deal with Google.
The Center for Digital Democracy filed a complaint in 2006 that spurred Congress' review of targeted advertising, according to Chester. He said Congress should prompt the Federal Communications Commission to create a national policy calling for an opt-in standard. "We can have some reasonable safeguards," he said.
By the end of August, users should be able to access Yahoo's opt-out option at the Yahoo privacy center, which is linked on most Yahoo network pages. The opt-out will also be available through a link in public service announcements found in online ads throughout the Yahoo network. Customers can already opt out of customized advertising served by Yahoo on third-party networks.
