Google and Yahoo are in early-stage negotiations with the U.S. Justice Department to avoid an antitrust challenge to their proposed advertising agreement, according to a report Monday night in The Wall Street Journal.
Meanwhile, the Justice Department and a multistate task force are still reviewing the proposal to decide whether to oppose the partnership, which has been criticized by advertising groups as anticompetitive. In September, the Justice Department hired antitrust litigator Sandy Litvack as a consultant in its networking and technology unit to weigh whether the case could be won at trial, say sources.
Under the nonexclusive partnership, which the companies hope to launch later this month, Google would supply Yahoo with some search ads, a move that could increase Yahoo search revenue but that also gives Google even more power in the market. Yahoo expects the 10-year deal to raise revenue by $800 million in its first year and to provide an extra $250 million to $450 million in incremental operating cash flow.
As part of the original proposal, which was made to regulators when Microsoft still had a buyout offer on the table for Yahoo, the Internet search pioneer said it would give the Justice Department three and half months to review the deal before it implements the search advertising partnership.
Faced with that financial challenge and a desire to push the Google ad deal through, Yahoo proposed to regulators that it subject the search advertising deal to a review process similar to one used for major mergers under the Hart-Scott-Rodino Act, said a source familiar with Yahoo.
Google's share of the U.S. search market reached 71 percent in August, compared with Yahoo's 18.26, according to Hitwise's most recent numbers.