Google called off Yahoo deal as DOJ closed in

Google called off its proposed search advertising deal with Yahoo just three hours before the U.S. Department of Justice was to file an antitrust complaint on Nov. 5 aimed at blocking it, according to the lawyer that the government hired to pursue the case.

In an interview with the legal blog AMLaw Daily published Dec. 2, Sanford Litvack -- the attorney who would have been the lead counsel on the antitrust case -- said that Google and Yahoo decided to abandon the proposed deal shortly after DOJ officials informed them of the agency's plans to file the antitrust complaint.

[ In the aftermath of the failed Google-Yahoo deal, Jerry Yang resigns, and the Microsoft-Yahoo dance continues. | Keep up on the latest tech news headlines at InfoWorld News, or subscribe to the Today's Headlines newsletter. ]

Shortly after the deal -- which would have had Yahoo running Google advertisements alongside its own search results -- was announced in June, Google and Yahoo came under fire from large advertiser groups, which charged that the arrangement would diminish competition and raise online advertising prices.

And an antitrust think tank said the partnership could end up as a "black hole that swallows up Yahoo," thus justifying an antitrust investigation.

In addition, the chairman of the U.S. Senate's antitrust subcommittee in October urged the DOJ to closely examine the proposed partnership, noting that it could lead to higher advertising prices and create unfair market conditions. Sen. Herb Kohl (D-Wis.) said at the time that the subcommittee's investigation found that many advertisers and competitors were concerned that Google would control a dominant share of the search advertising market. Under the deal, Yahoo would have less incentive to compete against Google and could opt to exit the market altogether, Kohl asserted.