"Our view is that Google is the dominant player in this space by a long shot," said Kanter, who added that the firms expect the deal to close by mid 2010. "When you have a market like this with one dominant player, advertisers and others are starving for more competition. If both companies separately don't have the scale to effectively compete against Google, combined they will create a more credible alternative -- and one that will attract more advertisers. At the end of the day, what matters is the effect on competition."
In an e-mail, Yahoo told Computerworld that the deal with Microsoft is aimed at boosting search competition. "We are confident in the merits of the deal and look forward to working with regulators throughout the process," said a Yahoo spokesman.
Microsoft has had antitrust issues of its own over the years in the U.S. and Europe, and Cantor said that probably will spur the U.S. government and European Commission examine the deal closely.
"Microsoft will say they need this merger to defend against this giant, Google," said Cantor. "That's not a credible argument. We're talking about a Microsoft that has more cash resources than almost any business in the world. They've spent years and tremendous resources creating Bing, which has gotten great reviews. They weren't pouring all these millions of dollars into Bing because they think they can't compete."
The antitrust attorney said he also expects that U.S. regulators will force Microsoft and Yahoo to amend the deal so that a third competitor remains, which could force Yahoo to either split off its search arm into a separate business or sell that business to another company.
Microsoft's Kanter said he doesn't foresee splitting up Yahoo.
"It's very premature to suggest there would be any need for any sort of change to the transaction," he added. "What matters at this stage is if this transaction will be good for competition."