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So now we know why Eric Schmidt, Google's [GOOG
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] CEO, suddenly pulled his plans for an ad-sharing partnership with beleaguered Yahoo [YHOO
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] and it comes courtesy of an interview anti-trust buster Sanford "Sandy" Litvack had with American Lawyer Daily which you can read here.
Litvack left his position at Hogan & Hartson lawfirm to consult with the government because of his expertise in anti-trust litigation. In the article, he said the US Justice Dept. was only three hours away from announcing that the federal government would be bringing an action against Google to thwart the deal.
"We were going to file the complaint at a certain time during the day," he recounts. "We told them we were going to file the complaint at that time of day. Three hours before, they told us they were abandoning the agreement."
The article is illuminating, to say the least, not so much for what the government was going to do to try to block the deal, but for what the government determined based on its exhaustive investigation into the proposal. Justice Department officials were also going to declare that Google had a monopoly in online advertising that such a pact would have extended.
So not only would Google have to endure the wrath of a federal anti-trust lawsuit regarding this deal in particular, but it would likely have to deal with anti-trust attorneys for the foreseeable future regarding any new venture it might want to pursue. At the time, Google CEO Schmidt said that Google was backing off its plans with Yahoo because its advertising partners had expressed concerns over the relationship and what a company controlling 90 percent of the search advertising market might do to rates. But it is clear that Google also had to be extremely concerned about what such an arrangement would mean for its relationship with the US government.
Specifically, Litvack says that the Google/Yahoo partnership would have violated sections 1 and 2 of the Antitrust Act. Section 1 bans agreements that unreasonably restrain trade; Section 2 prevents companies from trying to monopolize trade.
"It would have ended up also alleging that Google had a monopoly and that (a deal with Yahoo) would have furthered their monopoly," Litvack says in the article. In other words, with or without a Yahoo partnership, the government found that Google enjoys a monopoly in search advertising.
And that means even though the deal with Yahoo might be dead, it seems clear that Google is squarely in the sights of the Justice Department. It's a stunning revelation for a company that can least afford a protracted anti-trust battle with the Justice Department. Especially as Google continues to consolidate its power and control in the marketplace, and its only real competitor, such that it was, continues to whither.
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