Yahoo, Google Anxiously Await DOJ Alliance Decision

Tuesday will be an important day in Washington, D.C., a day that could change the course of history. At least for Internet powers Yahoo! Inc. (YHOO) and Google Inc. (GOOG). The Deal has learned that's the deadline for the two companies to take their last shot at winning Justice Department approval for their proposed search advertising alliance. But the chances of a last-minute breakthrough appear longer than Sen. John McCain's odds to win the Presidency.

The task for the companies -- to convince antitrust regulators the partnership won't be a threat to competition -- appears daunting, with insiders saying there's no way that a partnership between two of the top three search advertising firms can avoid hurting competition.

According to a source involved in the review process, Assistant Attorney General Tom Barnett told lawyers for the companies last Thursday that negotiations were over, and Barnett said the final proposal must come this week, ideally by Tuesday. The two companies originally drafted a 10-year contract, but had whittled away the scope of their proposed cooperation and entertained DOJ's request to cut the contract to as short as one year. There were also talks over minimizing the amount of searching the companies could cooperate on.

The DOJ could file a complaint seeking a preliminary injunction on the agreement even as the parties assess their options. Antitrust lawyers said the government would have to clear a high hurdle to win a preliminary injunction. But it is even less likely that Google and Yahoo! would want to battle the government in court over such a controversial deal, particularly while the financial market is so precarious, the lawyer said. -- David Shabelman

See Oct. 31 post from Tech Confidential