Microsoft-Yahoo deal seen squeaking by regulators

By Diane Bartz - Analysis

WASHINGTON (Reuters) - Microsoft's 10-year Internet search deal with Yahoo will get a hard look from Obama administration antitrust enforcers but will probably squeak through.

While the partnership knocks the number of competing search engines down to two, from three, antitrust experts said this might have happened anyway. The partners say they will join to create a stronger competitor to Google Inc.

"The question is: is it OK? Is two enough?" said antitrust attorney John Briggs of Axinn, Veltrop and Harkrider LLP.

"I think this deal would be really easy to get through in the Bush administration. They wouldn't even look twice at it," said Briggs. "This administration is going to look twice at it, and probably in the end let it through."

Microsoft's Bing search engine will power search queries on Yahoo's sites. The companies said they expected the deal to be "closely reviewed" by regulators, but were hopeful it would close in early 2010.

Google has 65 percent of the search market, versus Yahoo, with 29.6 percent, and Microsoft's 8.4 percent, according to comScore.

"Without this deal, I think it would be really unlikely that you'd have a market with three robust search providers in 10 years," said Beau Buffier, an attorney with Shearman & Sterling LLP.

Senator Herb Kohl, whose subcommittee oversees the Justice Department's Antitrust Division, said the panel was concerned that advertisers would face higher rates and that there might be less innovation because of the agreement.