Google, Microsoft trade barbs over Yahoo bid

Google has made its first official comments on Microsoft's proposed acquisition of Yahoo saying that the deal raises "troubling questions" and that the underlying principles of the Internet stand to be tested by the proposed deal.
The statement refers several times to Microsoft's past regulatory transgressions and indicates that Google could be preparing to fight the deal -- if it is accepted by Yahoo -- by pushing regulators to disallow it.

"Could Microsoft now attempt to exert the same sort of inappropriate and illegal influence over the Internet that it did with the PC?," asked David Drummond, senior vice president of corporate development and chief legal officer at Google in a statement posted on the corporate blog on Sunday.

Drummond also asks if an acquisition could allow Microsoft to "extend unfair practices from browsers and operating systems to the Internet?" and to " take advantage of a PC software monopoly to unfairly limit the ability of consumers to freely access competitors' email, IM, and web-based services?"

A report late Sunday in the online edition of The Wall Street Journal said Google CEO Eric Schmidt called Yahoo CEO Jerry Yang on Friday to offer help to the rival in thwarting the bid. The newspaper, which quoted people familiar with the matter, didn't provide details of the telephone call.

Google has something to fear from a combined Microsoft and Yahoo. The proposed deal, which was announced on Friday and has Microsoft offering US$44.6 billion for Yahoo, would combine the number two and three search engines. The two companies are also leaders in the areas of Web mail and instant messaging so a merger would provide stronger competition for Google in those areas.

But Google has a massive lead in search and the deal wouldn't necessarily lead to an improvement in search results, so Microsoft and Yahoo would still face a challenge to surpass Google's current dominance in this part of the market.

The Google statement got a quick response from Microsoft, which said a combination of the two companies would benefit Internet users by establishing a stronger number two competitor to Google.

"The alternative scenarios only lead to less competition on the Internet," said Microsoft's top-lawyer, General Counsel Brad Smith, in a statement.

"Microsoft is committed to openness, innovation, and the protection of privacy on the Internet. We believe that the combination of Microsoft and Yahoo! will advance these goals," Smith said.

A merged company would still only account for about 30 percent of the search queries run in the U.S. and about 10 percent in Europe, he said.