Google Cancelled Yahoo Search Deal To Avoid “Monopoly” Designation

Fearing a protracted legal battle, damage to its reputation/brand and perhaps even to its stock price, Google abruptly pulled out of the proposed Yahoo paid search deal. It was revealed at the time that the US Justice Department was planning to file an action against the deal. Now in an interview in AmLaw Daily, the attorney spearheading the potential case against Google, Sanford Litvack discusses what happened.

Here are some excerpts from the article/interview:

“We were going to file the complaint at a certain time during the day,” says Litvack, who rejoins Hogan & Hartson today. “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 never-filed government complaint would have charged that the agreement violated Sections 1 and 2 of the Sherman Act, Litvack tells the Am Law Daily in one of his first interviews since the companies canned the venture. Section 1 bans agreements that restrain trade unreasonably. Section 2 makes it unlawful for a company to monopolize or attempt to monopolize trade.

“It would have ended up also alleging that Google had a monopoly and that [the advertising pact] would have furthered their monopoly,” Litvack says.

Litvack acknowledges that Microsoft Corporation and other companies lobbied the department to block the agreement, both publicly and and in private meetings. Litvack insists, though, that Microsoft’s lobbying had no bearing on his recommended course of action or on the division’s ultimate decision.

What’s significant is that the US DOJ effectively considers Google to be a monopoly, although it’s important to note that the question has not been adjudicated and so it’s merely a legal opinion. Google did not want to expose itself to potential regulation on the basis of an adverse finding by a court on the question of whether it was in fact a “monopoly;” hence, the cancellation of the Yahoo deal.

This also likely means that Google’s future deals involving online advertising may be scrutinized much more carefully and closely than they have been in the past.