Google worried about Yahoo-Microsoft merger

In a thinly veiled attack on Microsoft’s $44.6 billion takeover bid for Yahoo, Google Inc. said Sunday that the proposed deal raises troubling questions and urged policymakers to take a close look before approving any merger.

The criticism came in a blog post by David Drummond, Google’s senior vice president and chief legal officer, who said the combination potentially threatens competition, recalling Microsoft’s past run-ins with regulators over monopolistic behavior.

“Could Microsoft now attempt to exert the same sort of inappropriate and illegal influence over the Internet that it did with the PC?” he asked.

The posting represents Google’s first comments about Microsoft’s surprise buyout bid last week, which promises to reshuffle the Internet landscape by bolstering Microsoft’s online advertising business. Google, in Mountain View, and Microsoft, in Redmond, Wash., are fierce competitors, and this is just the latest example of the bad blood between them.

Microsoft quickly responded to Google’s sharp elbows in a statement that defended a megamarriage with Yahoo, in Sunnyvale.

“The combination of Microsoft and Yahoo will create a more competitive marketplace by establishing a compelling No. 2 competitor for Internet search and online advertising,” said Brad Smith, Microsoft’s general counsel. “The alternative scenarios only lead to less competition on the Internet.”

He pointed out that Google has 65 percent share of the U.S. search market and an 85 percent share in Europe. In contrast, he said, Microsoft and Yahoo combined would control 30 percent of the U.S. search market and 10 percent in Europe.

In the blog, Drummond took aim at what he called Microsoft’s “legacy of serious legal and regulatory offenses” related to its Internet Explorer browser and Windows operating system. He questioned whether Microsoft would extend that behavior to the Internet, where it and Yahoo also operate the most popular Web portals.

“Could a combination of the two take advantage of a PC software monopoly to unfairly limit the ability of consumers to freely access competitors’ e-mail, IM (instant messaging), and web-based services?” Drummond asked.

Microsoft has had a number of run-ins with federal regulators, most notably reaching a settlement with the U.S. Justice Department over antitrust claims.

No doubt Google is concerned that Microsoft would somehow make its products more easily accessible, either from its services or the desktop, at Google’s expense. But it did not offer any details about what its fears are, nor did it call on federal regulators to take any specific action, although the comments certainly raise the possibility that Google will lobby for some oversight.

Microsoft took a similar tack against Google with the Federal Trade Commission recently in trying to sink Google’s pending $3.1 billion acquisition of DoubleClick, an online advertising company. The FTC ultimately approved the deal, which is now under review by European regulators.

Yahoo’s board of the directors has said that it is evaluating Microsoft’s merger proposal and added in a posting on its Web site Sunday that it also is looking into strategic alternatives, including remaining an independent company. It said the merger process “is fluid, and it can take quite a bit of time.”

Yahoo declined to comment about the dueling statements from Google and Microsoft on Sunday.

In a letter to employees Friday, Jerry Yang, Yahoo’s chief executive, acknowledged the difficulty of the situation and tried to rally the troops, saying, “We can’t let any of the noise we’re hearing around this situation distract us from our core mission. It’s critical that we continue to focus on running our business, executing our strategy and delivering value to all of our users, advertisers and publishers.”