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Reason Foundation

DoJ Threats Kill Google-Yahoo Deal

Steven Titch
November 5, 2008, 12:22pm

After the Department of Justice told Google that it faced an antitrust suit if it went forward with a revenue sharing deal with Yahoo, Google walked away, leaving Yahoo and in shareowners, as the Wall Street Journal aptly put, "in the lurch." As it has in the past, the Justice Department made a frontal antitrust assault on a tech industry business idea without really explaining the danger to consumers. Every new idea that challenges ingrained brick-and-mortar models is viewed, a priori, as an exploitation threat. Yahoo's CEO, Jerry Yang, is right when he says "Government does not understand our industry." To be sure, while Google dominated search engine advertising, it does not dominate on-line advertising. And Google is not alone among Internet search engines, it is just extraordinarily good at what it does. For example, Tuesday, if you inputted your address, Google Maps would have pointed you to your polling place. This creative use of search and database integration is what keeps people coming back. And that in turn draws advertisers. Yahoo will likely be rescued by Microsoft, a one-time victim of the antitrust hounds because it had the nerve to give away a Web browser for free. Even so, this summer we had to endure the spectacle of Microsoft execs egging on DoJ by bemoaning the size and influence of Google in the service of its own interests. It was not the company's finest hour. Getting back to the government's case, or lack of one, it's distressing to see such aggressiveness from DoJ without much legal argument. And, as with the Microsoft case, a bunch of state attorneys-general piled on, looking to plunder a deep-pocketed defendant for fines. Neither size, nor market share provides cause for antitrust. It is further regrettable that the case was pressed by a nominal pro-market administration. Barack Obama has not shied from expressing interest in using government mechanisms to enforce industrial policy. Antitrust is one such tool. One hopes vainly for restraint.


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