U.S. Department of Justice closes investigation into Microsoft-Yahoo! agreement

On 18 February 2010 the U.S. Department of Justice announced the closing of its investigation into the proposed Internet search and search advertising agreement between Microsoft Corporation and Yahoo! Inc. (see below p. 9 for the simultaneous clearing of the transaction by the European Commission).

The Department stated that in view of the evidence it has gained, the agreement is not likely to substantially lessen competition in the United States to the detriment of Internet search users, paid search advertisers, Internet publishers, or distributors of search or paid search advertising technology. The agreement is instead seen to allow quicker development of Microsoft’s search and search advertising technology.

By combining Yahoo!’s and Microsoft’s technologies the agreement is seen by customers to create a more competitive rival to Google, the currently dominant company. Customers view Google imposing the most significant competitive constraint on Microsoft and Yahoo!, not one on each other.

The Department also notes the relationship between scale and competitive performance in the search industry. By increasing Microsoft’s access to search queries, the agreement will increase Microsoft’s performance by accelerating automated learning and enabling Microsoft to serve better search results. The greater query data pool may also allow more effective testing and development of new and improved features to search products, which if realized should result in more competitive pressures in the marketplace. [Juha Vesala]