Justice Department Eyes Challenging Google's Web Dominance

As BoomTown readers know, I have been adamant that Yahoo’s online ad outsourcing deal with Google is troublesome on a lot of levels. Although, so is government intervention.

From giving advertisers less choice to creating a de facto monopoly to its potential for stifling innovation, the deal–which was struck as a parry to Microsoft’s attempt to buy Yahoo (YHOO) and is set to begin next month–gives me the heebie-jeebies, given the pair control 80 percent of the online search ad market.

Now, The Wall Street Journal is reporting that the Justice Department has quietly hired an outside litigator–former Walt Disney Vice Chairman Sanford Litvack–to contemplate whether the government should consider mounting an antitrust case against the search giant.

The article stresses that government regulators have not yet decided to move forward or whether they would simply focus on the Yahoo deal or cast their net more broadly concerning the huge market share of Google (GOOG) in search.

But, ironically, the move has echoes of the Justice Department suit against Microsoft 10 years ago for antitrust violations. Well-known litigator David Boies was hired as special counsel in that case.

Google has argued since it struck the deal that it keeps competition alive. In a statement to The Journal, the company said:

We voluntarily delayed implementation of this arrangement to give the Department of Justice time to understand it, and we continue to work cooperatively with them. While there has been a lot of speculation about this agreement’s potential impact on advertisers or ad prices, we think it would be premature for regulators to halt the agreement before we implement it and everyone can judge the actual impact.

Still, Google faces increasing headwinds. Major advertisers have been complaining about the implications of its Yahoo deal, including the Association of National Advertisers this week.

In an egregious pot-kettle move, Microsoft (MSFT) has also been very vocal about stopping the deal, including at Congressional hearings in Washington, D.C. in mid-July, which I attended.

Here are video interviews I did with the lawyers from Google, Yahoo and Microsoft at that hearing:

This kind of arguing will likely be taking place for a long time to come now with the Justice Department weighing in.

And even though what the government knows about the Internet could fit on a microchip, it is probably a good idea for regulators to at least poke around in this arena.

Because what I wrote back in April when the Yahoo-Google deal was revealed still stands:

And while it might be a long-cherished dream of Google’s to take over Yahoo search–and also get the chance to return to the scene of the crime, since Google got its first big push from doing Yahoo search, before Yahoo wised up too late–there is simply no way this will be allowed by regulators, nor should it.

Still, you have to almost admire the chutzpah of the search giant in making this move, if the sheer and unadulterated arrogance of it wasn’t so distracting.

Because while Google has almost none of the obvious menacing aggression that characterized Microsoft when it thoroughly dominated tech (although all those beach bikes on its campus inexplicably creep me out a little bit), the company still cannot be allowed to have a monopolistic share of the market.

It is bad for advertisers, it is bad for consumers, it is bad for innovation, no matter how well-intentioned Google is.

And no matter how many flashy moves Google and Yahoo make, it is flat-out wrong for one player to so dominate such an important sector (and I hope regulators look at the email domination in the case of a Yahoo-Microsoft union with a similar gimlet eye).”

Please see this disclosure related to me and Google.