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Yahoo, Google delay ad pact

The partnership is under scrutiny by the Justice Department.

October 04, 2008|From the Associated Press

Yahoo Inc. and Google Inc. agreed to delay an Internet- advertising partnership while U.S. regulators investigate whether the deal would hamper competition.

The companies agreed to a brief delay while discussions with the Justice Department continue, Yahoo and Google said Friday. Google Chief Executive Eric Schmidt said in August that the partnership would start in early October.

Competitors, consumer advocates and customers questioned whether the partnership would give Google too much control over advertising and information on the Web.

Increased scrutiny by regulators could limit Google's growth, said Ben Schachter, an analyst at UBS in New York.

"The biggest threat to Google is not competition, but clearly increasing government regulation and legal issues," Schachter said. "Regulatory issues are going to be a primary concern."

No date has been set for the inquiry to conclude, said a person with knowledge of the decision, who asked not to be named because the talks are private.

Google, which handles almost two-thirds of U.S. Internet searches, sought to sell ads alongside some query results on Yahoo's site, splitting the revenue.

Gina Talamona at the Justice Department declined to comment.

If the companies had proceeded before the review was complete, the Justice Department could have sought an injunction, said Blair Levin, an analyst at Stifel, Nicolaus & Co. in Washington. Google and Yahoo have said they don't legally need the agency's approval.

"There is a material risk that the government will either say, 'We're going to court to block this deal,' or 'Unless you make the following changes, we will go to court,' " said Levin, who once served as the Federal Communications Commission's chief of staff.

Shares of Google, based in Mountain View, Calif., fell $3.58 to $386.91.

Yahoo, in nearby Sunnyvale, gained 42 cents to $16.

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