Few tie-ups in recent times have given rise to as vigorous reactions as the much-publicised advertising deal signed between internet rivals Google and Yahoo.

Although several interested parties, like competitor Microsoft and certain advertising bodies, have decried the arrangement as akin to a monopoly detrimental to the end-customer, not all reactions have been vituperatively negative. (See: Advertisers opposes Yahoo-Google ad deal; authorities may take antitrust action)

The US Justice Department, for example, which had expressed an investigative interest in the deal, has yet to come out with a negative assessment although it had expressed certain concerns. Now, an antitrust think tank has said that the American government, subject to certain conditions, should approve the deal.

The American Antitrust Institute said the partnership makes it more likely that Yahoo would remain independent, which would maintain competition in the market. However, regulators should reshape the alliance between the two Internet companies to foster its benefits to consumers, while also avoiding its anticompetitive risks.

In addition, Google and Yahoo should be prohibited from setting minimum prices and Yahoo should be prevented from using Google ads in place of its own, the AAI said. Finally, the two companies should share revenue based on a fixed formula per click, preventing Yahoo from being rewarded with a higher share for using more Google ads.

The AAI said that it ''found that the publicly available data, including briefings provided by Yahoo and Google, do not rebut the concerns that the alliance as proposed is anticompetitive.''

''Such concerns would arise in any case where the top two firms in a highly concentrated market reach an agreement that potentially gives the dominant firm a market share in excess of 90 per cent. The parties' statements of good intent cannot be relied upon to override the economic incentives that may be generated by this agreement to engage in what may turn out to be anticompetitive conduct,'' it added.

But Google and Yahoo differ on the AAI's conclusions that the deal would be anticompetitive without instituting the organization's recommended changes.

"While we disagree with AAI's conclusions, it is noteworthy that even a group that has opposed most deals acknowledges the pro-competitive elements of our agreement with Yahoo. We believe strongly that this deal is good for competition and will benefit advertisers, Web site publishers, and consumers," according to a statement from Google.

Yahoo made a similar statement, saying, "We believe strongly that this agreement will strengthen Yahoo's competitive position in online advertising and will help to drive a more robust, higher quality Yahoo marketplace for our advertisers, publishers, and users."

"The pro-competitive potential of the arrangement depends on Yahoo remaining in paid search," Norman Hawker, senior fellow at AAI and a professor at Western Michigan University, said in a statement. "The government cannot compel Yahoo to do this; however, the government can insist on legally enforceable requirements that will ensure that Yahoo has an incentive to continue to develop."

Although the deal received support within the country, an international network of advertisers publicly criticized the proposed search-advertising partnership between Yahoo Inc. and Google Inc. on Monday, saying the deal may "have a detrimental effect on competition."

The World Federation of Advertisers, which says it represents 55 national advertiser associations worldwide, said it has asked the European Commission to block the partnership, which is expected to get under way next month.

Although the advertising partnership will only affect Web sites in North America, it is under review by antitrust regulators in Europe and Canada in addition to the US Justice Department and several state attorneys general.

The WFA said in its statement Monday that even though the partnership will only cover Yahoo sites in the US and Canada, it "believes the effects will be global."
In particular, the WFA said the deal could result in price increases for advertisers, and a reduced number of available options for search advertising.

"The substantial benefits for both parties in the US and Canada will almost certainly reduce their incentive to compete in other markets as they do today," the WFA said. The body says it represents roughly "90 per cent of global marketing communications," worth roughly $700 billion annually.

Google CEO Eric Schmidt recently told reporters at the company's Silicon Valley headquarters that Google planned to go ahead with the deal as planned in October. Schmidt said the company believes it doesn't need government approval to go ahead with the agreement. In addition, he said the company believed Microsoft is behind attempts to convince regulators to nix the deal. (Also see: Google to start advertising on Yahoo sites from 11 October)