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Bates White provides analysis to DOJ and European Commission concerning the Google-Yahoo! online search advertising agreement

December 8, 2008

Bates White Economic Consulting and Professors Marius Schwartz and Daniel Vincent represented an interested third party concerned about an online search-advertising agreement between Google and Yahoo!. The agreement, announced on June 12, 2008, would have enabled Google to sell and place some of the ads (sponsored links) displayed alongside Yahoo!’s search results in response to a query by a Yahoo! user. With the two companies accounting for over 90% of US search-advertising sales, the agreement raised significant antitrust concerns and was extensively reviewed by the US Department of Justice (DOJ).

Over the summer and into the fall of 2008, DOJ received comments from numerous interested parties. On behalf of one of these parties, Bates White and Professors Schwartz and Vincent developed models to explore the likely competitive effects of the agreement. The analysis concluded that the agreement would have led to price increases through two possible channels by ceding some of Yahoo!’s capacity (i.e., its stock of ad space on search pages) to Google and by causing some advertisers to stop bidding in Yahoo! auctions and instead become more dependent on Google. Quantitative analyses confirmed that the premises of these models were consistent with available data. This analysis was presented to DOJ and several states’ attorneys general offices.

Bates White and Professor Schwartz also collaborated with ESMT Competition Analysis, Bates White’s strategic partner in Europe, on an analysis of the likely effects of the Google-Yahoo! agreement on markets for search advertising in Europe. Professors Schwartz and Vincent and Dr. Hans Friederiszick of ESMT Competition Analysis presented their analyses to the DG Competition of the European Commission.

After over four months of consideration, the DOJ informed Google and Yahoo! that it was ready to file an antitrust lawsuit to block the implementation of the agreement. On November 5, 2008, Google announced it would end the agreement.

Bates White economists who worked on the matter include Federico Mini, Paolo Ramezzana, and George Rozanski.