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July 16, 2008

Yahoo acquisition soap opera goes to Washington

Posted by David Hunter at 2:18 PM ET.

US capitol building Yesterday, the head lawyers for the protagonists in the Yahoo acquisition soap opera headed off to Washington for testimony before both House and Senate committees, but it turned out to be one of the least exciting episodes so far. Brad Smith (Microsoft’s General Counsel), David Drummond (Google’s Chief Legal Officer), and Michael Callahan (Yahoo’s General Counsel) all delivered predictable prepared testimony as to whether Yahoo’s search advertising deal with Google indicated creeping monopoly or was just an ordinary business transaction that would provide better advertising for both consumers and advertisers.

The biggest excitement was provided by Brad Smith quoting Yahoo CEO Jerry Yang:

Yang "looked us in the eye," Smith said, and told Microsoft executives, "The search market today is basically a bipolar market. On one pole there’s Google, and on the other pole there are Yahoo and Microsoft both competing with Google. If we do this deal with Google, Yahoo will become part of Google’s pole, and Microsoft would not be strong enough in this market to remain a pole of its own."

Senators quickly bored in on Smith and Callahan, saying that Yang’s "bipolar" comments, if substantiated, were startling.

"This is pretty explosive stuff," said Sen. Herbert Kohl, D-Wis., chairman of the antitrust subcommittee, who reminded the witnesses they were under oath.

Smith said he repeated "exactly what Mr. Yang said." After the June meeting, Smith recalled, Microsoft chief executive, Steve Ballmer, told him "He (Yang) said there’s only going to be one pole in the market. I guess that would be a monopole, wouldn’t it?"

Callahan was pressed to respond by Sen. Arlen Specter, R-Pa., a former prosecutor. At first Callahan said "it would not be appropriate to comment on Mr. Smith’s accuracy." Then he said he could not recall Yang’s comment.

Good punning on Mr. Ballmer’s part, I’d say, but none of the solons called for storming the gates at the Department of Justice on behalf of either Microsoft or Yahoo-Google so this was merely all for PR value.

Filed under Acquisitions, Brad Smith, Coopetition, Executives, General Business, Google, Governmental Relations, Microsoft, Public Relations, Steve Ballmer, Yahoo

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