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Yahoo revisits possible Google alliance

David Drummond, a Google senior vice president and its chief legal officer, said in a blog post that the combination of Microsoft and Yahoo could undermine competition on the Web and called on policy makers to challenge the combination.

Microsoft responded to Google's arguments by saying that a merger with Yahoo would create a "compelling number two competitor for Internet search and online advertising" to market leader Google.

"The alternative scenarios only lead to less competition on the Internet," Microsoft general counsel Brad Smith said in a statement.

Drummond argued that Microsoft's power stems from decades-old monopolies in Windows -- the software operating system used to control most personal computers -- and Internet Explorer, which is the dominant browser consumers used to view the Web.

Microsoft's proposed merger with Yahoo would combine the number-one and number-two suppliers of Web-based email, instant messaging (IM) and portals, which act as starting points for hundreds of millions of users seeking information on the Web.

The Google executive argued in an official blog post that Microsoft could be looking to favour Microsoft and Yahoo services by pushing customers to other Web services they own instead of letting customers elect to use rival services.

"Could a combination of the two take advantage of a PC software monopoly to unfairly limit the ability of consumers to freely access competitors' email, IM and web-based services?" Drummond said in the Google blog.

In making its case for the deal during a conference call on Friday, Microsoft executives said Google -- not Microsoft -- was the one company antitrust regulators were likely to bar from buying Yahoo, based on Google's dominance in web search.

Microsoft executives cited industry data showing Google has a 75 per cent share of worldwide Web search revenue. Collectively, Yahoo and Microsoft attract around 20 per cent of Web searches, Internet measurement firms show.

"Today, Google is the dominant search engine and advertising company on theWeb," Smith said in replying to Google on Sunday. "Google has amassed about 75 per cent of paid search revenues worldwide and its share continues to grow."

A person familiar with Google's thinking said the company believes Microsoft is using the same playbook it did in the 1990s to switch Windows users away from Web browser pioneer Netscape Communications to its own Internet Explorer.

"It is the same old story," the source said.