Microsoft says Yahoo! Japan deal with Google is 'anti-competitive'
Microsoft has criticised Yahoo! and Google’s search partnership in Japan, saying it will give Google total control of all personal search information in the country.
Brad Smith, Microsoft’s senior vice president and general counsel, said of the new partnership, which was announced yesterday: “This agreement is even more anti-competitive than Google’s deal with Yahoo! in the United States and Canada that the Department of Justice found to be illegal.
The 2008 deal would have locked up 90pc of paid search advertising.
“This deal gives Google virtually 100pc of all searches in Japan, both paid and unpaid. It means there will be no search competition in Japan and that Google will end up controlling all personal search information for all Japanese consumers and businesses.”
Smith was referring to a US advertising agreement Google and Yahoo! were contemplating in 2008, which they then abandoned after the DOJ said it would stop the deal on anti-trust grounds.
Yahoo!’s search deal with Google in Japan, surprised many in the technology world, as Yahoo! had its far-reaching 10 year search partnership deal approved by both the US and European authorities earlier this year.
However, Yahoo! Japan is not controlled by Yahoo! Inc, as it only owns a 35pc stake. Softbank Corp, a Japanese mobile phone and internet service provider, owns the majority of Yahoo! Japan, with a 40pc stake.
A Yahoo! spokesman said: “Yahoo! Japan announced that it has chosen to implement Google as its backend algorithmic search engine and paid search infrastructure.
“Yahoo! Japan made this decision as an independent and separate publicly traded company, in which Yahoo! holds a 35pc equity interest… This decision by Yahoo! Japan does not impact the global rollout and implementation of the Yahoo! search alliance with Microsoft, except in the Japanese market.
"We remain confident in our transition plans for the search alliance, are driving innovation in the user experience around search on the Yahoo! network, and continue to be committed to our alliance with Microsoft.”
The Initiative for a Competitive Online Marketplace (ICOMP) has also criticised the deal citing a “concern for the healthy development of the Japanese online market”.
The organisation’s statement said: “ICOMP believes that the announcement raises major antitrust issues and that concerted efforts should be made to block its approval…There should be very great concern that Google would achieve a near-monopoly position in Japan, given the many significant antitrust investigations taking place in countries where it has already acquired a near-monopoly position.
“For those reasons, the presumption must be that it should not be allowed to go ahead and that it should be blocked on antitrust grounds.”
A Google spokesman responded: "Yahoo! Japan Corporation will continue to compete as an independent online search and advertising company, and will be able to customise Google’s search service for their users - including how they see and experience search on YJC.
"Users should continue to expect to have very different experiences on YJC - whose portal approach to search is very popular in Japan - versus when they are on Google.
"This kind of arrangement is commonplace in the business world, and it doesn't foreclose robust competition.
"Toyota sells its hybrid technology to Ford, even though they compete against one another in selling cars. Canon provides laser printer engines for HP, despite also competing in the broader laser printer market. And as we said, this is not the first time we’ve licensed our search technology to another portal site."
According to Google, both companies have consulted with the Japan Fair Trade Commission and have received confirmation from the JFTC that is has no objection to the partnership.
Google maintains that the deal differs to the US deal in 2008 as no Google adverts will appear on Yahoo! Japan's sites, nor will Google gain access to Yahoo! Japan advertising data. Yahoo! will continue to acquire new advertising customers independently of Google.
Yahoo! Japan is the country’s most popular search service and accounts for over 50pc of all search activity.
Google comes in second with just under 40pc and Microsoft’s Bing, third with around a 3pc share, according to Nielsen Online NetView figures from October 2008.
Yahoo!’s websites were also visited by almost nine out of every 10 Japanese internet users during May, according to comScore.
Microsoft and Yahoo!s search deal, will see Bing, power Yahoo!’s search engine. In return Yahoo! will be responsible for selling the advertising around the combined search efforts.
Outwardly to a user, there will be no discernable difference, as both search operations will continue have their own presence.
The search-advertising deal was first announced in July 2009 but the companies had to wait until they received clearance from both regulators before making any moves to implement the arrangement.
The European Commission said that because Microsoft and Yahoo! currently account for less than 10pc of the search market in Europe, while Google accounts for 90pc, the deal was expected to increase competition in search and search advertising by building a stronger force to rival Google’s dominance.
The companies are aiming to fuse their search technologies by the end of 2010 and hope to have reorganised their advertising arrangements accordingly by that time too – although they recognise this may take longer and carry over into 2011.
The deal will see Microsoft will keep 12pc of the search engine revenues created by Yahoo!’s website for the first five years and pay the remaining 88pc to Yahoo! during this period.