September 18, 2009

Microsoft, Yahoo in informal talks with EU over search deal

Microsoft and Yahoo are discussing their planned search collaboration with European regulators to establish whether the deal needs to be subjected to a formal merger probe, Microsoft said Thursday.

"We are having informal discussions with the European Commission," said Jesse Verstraete, Microsoft's senior corporate communications manager.

The Commission, meanwhile, refused to comment on the talks.

"It is up to the parties involved to decide whether they have to notify us," the Commission's competition spokesman, Jonathan Todd, said.

If Microsoft incorrectly concluded that a formal notification was not necessary then it could face fines.

One person close to Microsoft said the question under discussion with the European regulators is whether the proposed deal is a merger or simply a collaborative agreement.

The situation in Europe is different to the one in the U.S., where the Department of Justice last week asked the companies for further information about their planned deal, said the person, who asked not to be named.

"Google isn't as powerful in the U.S. as it is in Europe, where it has a 90% share of the market for Internet search," said the person. In the U.S. Google's market share stands at 75%, she said.

Microsoft therefore expects the deal with Yahoo to pose less of a problem for regulators in Europe, because it will be seen as a useful counterweight to the near-ubiquitous Google search engine, she said.

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