Microsoft Attacks Yahoo Japan's Google Deal

It's on like "Donkey Kong," as the kids say.

Days after Microsoft's lead attorney opened fire (rhetorically speaking) on Yahoo Japan's selection of Google for its search and search ad technology, Microsoft announced it would take more concrete steps to scuttle the deal.

"We plan to present evidence to the Japanese FTC explaining why we believe that this deal is substantially more harmful to competition than Google's deal with Yahoo in 2008 that the U.S. Dept. of Justice found to be illegal," a Microsoft spokesperson told eWEEK in an e-mail July 30.

In a July 27 statement e-mailed to eWEEK, Microsoft General Counsel Brad Smith argued that the Yahoo Japan deal "gives Google virtually 100 percent of all searches in Japan, both paid and unpaid." For its part, Yahoo Japan has insisted that Google's Japanese-language services currently outpace those of Microsoft.

Bing currently powers Yahoo's back-end search in 59 countries, and Microsoft no doubt hopes that the major components of its search-and-advertising deal with the Web portal company--which will see Bing power search for all of Yahoo's online properties, while Yahoo takes over worldwide sales force duties for both companies' search advertisers--will be in place by the end of 2010.

But Yahoo only owns 35 percent of Yahoo Japan (according to Bloomberg), meaning the subsidiary can choose its vendors without mother-ship interference. Now, ordinarily, I'd caveat that statement with "in theory," but Yahoo Japan CEO Masahiro Inoue seems determined to go his own road on this one; if the U.S. Yahoo tried to apply leverage before this situation erupted, it evidently didn't work.

As I mentioned in my previous post on this, the brouhaha suggests that Microsoft may face a decidedly heavy battle in some markets as it tries to expand Bing's international reach. The latest twist suggests that Microsoft is willing to use the tools at its disposal, including an army of lawyers, to make that happen; it'll be interesting to see what happens when Redmond tries to face down an opponent with equally substantive cash flow and leverage.

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