Google (GOOG) executives never figured the Department of Justice would actually move to block the company’s search deal with Yahoo. But it did. And three hours before the DOJ planned to file suit last fall, both companies announced they would abandon their plans to sell Google ads against Yahoo (YHOO) search results.
How the Department of Justice came to its decision — a decision that slowed Google’s growth in an already down quarter and dealt Yahoo a blow severe enough to send CEO Jerry Yang and president Sue Decker packing — is the subject of a feature in the February issue of Wired called “The Plot to Kill Google.”
We read Wired‘s story and learned that there are eight men responsible for killing the deal. They are:
Tom Barnett, assistant attorney general for antitrust at the DOJ. When Tom met with Yahoo and Google lawyers in October, Yahoo’s lawyers told him that they’d already negotiated with DOJ staffers and decided on amenable terms for all parties. According to the Wired story, Tom said: “Staff is irrelevant.” Then he brought up Section Two of the Sherman Antitrust Act — the piece of law that split Standard Oil in 1911 and AT&T in 1982. That was pretty much the end.
But Tom didn’t come to Section Two all on his own. After Google so successfully sabotaged Microsoft’s bid to acquire Yahoo by painting the company once more as the “Evil Empire,” Microsoft’s (MSFT) head of strategic relations John Kelly orchestrated a careful campaign to return the favour. “Frankly, we saw history repeating itself. We realised that we were goin got have to speak up,” Kelly told Wired.
Herbert Kohl, the Senator from Wisconsin and chair of the Senate’s Antitrust Subcommittee, was one of the first people Microsoft and John spoke to. Kohl soon wrote a letter to the antitrust lawyer, Tom Barnett, telling him “important competition issues are raised by this transaction.”
Advertising consultant Michael Kasson, however, provided Microsoft access to a group of opponents to the Google-Yahoo deal far more convincing to Tom Burnett than a Senator from Wisconsin: Google’s paranoid advertising customers on Madison Avenue. Michael, who reportedly has the third best rolodex in the industry, told Kelly: “Google has badly misjudged how it is perceived. We have a clear and easy story to tell.” Together Kasson and Kohl spoke to 32 CMOs and 375 top advertisers. Soon enough, Tom Barnett began fielding call after call and letter after letter from agencies complaining that the Google-Yahoo deal would limit their choices and unfairly drive up prices.
Eventually, Association of National Advertisers president Bob Liodice took on spreading that story as if it were his own. “The more we dug in, the more we realised that we had to say something,” Bob told Wired. In September, the ANA wrote Tom Burnett an open letter explaining its oposition to the deal.
None of these efforts to undermine the deal would have worked if Yahoo and Google hadn’t so underestimated them. When Yahoo lawyer Dan Wall heard that Microsoft was passing around a memo drawing parrallels between the Google-Yahoo deal and 68-year-old case United States v. Socony-Vacuum Oil Co., Dan “didn’t see how a 1940s case against conspiring oil companies bore much relevance,” according to Wired. Dan should have. The DOJ brought up the case on a conference call and, not long after, forced Google and Yahoo to abandon the deal. Anticipating and deflecting that kind of legal manuever — no matter how silly it might seem — is precisely what Yahoo was paying Dan for. He was simply outflanked.
AT&T (T) public policy chief James Cicconi may not have scored the decisive blow against the Google-Yahoo deal — that prize is Microsoft’s — but he and AT&T definitely get an assist. From Wired: “On September 24, 10 members of Congress sent a letter to the DOJ opposing the deal. All of them have received donations from AT&T over their careers (average total contribution since 1996: $29,000), and most counted the telecom giant as one of their largest contributors.” Why’d AT&T and James do it? Probably because it saw a way to hit Google back for all net neutrality and spectrum advocacy the search giant had gotten itself involved with these past few years, often at AT&T’s expense.
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