Justice probes Yahoo-Google deal

April 24, 2008: 10:29 AM ET

Microsoft (MSFT) signaled its ready to play hardball with Yahoo (YHOO) in its bid to acquire the Internet giant, and antitrust regulators are scrutinizing a trial advertising partnership that Google (GOOG) and Yahoo recently struck.

Microsoft put some substance behind its threat to take its three-month-old buyout offer to Yahoo shareholders by naming 13 people as potential candidates to the company's board, according to Thursday's The Wall Street Journal.

The list includes former Nextel Partners CEO John Chapple; Edward Meyer, former chief of Grey Global Group; Jaynie Studenmund, the former chief operating officer at Overture Services, a company Yahoo acquired a few years ago; and former Adelphia Chief financial officer Vanessa Wittman, the Journal reported.

Microsoft's tougher stance comes amid news reports that the Justice Department is looking into Yahoo's outsourcing of some of its advertising to Google. The companies' two-week trial ended Wednesday. Yahoo has said it involved about 3% of its search results.

Yahoo has been looking for ways to reduce the cost of operating its search service and, in an effort to thwart Microsoft, to demonstrate it can thrive as a standalone business. But the cooperation between the No.1 and No.2 two search engine shops immediately raised anticompetitive flags when the pact was announced earlier this month.

Google says it "informed the Justice Department before we launched this test, and we have been responsive to their questions about it," according to the Los Angeles Times. Yahoo said it too had given the Justice Department a heads up prior to the test, according to the Times report.

Microsoft has given Yahoo until Saturday to come up with a counter proposal or answer to its $43 billion takeover offer.

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