States reviewing Yahoo-Google search ad deal

Updated July 15 at 7:05 a.m. PT, with comment from additional sources

A collection of state attorneys general are reviewing the Yahoo-Google search-advertising partnership for possible antitrust violations, several states confirmed.

While these states are in communication with one another and engaged in a collective review of the proposed deal, none have emerged as the lead state or states on the matter, said Sandi Copes, a spokeswoman for the attorney general for the state of Florida.

Attorneys general from Florida, Arkansas, and Connecticut are all taking a look at the proposed deal, but the review process is in various stages.

Arkansas, for example, is "looking into it," according to a representative of that office, while Connecticut confirms that it has an investigation under way.

"We are issuing a number of subpoenas and working with other states," said Richard Blumenthal, Connecticut's attorney general.

While the states declined to specify the number of attorneys general involved in the review, an article in the Washington Post reported that about a dozen state attorneys general are reviewing the matter.

Google, in an e-mail response to CNET News, said: "Just as we are continuing to have cooperative discussions with the Department of Justice about this arrangement, we voluntarily reached out to state attorneys general to explain the deal when we first announced it. We continue to have discussions with them about the agreement. We are confident that the arrangement is beneficial to competition, but we are not going to discuss the details of the regulatory process."

Yahoo declined comment.

Meanwhile, one source familiar with the states' efforts said Yahoo offered to provide the states with the same information it was providing the Department of Justice and that roughly a handful of the states have taken the company up on its offer. The source added that it is likely that these states are sharing the information with the other states, given that in collective efforts by the states, it would be unusual for 20 states to want their own copy of the information.

And one source close to Yahoo said the company voluntarily reached out to the states when the Google deal was first announced.

"We are fully engaged and cooperating, and the more people learn about this deal, the more they'll find it's pro-competitive," the source said.

The involvement by the states may not come as a surprise, given that the U.S. Department of Justice has a formal investigation under way, and a congressional committee is preparing to hold a hearing on the proposed Yahoo-Google arrangement on Tuesday.

However, the states' involvement is significant because it adds another layer of perspective and voice to antitrust issues that may go beyond what the Department of Justice or Congress may be seeking.

It also comes with more challenges, in that it requires greater coordination among the various states, compared with other agencies, such as the Justice Department, according to a source involved in the states' effort.

Under its previously announced nonexclusive partnership announced in June, Google will supply Yahoo with search ads, a move designed to increase Yahoo's search revenue, but it could also increase Google's power in the market. That is a potential concern for antitrust regulators.