The Talent

December 2, 2008 1:00 PM

Hogan's Litvack Discusses Google/Yahoo

Posted by Nate Raymond

Litvack Google Inc. and Yahoo! Inc. called off their joint advertising agreement just three hours before the Department of Justice planned to file antitrust charges to block the pact, according to the lawyer who would have been lead counsel for the government. 

Sanford "Sandy" Litvack (right) left Hogan & Hartson in September to consult for the department's antitrust division on a possible court challenge to the Web giants' agreement. The companies abandoned the deal in November after the Justice Department informed them it would seek to block the deal.

"We were going to file the complaint at a certain time during the day," says Litvack, who rejoins Hogan & Hartson today. "We told them we were going to file the complaint at that time of day. Three hours before, they told us they were abandoning the agreement."

The agreement, announced in April, would have given Yahoo the ability to use Google to sell advertising along the side of Yahoo pages. (Google's ads would have replaced ads previously sold by Yahoo's own platform.) The proposal came amid Microsoft Corporation's $44.6 billion hostile takeover bid for Yahoo. Microsoft abandoned that deal a month after the proposed Google-Yahoo deal became public, and as the Department of Justice and state regulators began looking into the Google pact for possible antitrust violations.

The never-filed government complaint would have charged that the agreement violated Sections 1 and 2 of the Sherman Act, Litvack tells the Am Law Daily in one of his first interviews since the companies canned the venture. Section 1 bans agreements that restrain trade unreasonably. Section 2 makes it unlawful for a company to monopolize or attempt to monopolize trade.

"It would have ended up also alleging that Google had a monopoly and that [the advertising pact] would have furthered their monopoly," Litvack says.

The complaint would have sought a preliminary injunction to stop the agreement from going forward. "The fact that we filed a lawsuit would not by itself have stopped them," he says. "We would have had to get an injunction from the court, and we would have sought that."

Five firms were involved in the negotiations, Litvack says. Google was represented in the negotiations by Clearly Gottlieb Steen & Hamilton and Wilson Sonsini Goodrich & Rosati. Yahoo turned to Latham & Watkins, Hunton & Williams, and Skadden, Arps, Slate, Meagher & Flom.

Litvack acknowledges that Microsoft Corporation and other companies lobbied the department to block the agreement, both publicly and and in private meetings. Litvack insists, though, that Microsoft's lobbying had no bearing on his recommended course of action or on the division's ultimate decision. Microsoft was represented by Cadwalader, Wickersham & Taft.

The Department of Justice said in a November 5 press release that its investigation showed Google was "by far the largest provider" of Internet search and advertising, as well as Internet search syndication. The agreement with Yahoo, had it gone forward, would have accounted for 90 percent of those markets, the release said. Litvack says by publicizing Google's current market share in the press release  the department "may or may not be" trying to put the company on notice for possible future antitrust actions.

"[The department is] making it clear to the parties and to the world that this is how the division viewed these particular aspects of Google's business," Litvack says. That said, Litvack says the change in administration may mean a shift in how the division handles future antitrust matters.

When the case closed November 5, Litvack says "there was some talk about my staying to do some other stuff, but I decided to come back" to Hogan & Hartson. He's happy to be back, he says, but does regret that he won't get to go to court in what would have been the highest-profile antitrust case in years.

"Of course I was looking forward to it," he says. "We felt pretty good about it, we felt pretty confident. Yeah, I would have liked to have done it."

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It is reported that Microsoft just made another bid for Yahoo.

Were they exploiting this opportunity - since their latest bid is much lower.

Could the facts of the case have been leaked to them BEFORE they decided to re-bid?

This was appallingly silly (or more like purely political) regulation given everything else going on in the economy. Yes, anti-trust and other regulation is needed, but pick the battles more wisely, please. Google would not have had the power to fix web Yahoo ad prices any more than eBay fixes widget prices - and has far less than market-warping heft than Microsoft.

Wow! I guess, bigger is not necessarily better! More regulations and more laws to follow!

First, our economy was fine when this was happening. Second, anybody will tell you that it is the power to raise prices above market, not to fix them. With a 90% market share, the feds could make a case that Google would have the power to do both. Finally, ebay sets the commission prices on widgets and not the price of widgets themselves, and Microsoft's abuses had nothing to do with joint ventures (really they involved the exact opposite).

Seriously when are these two search engines going to kiss and make up I have been waiting for a decent challenge to come to Google but it appears I will have to keep waiting - hopefully Google is really serious about their motto of not being evil

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