Google asks: Will Msft-Yahoo exert “illegal influence over Internet”?

[update: Microsoft has responded, saying the combination of Microsoft and Yahoo creates a more competitive marketplace by establishing a “compelling number two competitor for Internet search and online advertising.” Google has more than 65 percent search query share in the U.S. and more than 85 percent in Europe. Microsoft and Yahoo on the other hand have roughly 30 percent combined in the U.S. and approximately 10 percent combined in Europe, it said.]
Google has just responded with an official statement on Microsoft’s bid for Yahoo, saying Microsoft’s hostile bid for Yahoo raises troubling questions about whether Microsoft will use a merger to exert “illegal influence.”

It comes amid separate news reports that Google chief executive Eric Schmidt has reached out to Yahoo to see if Google can help thwart Microsoft’s bid.

Written by David Drummond, Google’s top legal executive, Google’s statement said the potential merger should be judged by policymakers as more than a financial transaction. It should also be assessed according to whether it “preserves the underlying principles of the Internet: openness and innovation.” According to Drummond:

Could Microsoft now attempt to exert the same sort of inappropriate and illegal influence over the Internet that it did with the PC? While the Internet rewards competitive innovation, Microsoft has frequently sought to establish proprietary monopolies — and then leverage its dominance into new, adjacent markets.

Could the acquisition of Yahoo! allow Microsoft — despite its legacy of serious legal and regulatory offenses — to extend unfair practices from browsers and operating systems to the Internet? In addition, Microsoft plus Yahoo! equals an overwhelming share of instant messaging and web email accounts. And between them, the two companies operate the two most heavily trafficked portals on the Internet. Could a combination of the two take advantage of a PC software monopoly to unfairly limit the ability of consumers to freely access competitors’ email, IM, and web-based services?