Microsoft bid for Yahoo faces inquiry

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The US competition auth-orities will launch an investigation this week into the proposed takeover of the internet portal specialist Yahoo by Microsoft.

The US Congress's Judiciary Committee is to hold its first hearing on the deal on Thursday, even though Yahoo has yet to formally respond to Microsoft's proposals, unveiled on Friday.

John Conyers and Lamar Smith, respectively the Democrat and Republican congressmen who run the Judiciary Committee, said the deal was so large that it presented "important issues regarding the competitive landscape of the internet" and it therefore intended to give the proposal "a careful examination".

"The committee will hear from experts who will weigh in on whether this proposed consolidation works to further or undermine the fundamental principles of a competitive internet," it said.

While the Judiciary Committee does not have powers to veto a deal between Microsoft and Yahoo, its interest will cause some anxiety at the computing giant, which has had its fair share of run-ins with competition regulators, particularly in Europe.

Neelie Kroes, the European Union's competition commissioner, has also signalled that she would want to investigate a merger between Microsoft and Yahoo, though she has also said that previous rulings against the company would be irrelevant to such an inquiry.

Three years ago, the European Commission fined Microsoft €497m (£374m) for market dominance abuses and it has subsequently opened two new competition inquiries into the American company.

However, the dominance of the internet giant Google in the search engine market would make it difficult for competition watchdogs on either side of the Atlantic to intervene in an alliance between Microsoft and Yahoo. The two companies combined would still have a smaller share of the market than Google, and would also remain behind on most types of advertising.