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In the '90s, Washington PR firm Chlopak Leonard Schechter pushed anti-Microsoft information that its client, Oracle, had obtained through hiring investigators to rifle through garbage. Now working for Google, Chlopak is taking a greener approach: It's reusing Google-friendly quotes already aired in the press as fill-in-the-blank quotes for other journalists. Chlopak flack Rob Haralson does not note that the quotes, which support Google's proposed deal to take over Yahoo's search advertising, mostly come from Google executives or lawyers speaking anonymously. Still, Haralson may not be acting as strategically as he thinks. The quotes portray the deal, which is facing antitrust scrutiny in Washington, as no more significant than a supplier providing parts to a PC maker. That may not be a particularly good analogy — has Haralson ever sat in on an Intel negotiation? Google's recycled arguments:

From: Rob Haralson
Sent: Friday, May 23, 2008 8:30 AM
To:
Subject: Google-Yahoo!

Hope all is well. There is a lot of information floating around about a possible transaction between Google and Yahoo!, and - as a consultant to Google - I wanted to provide you with some interesting quotes from a couple of recent articles exploring competition issues related to a potential deal.

"Straightforward Supplier Arrangement" with Parallels to Other Industries

"The approach the DoJ will take in evaluating a search-outsourcing deal will be different than evaluating a full-blown merger, an industry attorney said. Unlike mergers or business combinations where the acquirer is getting full operational control of an entity, this arrangement is likely to be reviewed as an original equipment manufacturing (OEM) relationship or a commercial one, he explained." - "Google-Yahoo: Anti-trust regulators to focus on commercial arrangements versus outright take over, source says" - dealReporter, May 16, 2008

"People involved in shaping Google's approach say the deal under consideration would be a straightforward supplier arrangement, similar to ones in the markets for computer printers, appliances and cell phone service.

"The printer industry, they say, is a perfect example. Canon supplies printer engines to about 80 percent of the laser printer market, including its rival Hewlett-Packard. They point to many others, including Whirlpool making appliances for Sears, AT&T licensing its mobile network to Virgin and other small carriers, Toyota selling hybrid engines to General Motors and Microsoft tailoring its Office software for Apple computers." - "Google Says It Will Defend Competitive Rationale of a Yahoo Deal" - New York Times, May 22, 2008

DOJ and FTC Have Endorsed "Co-opetition" Arrangements

"In its antitrust guidelines for partnerships among competitors, issued in 2000, the Justice Department and Federal Trade Commission said: 'In order to compete in modern markets, competitors sometimes need to collaborate. ... Such collaborations are not only benign but pro-competitive.'" - "Google Says It Will Defend Competitive Rationale of a Yahoo Deal" - New York Times, May 22, 2008

"...if one company has a more efficient technology than the other, with one wanting to outsource to the other, a deal can be structured that still leaves a lot of independent competition, the industry attorney explained." - "Google-Yahoo: Anti-trust regulators to focus on commercial arrangements versus outright take over, source says" - dealReporter, May 16, 2008

Deal Likely to be "Easily Approved" by U.S. Regulators

"'If there were a deal [with Yahoo], we would anticipate structuring the deal to address the antitrust concerns that have been widely discussed,' [Eric] Schmidt said." - "Google execs hope for long-term ad deal with Yahoo" - Associated Press, May 8, 2008

"These collaborative deals tend to be easily approved by American antitrust authorities, and Google presented the Yahoo plan as such a deal in response to initial inquiries by the Justice Department.

"'There is nothing in antitrust law that says a company can't use the best technology,' said one person involved in confidential discussions of the deal. 'It can't be bad for competition to help a company become more efficient.'" - "Google Says It Will Defend Competitive Rationale of a Yahoo Deal" - New York Times, May 22, 2008

Deal Likely to be Non-Exclusive, Reducing Antitrust Risk

"The arrangement currently under consideration would be a non-exclusive arrangement in which Google would allow Yahoo to use selected ad technologies but would not be structured as a 100% outsourcing deal, the source familiar said. This is an important aspect of the deal as Yahoo would continue to use its technology for some search queries and maintain a search capability. The company would also have the ability to use the information gained from the arrangement to perfect its algorithms and improve its systems, the source said." - "Google-Yahoo: Anti-trust regulators to focus on commercial arrangements versus outright take over, source says" - dealReporter, May 16, 2008

In summary, the reports indicate that:

- Any deal between Google and Yahoo! would be non-exclusive;
- The deal looks to be similar to those in which companies provide competitors with complementary services or technologies; and
- The Department of Justice has approved similar deals in the past.

The negotiations between the two companies are ongoing, so more details may be emerging over the course of the next several days and weeks. If you'd prefer not to receive more emails about this, please let me know. Alternatively, I am happy to provide you more information at your request.

Best,
Rob Haralson

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Rob Haralson | Chlopak, Leonard, Schechter, and Associates