As expected, online giant Google pulled out of its proposed advertising deal with rival Yahoo! after regulators from the US Department of Justice (DOJ) raised antitrust objections. The companies had worked to appease the DOJ's concerns over the past few weeks but were unable to reach an agreement.
"Had the companies implemented their arrangement, Yahoo's competition likely would have been blunted immediately with respect to the search pages that Yahoo chose to fill with ads sold by Google rather than its own ads," a DOJ statement reads. The DOJ told Google that it would have sued to block the deal, triggering a series of ultimately fruitless negotiations.
"Yahoo! continues to believe in the benefits of the agreement and is disappointed that Google has elected to withdraw from the agreement rather than defend it in court," the company noted in a public statement. "Google notified Yahoo! of its refusal to move forward with implementation of the agreement following indication from the Department of Justice that it would seek to block it, despite Yahoo!'s proposed revisions to address the DOJ's concerns."
Of course, Yahoo! is also racing to overcome doubts that this major setback isn't so major and isn't, in fact, even a setback. "This deal was incremental to Yahoo!'s product roadmap and does not change Yahoo!'s commitment to innovation and growth in search," the company said.
Oddly, Yahoo!'s shares jumped 8.5 percent to $14.49 in late Wednesday trading. But the investor wakeup call had nothing to do with trust in the company's vision. Instead, they were reacting to rumors--since denied by everyone involved--that Microsoft would jump into the fray again and make another offer for Yahoo!. Other rumors see Yahoo! purchasing Time Warner's AOL unit.