Speaking before a congressional subcommittee today, Microsoft Senior Vice President And General Counsel Brad Smith said that Yahoo!'s recent Internet search outsourcing deal with market leader Google would harm online competition and innovation. The executive also questioned the legality of the deal.

"If search is the gateway to the Internet, and most believe that it is, this deal will put Google in a position to own that gateway and the information that flows through it," he said. "Never before in the history of advertising has one company been in the position to control prices on up to 90 percent of advertising in a single medium. Not in television, not in radio, not in publishing. It should not happen on the Internet."

"When Yahoo! talks about this deal generating up to $800 million in additional revenue, that's money out of the pockets of American businesses, big and small, who will pay higher prices for the very same ads they buy from Yahoo! today," he added.'

Smith outlined Microsoft's major concerns with the Google-Yahoo! deal:

- It will give Google unprecedented control--as much as 90 percent--of online advertising.

- It will provide fewer choices to online advertisers, forcing them to do business with Google.

- It will lead to higher prices.

- It will cede control of the Internet search market to Google, raising serious privacy issues.

"If one company, Google, controls up to 90 percent of online search advertising \[that company\] will have a complete picture of your online activities," he testified. "If that happens, Congress won't need to enact a federal privacy policy \[because the country\] will already have a national privacy policy: Google's privacy policy."

Microsoft, of course, has an obvious interest in the outcome of a federal investigation into the Google-Yahoo! deal. It is competing with both companies for online advertisers and has been engaged in a bizarre on-again-off-again attempt to acquire Yahoo! for most of this year.