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The European Union's Competition Commission is investigating the proposed search advertising tie-up between Google and Yahoo!.

"In mid-July, we decided to open a preliminary investigation on our own initiative into potential effects of the Google-Yahoo agreement on competition in the European Economic Area (EEA) market," a spokesman for European Competition Commissioner Neelie Kroes has told Reuters.

Under the agreement, Google would serve ads onto Yahoo! search results pages in the US and Canada - not the EU. But we all know the pact would affect European advertisers.

Earlier today, the World Association of Newspapers (WAN) - an organization representing 18,000 papers across the globe - called on the EU (as well as the US Department of Justice and the Competition Bureau of Canada) to bury the proposed deal.

"First, many of our European members are active in North America and will be directly harmed by any anti-competitive conduct there," the organization said in a letter to European Competition Director Cecilio Madero.

"Second, we believe the deal will result in reduced incentives for Yahoo to compete against Google even in Europe, as Yahoo reportedly expects to earn hundreds of millions annually under the agreement. Also, because Google and Yahoo together control over 95 per cent of advertisers’ search advertising spending in Europe, the two companies could easily set the conditions for competition in the EU if they chose to do so."

The world was well aware that regulators in the US and Canada were probing the deal, but until news of WAN's letter hit the web, sparking more than a few phone calls to the EU, the European investigation was on the down low. The EU spokesman said the probe had no deadline.

Google and Yahoo! reached their agreement as a means of fending off Steve Ballmer's $44.6bn bid to swallow Jerry Yang and company. But a Goo-Hoo ad pact is surely more dangerous than a full-fledged Mircohoo. Even without a Yahoo! tie-up, Google controls 70 per cent of the North American search advertising market. ®

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