• by Wendy Davis  @wendyndavis, October 19, 2009

Arguing that the proposed Microsoft-Yahoo search deal would boost competition, the American Association of Advertising Agencies has asked the U.S. Justice Department to approve the arrangement as soon as possible.

"Yahoo and Microsoft's proposal to combine their technologies and search platforms is good for advertisers, marketing service agencies, website publishers and consumers," the AAAA wrote Monday in an open letter to the DOJ. "This proposal enhances competition, and should be allowed to take effect as soon as possible," said the letter, which was signed by AAAA President and CEO Nancy Hill, as well as the heads of Publicis Groupe, WPP, Interpublic Group of Companies and Omnicom.

The deal calls for Microsoft to power organic search for Yahoo and for Yahoo to handle paid search for Microsoft. Together, Yahoo and Microsoft account for about 29% of the U.S. search market, while Google accounts for around 65%, according to comScore.

Microsoft and Yahoo also have garnered support for this deal from marketers, who say that the two companies together will pose a more significant challenge to Google than either company does separately.

"We believe that combining the very best assets of both companies will actually make the landscape more competitive," says Bob Liodice, president and CEO of the Association of National Advertisers.

Yahoo said in a statement that it welcomes support for the deal, which it hopes it will close in early 2010.

But not everyone unequivocally backs the proposed arrangement. Last month, the Center for Digital Democracy, Consumer Action, Consumer Watchdog and the U.S. Public Interest Research Group called on the DOJ to examine how the agreement will affect the overall digital marketplace.

"The proposed combination of Microsoft's and Yahoo's search platforms effectively undermines the latter as a meaningful competitor in the online ad sector, as it gives up its ability to offer marketers a robust search and display combination," they wrote in a letter to Christine Varney, assistant attorney general for the antitrust division.

Last year, Google and Yahoo attempted to forge a search partnership, but abandoned their plans after the DOJ threatened to sue to stop the deal from proceeding. That arrangement drew heated opposition from an array of organizations, including the ANA, World Federation of Advertisers and World Association of Newspapers.