• Los Angeles Times, Wednesday, July 16, 2008 10:45 AM

Google, Yahoo and Microsoft execs met on Capitol Hill Tuesday morning to argue Yahoo's proposed search deal with Google before the Senate's antitrust committee. As expected, Google and Yahoo argued for the deal, which would result in Google controlling close to 90% of the search market, and Microsoft argued against it.

However, the Los Angeles Times reports that Microsoft general counsel Brad Smith may have changed the dynamics of the dispute with an anecdote about a meeting between he, Microsoft CEO Steve Ballmer and Yahoo CEO Jerry Yang at the San Jose airport last month. Smith said that Yang looked them in the eye and said, "Look, the search market today is basically a bipolar market. On one pole there's Google, and on the other pole there are Yahoo and Microsoft both competing with Google. If we do this deal with Google, Yahoo will become part of Google's pole." He added that Microsoft would not be strong enough to be a pole of its own.

Says the Times: "The pronouncement exploded in the ornate Senate hearing room like a small bombshell," as Sen. Herb Kohl, the committee chairman, turned towards Yahoo general counsel Michael Callahan and said: "Clearly what you're saying contradicts what your boss said. That's pretty explosive stuff, and we'll have to consider that."

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