Google and Yahoo could face antitrust suit

Yahoo and Google, the two leading internet search and web services providers, are reported to be back in talks with the US Justice Department over concerns that their controversial advertising collaboration is breaking competition rules.

A report published by US financial newspaper The Wall Street Journal, citing legal sources close to the discussions, stated that settlement negotiations are at an early stage. It remains unclear whether the companies will resolve the government objections.

Advertisers, who have raised objections to the deal, told Justice Department officials that the partnership will limit competition, raise prices and reduce choices, the paper said.

Under the agreement, Google would supply Yahoo with advertising services to run alongside Yahoo's own web search system. Yahoo runs the web's second most popular search service.

Yahoo struck the agreement in June with Google in an effort to defend itself from Microsoft's takeover efforts.

Even as senior Justice Department officials weigh the companies' proposals to resolve antitrust issues, its trial staff continues to prepare a lawsuit to block the deal, the paper said citing lawyers and executives contacted by the government.

The companies have been cooperating with the Justice Department's investigation and recently agreed to delay implementing the deal until at least 22 October to give federal and state antitrust officials time to complete their separate investigations, according to the paper.

Yahoo, Google and the Justice Department could not be immediately reached for comment by Reuters.