Go Microsoft and Yahoo? (updated x3)

Perhaps the best reason for supporting the Microsoft bid for Yahoo is the efforts Google seem to be putting in to stop it. May be Google just doesn't want the competition.

When consumers did not ask for antitrust actions but rival firms do, you have to worry. Are such anti-trust actions just firms trying to handicap their rivals’ by turning to the government for protection.

High technology markets are among the most dynamic and competitive in the world but such competition places heavy pressures on rival businesses, which must keep pace or lose out. Rivals can legitimately respond by improving their own products or by lowering prices. These are actions from which consumers gain. Increasingly we see, however, antitrust authorities are being asked to respond to increased competition. We see more protectionist demands by uncompetitive firms. This results in the workings of markets being short-circuited. Antitrust protectionism means that market decisions about how to compete for consumers’ favour are displaced by bureaucratic and political decisions. More of the energies of firms are directed to politics, less to production and innovation. Consumers and innovators are the losers, innovation is penalized, competition is thwarted and price aren't stopped from rising they are prevented from falling.

This isn't the first time we have seen such moves in the high tech sector. Ten years ago attacking Microsoft was all the rage. Similar issues arose in that case. Have consumers really benefited from all the antitrust action against Microsoft? At that time a number of economists thought they would not. Here is an Open Letter on Antitrust Protectionism (pdf) from that time which still seems relevant today.

(HT: Alex Tabarrok, Marginal Revolution)

Update: Chris Makler comments at the Aplia Econ Blog, noting that "... since Google's position is so dominant, it might actually help consumers if Google had a larger adversary within the industry."

Update 2: The Economist has an article looking at the offer, The Microhoo! hoo-hah.

Update 3: James D. Miller comments, Google's reaction to Microsoft's Yahoo! bid. He argues, "Businesses hate competition. So if a Microsoft - Yahoo! merger would greatly reduce competition in online markets then Google would benefit. But Google opposes the merger so the merger probably wouldn't significantly reduce competition"