Microsoft: Google/Yahoo deal means less competition

said Senator Herb Kohl, a Wisconsin Democrat and subcommittee chairman. "The stakes are very high in maintaining a vibrant and competitive Internet advertising sector."

Senator Patrick Leahy, a Vermont Democrat, said he was just as concerned with the potential impact on Internet users' privacy as with the competition issues. Leahy has called for Congress to pass a new privacy law outlining what companies can do with personal information.

"If this agreement goes forward, Congress may not have to enact a national privacy policy," said Microsoft's Smith. "We'll have a national policy. It'll be Google's."

Senators also heard from two customers of search advertising. AT&T's Yellowpages.com said the deal will hurt small advertisers. But Tim Carter, owner of home-improvement Web site AsktheBuilder.com, said the deal can help Yahoo stay competitive.

"If they can lease space on their Web site to some other company and derive revenue for doing virtually nothing, why would you or anyone stop them?" he said. "Who is getting harmed? Perhaps some other company or companies that decided to follow a different pathway in the business jungle. My father-in-law taught me long ago that there is no substitute for brains."