The Justice Department's Anti-trust Division is in for a lot of sleepless nights. First they were worried about the impact of a possible Microsoft-Yahoo merger, which would have combined the search engine market for the second and third largest players. Now that goes on the back-burner and they have a more urgent headache - To study the impact of a deal between the first and the second largest players in the search market - Google and Yahoo. I'm on record here as saying that the concept of Yahoo outsourcing their ad serving to Google is DOA on account of the massive anti-trust violations involved. The current investigation by the DOJ was triggered by a test between the two companies which involved just 3% of Yahoo's search queries. Imagine the kind of heat a deal for full outsourcing would bring on. Photo credit - CIO-Today.com

Reuters, via the Guardian, UK, reports that the Justice Department is concerned that the test may violate antitrust law, the source said, adding that authorities "have initiated an investigation" of it. The source, who spoke on condition of anonymity, said some of the government's concern focused on a telephone call from Google Chief Executive Eric Schmidt to Yahoo Chief Executive Jerry Yang to offer help in thwarting Microsoft's $44.6 billion takeover bid. A second source said that the Justice Department was concerned about a longer-term deal, and had an initial inquiry underway into the matter.

So Microsoft won't allow Yahoo to tie-up with Google. Google, for its part, won't allow Microsoft to eat up Yahoo. Poor old Yahoo would prefer to be left alone, and the DOJ, no doubt is in total agreement with Yahoo on this sentiment. Any way you look at it, Yahoo remains independent and on its own. But....from a market point of view, an independent Yahoo has long since been buried. The day Microsoft made its bid, resulting in Yahoo shares shooting up, there's only one result that Yahoo's shareholders are going to consider satisfactory - A consummation of the Microsoft deal, resulting in a permanent locking in of the hyped up price, which would otherwise tank the day it becomes clear there ain't going to be no deal.

Anti-trust regulators won't allow 'a deal', but share holders won't allow for 'no deal'. Stalemate. Who wins? Uh...Maybe someone can push Yahoo to the brink of bankruptcy, the Fed can then takeover Yahoo and hand it over to Microsoft for a couple of dollars per share. The stated reason for the overnight firesale could be the importance of Yahoo's continued existence for pizza vendors in Sunnyvale.