Microsoft - News Corp. deal could face legal challenges

Cutting a deal with Microsoft (MSFT) to block Google (GOOG) in exchange for cash may or may not be a viable way for Rupert Murdoch to improve the economics of his media outlets. But before he can find out, Murdoch will have to answer a different question: Is it even legal?

It may not be, according to several legal experts contacted by DailyFinance. A potential News Corp.-Microsoft pact, as sketched out by the Financial Times, could run afoul of the law in several ways. For starters, it could violate anti-trust laws, says to Michael J. Thomas, a principal at the St. Louis law firm Harness Dickey. "Anti-competitive behavior is where you're trying to impair or eliminate someone's ability to compete against you," says Thomas. "The fundamental principle is that competition is good for consumers." For Microsoft to pay News Corp. (NWS) specifically to withhold its content from Google while making it available to other search engines "strikes me as more anti-competitive than competitive," he says.
If Google were looking for grounds upon which to challenge an agreement, it could invoke the "essential facilities doctrine," arguing that access to the news is necessary in order to remain competitive. One problem with this approach is that Google executives have already undercut it with their public posturing: At a conference in England last week, the company's UK director, Matt Brittin, said flat out, "Does Google need news content to survive? No."

Another possibility is that Google could argue that, by inducing News Corp. to sever its existing relationship with Google, Microsoft is committing so-called tortious interference. Typically, that's when two parties have a contract and a third party induces one of the two to breach that contract. There's no contract that entitles Google to index News Corp.'s stories, but Google could make a case that its longstanding access to those articles creates a "valid business expectancy," which in some instances is sufficient to allow a tortious interference claim to go forward.

"You could fashion a tortious interference claim. Whether it would be upheld or not, I'm not sure," says Monroe Weiss, a senior partner at the Manhattan firm Frenkel Lambert Weiss Weisman & Gordon. "This is a lawsuit waiting to happen, whatever you want to call it."

Whatever the avenue of attack, News Corp. can always invoke business necessity in its defense, pointing to the utter collapse of the newspaper industry as Exhibit A. That's likely to carry some weight with judges, who may be inclined to cut publishers some slack if they see it as crucial to the survival of the press, says Thompson. "I think as a practical matter, courts would probably be sensitive to News Corp.'s plight," he says. "I think I'd rather have News Corp.'s side for that lawsuit, if there was one."

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