The Justice Department met with Google and Yahoo's customers and competitors this week as it continues to build an antitrust case for its litigious hired gun Sandy Litvack. On top of that, Canada is now on Google's case too, having hired antitrust lawyer David Kent. Never heard of him, sure he's a hoser, eh. In response to all the haters, Google just made itself another enemy: Kara Swisher, the mean lesbian mommyblogger employed by Rupert Murdoch and partnered to Google executive Megan Smith. Fun times at home!Google's mistake: Creating a PowerPoint presentation and posting it to a site with the search-engine-optimized name "Facts about the Yahoo-Google advertising agreement." In the presentation, which we've embedded below, Google explained that the deal is not a merger and that Ford uses Toyota engines in some of its cars. It also misquoted Swisher, making her really mad. The presentation cites Swisher as saying:

CEO Eric Schmidt says Google is moving at full speed with plans to place ads on its archrival Yahoo, even though the Department of Justice is just gearing up to take action on the deal. The deal, signed in June, is set to start in weeks. "You face a question as a large company trying to change things: How many initiatives do you want to take on that are unpopular or lead to criticism?" said Schmidt in a press conference. By "change things," Schmidt would have you think he's talking about saving the world. But here's something that should draw interest from antitrust cops: A Valleywag tipster says that one unpopular change Google is making is to hike the minimum bids on some ads tenfold. That kind of pricing power is usually a sign of a monopoly. And it should well lead to criticism.It's not clear how widespread the price hikes are. (If you've seen raises in your Google bids, please let us know.) But even if the price changes are narrowly targeted, they're alarming in their size and suddenness. The effect of hiking the bids, and then dropping them, says our tipster, is that many of the keyword campaigns were canceled for not meeting the temporarily raised minimums, as he says this screenshot shows:

Samsung has launched a hostile $5.9 billion offer for SanDisk, a rival maker of flash-memory chips, which SanDisk has rejected. Toshiba, which manufactures chips in partnership with SanDisk, is considering a blocking bid. The posturing is typical: SanDisk says the bid undervalues the company, while Samsung executives retort that it is "full and fair." Leave aside the deal theatrics: Why does Samsung want SanDisk?Simple: It needs to bulk up to contend with the might of Apple, one of the largest buyers of flash memory. Samsung has supplied the memory chips for Apple's iPhone since its launch last year. Before then, Samsung sold Apple memory for its iPod line, and continues to do so today. Apple is a huge customer for Samsung — so huge that it can command deep discounts, and tie up an enormous amount of Samsung's manufacturing capability. When Apple first launched its flash-memory iPod Nano, it locked up enough production to keep rivals off the market for months. (Even Samsung and SanDisk tried to launch me-too clones of the Nano, to no effect.) Regulators may block Samsung's SanDisk bid. But they ought to keep an eye on Apple, too. Antitrust cops tend to spend all their time watching for monopolies — sellers who wield undue influence over a market. They should crack open their investment glossaries and look up "monopsony" — the condition that exists when a buyer dominates a market. (Illustration via Apple Insider)

We would never claim to be as smart as Google's pet economics professor, Hal Varian. But rereading the blog post Varian wrote to refute claims that Google's deal to sell ads on Yahoo would raise prices, some of his points puzzled us. Were I a student in one of his Berkeley classes, I'd raise my hand to ask three questions:

Hal Varian has a sweet gig. Not only is he Google's chief economist, but he also still holds professorships in three departments at Berkeley — Economics, the School of Information, and the prestigious Haas School of Business. Today, Varian put on his Google cap on to fisk a widely-circulated report that claimed the company's new ad deal with Yahoo would raise prices all around. It's actually worth reading, at least up to "the report suffers from a number of methodology flaws."

The U.S. Justice Department has agreed to share documents with California attorney general Jerry Brown's office regarding a possible antitrust suit against Google. Both federal and state lawyers are targeting Google over its deal to sell some of Yahoo's search ads. California's investigation comes at the behest of state assemblyman Joel Anderson, who wrote in a letter to Brown's office: "We're talking about giving (Google and Yahoo) over 90 percent market share — nobody else on the Web has a database like that. Who can compete?" If Anderson's concern sounds familiar, its because in recent days big advertisers, small advertisers and federal lawyers have expressed similar concerns with similar wording. That's because it's all coming from the same source: Microsoft and its CEO Steve Ballmer, who's still bitter about Google blocking its Yahoo acquisition. Says one trade reporter also subject to the Seattle company's lobbying efforts:

The Justice Department is probably going to bring an antitrust suit against Google, experts are beginning to say. Yesterday, the department hired former Disney superlawyer Sandy Litvack to take a closer look at Yahoo's deal to outsource search to Google. “They wouldn’t bring in a special counsel unless they were preparing to litigate,” says Sam Miller, the lawyer who defended Microsoft's antitrust trial. Former FCC official Blair Levin agrees. Levin wrote in a Stifel Nicholas research note yesterday that "the hiring of a lawyer with this kind of background is far more rare, and, in our memory, the times when this has happened the Department brought a case." The irony: if the U.S. does win the case against Google, it won't be the search giant which feels the most pain. Yahoo would lose $250 million to $450 million in cash it's counting on raking in.

(Yang) said 'If we do this deal with Google, Yahoo will become part of Google's pole and Microsoft,' he said, 'would not be strong enough in this market to remain a pole of its own.

Google has come under increasing fire for a lack of transparency in how it does everything — from keeping porn off YouTube to calculating advertising rates to determining which search results go where. I may personally distrust the wise benevolence of markets, but information asymmetry is a time-tested business tactic. In an article comparing the applied economics of Microsoft in the PC era and Google in the Internet era, the New York Times gets more of the same blather from the Googleplex regarding the enigma wrapped inside a puzzle wrapped inside the algorithm from Hal Varian, Google's in-house rent-a-quote economics guru:

European regulators are looking into whether IBM is unfairly dominating the mainframe market. What, is this 1968? IBM's purchase of Platform Solutions, a 36-person rival which made cheaper versions of IBM's mainframes, would normally be too small to rouse antitrust inquiries. But, amid accusations that IBM bought the firm to quash a rival, regulators are looking into it nonetheless. I'm actually disinclined to believe the conspiracy theories. IBM, under official antitrust oversight for decades, surely doesn't want to invite government officials back in.

"What is Yahoo's incentive to continue to compete?" That's the question Clinton-era Federal Trade Commission competition policy director David Balto asked of the search advertising deal between Yahoo and Google. And that's just one of many questions that will be asked by the Department of Justice now that officials have opened a formal investigation into the deal, according to unnamed sources cited by the Washington Post.

Board members, employees, shareholders and now Congressional lawmakers wonder whether Yahoo CEO made the right call outsourcing Yahoo search ads to Google. Yang is in Washington to answer their concerns, meeting with Senator Herb Kohl (D.-Wisc.) and Senator Richard Durbin (D-Ill.) yesterday. Later this week, he'll meet with Representative Joe Barton (R.-Texas), who earlier wrote a letter to Yang asking him to explain how the deal won't "have an anticompetitive impact on the online-search market, including the pricing of online-search advertising."

The National Black Chamber of Commerce has weighed in against the partnership between Google and Yahoo, suggesting that by gaining control of Yahoo's search advertising inventory, it will create a single auction market for search ad placement and lead to higher prices.

If Yahoo outsources search to Google, Microsoft will come screaming to antitrust regulators. How will Microsoft lawyers make their case? They'll let Yahoo docs do the talking. Before Yahoo was for outsourcing its search to Google, Yahoo was against outsourcing its search to Google. To explain why, Yahoo execs prepared a document for an all-hands meeting to be held on January 30. The document is part of the complaint a judge presiding over a shareholder suit against Yahoo released to the public yesterday. It reads:

"Guys like us avoid monopolies. We like to compete." — Microsoft chairman Bill Gates, whose company remains under antitrust supervision, at the All Things Digital conference Tuesday.

In the '90s, Washington PR firm Chlopak Leonard Schechter pushed anti-Microsoft information that its client, Oracle, had obtained through hiring investigators to rifle through garbage. Now working for Google, Chlopak is taking a greener approach: It's reusing Google-friendly quotes already aired in the press as fill-in-the-blank quotes for other journalists. Chlopak flack Rob Haralson does not note that the quotes, which support Google's proposed deal to take over Yahoo's search advertising, mostly come from Google executives or lawyers speaking anonymously. Still, Haralson may not be acting as strategically as he thinks. The quotes portray the deal, which is facing antitrust scrutiny in Washington, as no more significant than a supplier providing parts to a PC maker. That may not be a particularly good analogy — has Haralson ever sat in on an Intel negotiation? Google's recycled arguments:

Yahoo executives want to let Google serve ads next to its search results. But that would mean Google would be selling ads on 80 percent of all search queries online. Microsoft won't let that happen without stirring up antitrust fears in Washington. Secret Google sources tell the New York Times they plan to get around these concerns by schooling regulators on the concept of "co-opetition," which they say what Toyota does when it sells hybrid engines to GM, or when Whirlpool makes appliances for Sears.

Taking questions after a speech before the New America Foundation, Google cofounder Larry Page told the crowd the reason Microsoft and Yahoo shouldn't merge is that it would give Microsoft too much control over email and instant messaging. "90 percent of the communications all in one company, I think that's a really big risk." We totally agree! So when will Google open its search results pages to third-party advertisements?

Yahoo shares are hovering around $25 because investors hope major Yahoo shareholders can still force a deal with Microsoft at $33 per share or more. But at Google's annual shareholder meeting yesterday, cofounder Sergey Brin and CEO Eric Schmidt tried their best to destroy those hopes, amping up talk of a deal that would outsource Yahoo's search advertising to Google and make Yahoo unattractive to Microsoft. Brin said the deal is designed to keep Microsoft at bay. "[Yahoo was] under a hostile attack and we wanted to make sure they had as many options as possible," Brin said.

After more than a decade of trans-Atlantic antitrust scrutiny, one would think Microsoft would be, oh, I don't know, subtle about its ambitions to destroy a competitor. Someone in Microsoft's European HR offices didn't get the message. A poster advertising jobs at Microsoft Europe lists, among other qualities it's looking for in candidates, the ability to be a "Google killer."