Microsoft says it doesn't expect any regulatory roadblocks to prevent it from swallowing Yahoo!. But some legal experts predict the proposed merger might nt be the cakewalk Microsoft expects. At the very least, the $45 billion deal's massive size, its complexity and its impact on various markets mean it is not likely to get a rubber stamp from government regulators.

"As a rule of thumb, a merger that reduces the number of players from 3 to 2 is going to get challenged unless there's some good reason for why it helps competition," says one antitrust attorney, speaking anonymously because he wasn't sure if his firm represents any of the companies.

Microsoft's good reason comes down to one word: Google. The online search advertising market is so dominated by Google, that Microsoft says joining forces may be the only way to increase competition in such an important market.

And Microsoft won't have any trouble finding statistical data to make its case.

According to Nielsen Online, Google garnered 56.3% of all online searches in the month of December. By contrast, Yahoo! and Microsoft's MSN network, attracted 17.7% and 13.8% of searches in December, respectively.

"The industry will be well served by having more than one strong player, offering more value and real choice to advertisers, publishers and consumers," said Microsoft Platform and Service Division President Kevin Johnson in a statement announcing the merger proposal.

Nonetheless, a move from three players to two will result in more market concentration, and that can raise flags with regulators.

The U.S. Supreme Court Tuesday rejected an appeal from a unit of AT&T Corp. (T) challenging an antitrust lawsuit brought by several Internet service providers. The California Internet service companies sued the Pacific Bell unit in 2003, alleging the regional phone company charged them high wholesale prices for access to high-speed digital lines.

Federal telecommunications laws require regional phone companies to sell access to competitors. The companies, including Linkline Communications Inc., Nitelog Inc. and In-Reach Internet Inc., said they couldn't compete with the AT& T unit's own high-speed Internet service prices to consumers because of the " price squeeze."

When the lawsuit was filed, the AT&T unit was part of SBC Communications Inc., which has since merged with AT&T.

A U.S. District Court allowed the antitrust lawsuit to proceed and the 9th U.S. Circuit Court of Appeals in San Francisco affirmed that ruling.

The AT&T unit, in the Supreme Court appeal, said there are several problems with the Ninth Circuit ruling, including conflicts with a recent telecommunications antitrust ruling by the high court. "The decision promises to deter price cuts that benefit consumers," the AT&T unit said.

The Internet companies said the AT&T unit's actions that led to the lawsuit " amounts to a refusal to provide competitors the same services or prices otherwise made to petitioners' retail customers."

Microsoft said on Monday it would not appeal against its defeat in a landmark antitrust case in a top European Union court last month. Earlier on Monday the European Commission said Microsoft had agreed on measures to comply with a decision by the EU executive in 2004 that the software group was breaking competition rules. "At the time the Court of First Instance issued its judgment in September, Microsoft committed to taking any further steps necessary to achieve full compliance with the Commission's decision," Microsoft said in a statement.

"We have undertaken a constructive discussion with the Commission and have now agreed on those additional steps. We will not appeal the CFI's decision ... and will continue to work closely with the Commission and the industry to ensure a flourishing and competitive environment for information technology in Europe and around the world," it said.

Two antitrust claims brought against Microsoft Corp. by Novell Inc. can proceed, a federal appeals court ruled Monday. A panel of the 4th U.S. Circuit Court of Appeals affirmed a decision by U.S. District Judge J. Frederick Motz of Baltimore dismissing four of Novell's six claims but keeping the other two alive.

Novell alleges Microsoft used its monopoly power to limit sales of WordPerfect, a word-processing program, and Quattro Pro, a spreadsheet program.

The appellate court agreed with the lower court that the four claims that were dismissed were filed after the statute of limitations expired.

The other two claims are not subject to the same deadline because they were based on anticompetitive conduct alleged in a Department of Justice complaint, the appeals court said.

"Taking Novell's allegations as true, as we must, the injury that Novell alleges here is plainly an injury to competition that the antitrust laws were intended to forestall," appeals court Judge Allyson Duncan wrote in an opinion joined by Judge Dennis Shedd.

Judge H. Emory Widener Jr. also heard the arguments in the case but died before the panel filed its decision.

Qualcomm, the second-biggest maker of chips that run mobile phones after Texas Instruments, named Donald Rosenberg, the outgoing general counsel of Apple, as its new top lawyer. Rosenberg will help the company defend itself against a series of patent and antitrust lawsuits. Separately, Apple said Friday that it was hiring Daniel Cooperman of Oracle to replace Rosenberg, who had been at Apple less than a year.

The San Diego-based company, ensnarled in patent litigation with Nokia and competitor Broadcom, suffered several litigation setbacks earlier this year.

In June, the International Trade Commission ordered an import ban on newer models of phones that run on Qualcomm chips because the chips infringe a Broadcom patent. The ruling, which threatened to prevent phone companies from introducing new models for the holiday season, was put on hold earlier this month by an appeals court.

In August, a federal judge ruled that Qualcomm had intentionally infringed Broadcom's patents and ordered Qualcomm to pay twice as much in damages as originally ordered.

Another court ruled that Qualcomm had withheld evidence in a separate lawsuit and that former company attorneys could face possible fines or sanctions for what that judge called an "organized program of litigation misconduct."

Earlier this month, the ITC said that it would investigate patent-infringement claims by Nokia against Qualcomm.

Lou Lupin resigned as general counsel in August for what Qualcomm called "personal" reasons.

Rosenberg joins Qualcomm after working at Apple for less than a year. He joined Apple in November after its former general counsel, Nancy Heinen, left in May 2006. She was sued by the Securities and Exchange Commission for her alleged role in improperly backdating stock-option grants.

Rosenberg, who will join Qualcomm on Oct. 8, was previously general counsel at International Business Machines.

Google Inc. is still hoping to persuade a federal judge to consider its concerns about a search feature built into Microsoft Corp.'s Windows Vista.

In a court filing this week, the search company reiterated its request for standing to submit a brief for consideration by U.S. District Judge Colleen Kollar-Kotelly. The judge said last week that Google should instead continue working through the Justice Department and other plaintiffs in the Microsoft antitrust case.

Google spokesman Adam Kovacevich described the latest filing as primarily a procedural matter, complying with the judge's statement in court that Google needed to answer Microsoft's response to its original motion for standing in the case. He said the filing doesn't signal that Google is looking for further means of pressing its case.

At the same time, Google made it clear in the filing that it still believes the judge should consider its concerns directly.

The filing said Google "offers an important and useful perspective" in the Microsoft case.

The dispute revolves around Windows Vista's desktop search function, which indexes files for fast searching by users.

Google argued that the way Microsoft built desktop search into the operating system wasn't fair to competing desktop search tools, such as its own Google Desktop.

Microsoft, the U.S. Justice Department and state antitrust officials agreed to a compromise two weeks ago that opened up some elements of Windows Vista's desktop search function to competing programs. Google said it wasn't sure that the changes went far enough.

Google last week asked the judge for standing to request an extension of Microsoft antitrust oversight, scheduled to expire later this year, so that the court and government officials could ensure that the compromise had the desired effect.

Microsoft spokesman Jack Evans reiterated Tuesday that the Justice Department and states said they were satisfied with the compromise, and that Microsoft believes Google has provided no new information in its filings to suggest otherwise.

Google's latest filing outlined the reasons the company believes it should be allowed to participate in the case and file its request. Because it wasn't a plaintiff in the case, it's seeking standing as amicus curiae, or friend of the court, to be able to make its case directly to the judge.

"As the developer of a major desktop search product and the company that brought the desktop search issue to the attention of the plaintiffs, Google has familiarity with the issues raised and is well positioned to provide information to the Court," the filing said.

Google concluded by asking the court to either let it participate as amicus curiae or defer ruling on that matter until the company has the information it needs to better assess the desktop-search compromise.

The US Federal Trade Commission (FTC) has begun an investigation into a proposed purchase of advertising management technology company DoubleClick Inc. by Google Inc. for possible anti-trust violations, the New York Times reported Tuesday. Google announced its plans to purchase DoubleClick for $3.1 billion in April, and the FTC investigation was expected to follow after several Internet privacy groups filed a joint complaint with the FTC concerning the potential buy-out. According to Don Harrison, Google's senior corporate counsel, the acquisition "poses no risk to competition" and has been reviewed by "numerous independent analysts and academics."

Google has been the focus of many investigations concerning its compliance with both US and foreign laws. Most recently, the European Commission began an investigation into whether Google complies with EU privacy rules. In April, AFP and Google settled a landmark copyright infringement lawsuit over Google's practice of automatically pulling and displaying photos, headlines and leads of news stories from the websites of AFP subscribers.