There was no response from Yahoo yesterday as it examined Microsoft's US$44.6 billion (S$63 billion) offer.

But leading members of the US Congress Judiciary Committee announced that a hearing will be held on Friday. The US Justice Department and the European Commission too have indicated interest in scrutinising any deal on antitrust grounds.

'Microsoft's bid to acquire Yahoo is certainly one of the largest technology mergers we've seen and presents important issues regarding the competitive landscape of the Internet,' Congressmen John Conyers and Lamar Smith said in a joint statement on Friday.

Mr Steve Ballmer, Microsoft's chief executive was clear about his objectives in making the offer. In his letter to Yahoo, he noted the competition from Google, without mentioning the company by name, and said that a merger would create a number of advantages, including scale, more research and development, and a wide array of products.

'Today, the market is increasingly dominated by one player who is consolidating its dominance through acquisition. Together, Microsoft and Yahoo can offer a credible alternative for consumers, advertisers and publishers,' he said.

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A marriage of Microsoft and Yahoo would indeed create a huge technology company with a strong position across nearly every online product, including e-mail, instant messaging, news, photo storage and search.

But the fact that Google is so dominant in online advertising probably helps Microsoft, some analysts say.

Even if it led in effect to a duopoly, a merger would create 'more vigorous competition' in a market that might otherwise fall to a single company, said Mr Ron Cass, a former vice-chairman of the US International Trade Commission.

The prospect of a stronger rival to Google was welcomed by advertisers wary of its growing strength.

Sir Martin Sorrell, CEO of WPP, said: 'Clients would like to see more balance in the marketplace.'

Google declined to comment on the proposed merger.

Whether the proposed union would work is open to question.

First, the offer must be accepted by Yahoo's shareholders. Yahoo co-founder and chief executive Jerry Yang has reportedly resisted selling but the offer of US$31 a share - when Thursday's closing price was below US$20 - is likely to be attractive to the company's shareholders.

On Friday, Yahoo's shares rose 48 per cent to US$28.38, up US$9.20. Microsoft shares fell to US$30.45, off $2.15, or 6.6 per cent. Google shares closed at US$515.90, which is a decline of US$48.40, or 8.6 per cent.

Whether a Microsoft-Yahoo union would be enough to pose serious competition for Google is also an open question.

Critics say acquiring Yahoo would still leave Microsoft with a smaller share of the Web search market and Mr Ballmer would face the distraction of combining the businesses.

Much would also depend on whether the merged company would have the dynamic leadership to take on Google, something which has been lacking in recent years, some observers noted.

'To make this really sing, you've got to have a person at the helm who's a truly visionary leader,' Gartner Group analyst Allen Weiner said. 'I don't see that person at either company now.'

Microsoft's top brass will also have on its hands a Noah's Ark of a Web company - with two of everything - that needs to be moulded into one cohesive brand.

Analysts worry too about a culture clash that could lead to Yahoo employees running off, perhaps to Google.

Los Angeles Times, Washington Post, Reuters