In February, Glenn Manishin, a top tech antitrust lawyer at Duane Morris, told a UBS conference call that a Yahoo-Google search tie-up would be "much more problematic" than the Microsoft-Yahoo merger itself.

The reason is simple. Google commands nearly 70 percent of the search market, while Yahoo holds almost 20 percent. Combining the two companies' search engines would create a virtual monopoly in search.

Manishin said the one exception would be if Yahoo stood before the Department of Justice and argued that it was a "failing company" and thus needed the deal to avoid "financial distress." In other words, Jerry Yang would have to convince the D.O.J.—and European regulators—that Yahoo needs a deal with Google in order to stave off bankruptcy.

While Yahoo is getting slaughtered by Google in search, it is hardly in "financial distress." In fact, it earns over $1 billion per year, and was attractive enough for Microsoft to offer $45 billion for it.

And given Google's attitude toward the Microsoft-Yahoo deal—warning that the tie-up would in effect create an internet monopoly—Microsoft would waste no time in pointing out, correctly, the anticompetitive implications of a Yahoo-Google search pact.

Microsoft general counsel Brad Smith said Wednesday the agreement "would consolidate over 90 percent of the search-advertising market in Google's hands."

"This would make the market far less competitive, in sharp contrast to our own proposal to acquire Yahoo," Smith said in a statement. "We will assess closely all of our options. Our proposal remains the only alternative put forward that offers Yahoo shareholders full and fair value for their shares, gives every shareholder a vote on the future of the company, and enhances choice for content creators, advertisers, and consumers."