The Wall Street Journal is reporting that Google and Yahoo are closing to walking away from their proposed advertising alliance after the Justice Department said it would go to court to stop the deal absent major concessions.

Earlier this month Consumer Watchdog wrote the Justice Department to block Google’s proposed advertising alliance with Yahoo based on privacy concerns.  The letter notes that the introduction of Google’s new browser Chrome, without new privacy protections, poses an unprecedented threat to consumers. (Read it at: http://www.consumerwatchdog.org/resources/JusticeGooglelet100208.pdf)

The two Internet companies have so far failed to reach an agreement
on their partnership with the Justice Department, which has been
building a lawsuit to block the deal. Following a meeting Thursday with the Justice Department, the companies could announce a decision to back away from the partnership — or a last-minute resolution, if one is
reached — by the middle of next week, according to these sources.

Google spokesman Adam Kovacevich said the company continues to have
‘cooperative discussions with the Department of Justice about this
arrangement."

Hopefully Google is getting the message that it needs to take its dominance over the personal computing seriously and concede more to consumer demands if it wants to grow its business.