A pack of California legislators sent a letter to U.S. Attorney General Michael Mukasey today, asking the DOJ to think twice before interfering with an advertising deal between Google and Yahoo.

DOJ interference in the Google-Yahoo agreement could chill future, similar deals between other companies afraid of facing scrutiny, the letter said.

The agreement, which would allow Yahoo to supply its advertising network with ads placed at Google AdSense, is facing intense scrutiny from both regulators and businesses due to antitrust concerns.

Reports indicate that DOJ investigators are eyeing the advertising deal suspiciously, and recently retained the services of veteran litigator and former Walt Disney Co. Vice Chairman Sanford Litvack, in the event that it decides to block the deal.

Interfering with the Google-Yahoo deal could “detrimentally affect the online advertising market and electronic commerce,” the letter reads. “Microsoft had a similar arrangement with Yahoo and Google has similar arrangements with tens of thousands of companies.”

Indeed, non-exclusive deals between rivals are “standard among Internet companies,” it says.

The Center for Digital Democracy’s Jeff Chester said the letter smells like it was written under the influence of Google and Yahoo lobbyists, and reveals “a shocking lack of concern for the public interest, let alone competition.”

“These House Democrats are shouting ‘deregulation’ to the Department of Justice when they write that the deal should go through without regulatory action,” said Chester, whose group advocates DOJ intervention.

In a brief interview with MediaPost’s Online Media Daily, an unnamed Google spokesman said his company is “continuing to have cooperative discussions with the [DOJ] … and voluntarily [delaying] implementation in order to give them time to understand the agreement.”

A Yahoo spokeswoman noted the deal, which both companies signed last June, will “strengthen Yahoo's competitive position” and bolster the quality of its advertising marketplace.

Investigators at the European Union are reportedly looking into the deal as well, and the European Competition Commission opened an inquiry last July.

Critics say the ad deal could raise pay-per-click rates considerably, possibly by as much as 22 percent (PDF), and note that Google-Yahoo cooperation would corner as much as 90 percent of the advertising market.