The election is not the only event with only days to go–a move in face-off Yahoo and Google are in with the Justice Department over their controversial search advertising partnership will have an outcome, sources close to all sides said, before the next President is chosen.

Thus, I predict news either tomorrow or Monday.

Why? Well, campaign news will surely drown out any attention any development might get, of course.

But, actually, for more obvious reasons: Whoever is elected, the Assistant Attorney General for Antitrust, Thomas Barnett, will be leaving that post sometime after the Nov. 4 election.

Thus, Barnett and his team are likely–after all this noise–to want to take action of some sort before he becomes, in essence, a lame duck.

Of course, it is ironic that, as the clock counts down the last minutes, a regulator not regarded as a very effective trustbuster and who has taken a mostly hands-off attitude toward meddling with businesses, could launch a lawsuit against the most powerful Internet company in the world.

Or not.

Yahoo (YHOO), Google (GOOG) and the Justice Department are still talking, sources said, trying to come to some accommodation.

So, as we wait for the verdict, here’s a short handicap of options:

1. Google and/or Yahoo walk:

It seems far more likely that Google would do this than Yahoo, given its corporate culture is impatient with moving forward illogically (think Spock and you have the right picture of Google’s mindset).

I would imagine Google execs do not want to accept any caps or changes to the deal at all, and might conclude such restrictions make it not as worthwhile.

Yahoo, of course, cannot walk as easily, depending on the deal for revenue and because it must avoid having to then turn to Microsoft (MSFT) to strike a search ad deal from a very prone position.

Thus, Yahoo has to be pulling out all the stops to make something work.

Then again, if a Justice Department lawsuit is the alternative, walking would be the best option.

Prediction: Even odds.

2. Google and Yahoo accept changes:

Whether it be caps or monitoring or forcing Yahoo to strike a similar deal with Microsoft, this option seems like a bad one for the pair, as it hobbles the deal before it even has a chance to be tested.

Plus, the joy of government regulators breathing down your neck 24/7 is, well, priceless, especially after Google CEO Eric Schmidt told regulators he would move forward with or without them.

While Google has now perhaps permanently put the government on notice that is must be more scrutinized than ever going forward with that unfortunate statement, I would be surprised if Google accepted any substantial changes to the deal.

Prediction: If small adjustments, likely. If more, it would be hard to imagine.

3. The Justice Department files a lawsuit:

Ouch. Bad all around.

First, the Justice Department will have a hard time proving this partnership–which has not launched–is damaging. While it is good to have all those nervous advertisers to point to, it will be an uphill slog of a case.

Second, another lawsuit or fight for slap-happy Google? Oh, dear. It just settled the book scanning lawsuit and is still embroiled in a bigger lawsuit with Viacom (VIA) over YouTube copyright infringement. Enough.

Third, a Justice Department lawsuit for Yahoo should be the proverbial straw that breaks Yahoo CEO Jerry Yang’s rule of the company and would get Yahoo stock to the penny-stock level.

Prediction: I witnessed the Microsoft antitrust trial, while working at the Washington Post and I am here to say to all parties involved: Do not go there.

4. Justice waves the deal on through as is:

Wake up, Eric and Jerry, you’ve been dreaming! Also, in this event, the head of Microsoft CEO Steve Ballmer would explode.

Prediction: Well, it could happen. Also Ralph Nader could get elected.

Please see this disclosure related to me and Google.

You have to admire the sledgehammer stylings of Google CEO Eric Schmidt, who loves to accuse Microsoft (justifiably, I might add) of bullying lobbying tactics in our nation’s capital, in the latest moves in the regulatory fight over the controversial search advertising outsourcing partnership that Yahoo and Google have struck.

Today, just days before the Justice Department will decide whether to move ahead with a lawsuit to stop the Yahoogle deal from proceeding or let it move forward with some other remedy or tweaking, Schmidt announced that he would be campaigning for Democratic presidential candidate Sen. Barack Obama in the last two weeks of the election.

Schmidt said in an interview that it was a personal endorsement and not from the company, even though many of its top execs are longtime supporters of Obama.

“I’m doing this personally,” he said. “Google is officially neutral.”

Well maybe so, and Schmidt has long been politically active himself.

But I cannot help but be struck by the perfect timing of the announcement, right as government officials under the Bush administration must make a move before the election makes them unable to do so.

(Then again, if Schmidt had endorsed Obama after any move by the government, it probably would have looked worse.)

In any case, it now makes any action by Washington policymakers even more complex.

To begin, Assistant Attorney General for Antitrust Thomas Barnett (pictured here), who will be leaving that post after the November election, has not been much of a trustbuster, to say the least, taking a mostly hands-off attitude toward business regulation.

But, in taking a long look at the deal in the first place, a partnership that does not actually need Justice Department approval to move forward, and hiring an outside counsel too, Barnett has also put himself out on a limb.

Thus, he is likely not to pat Yahoo (YHOO) and Google (GOOG) on the back and wish them good luck in their exciting endeavor.

That’s especially true given that a wide range of advertisers has expressed worries about the deal, which they say will lift online search ad prices and create a dangerous duopoly, along with public interest groups that have called the deal dangerous. Plus, there are also the many other special interest groups, all jacked up by Microsoft’s lobbying.

(It still surprises me up that some reports find it shocking that Microsoft is being aggressive here–helloooooo–Google would do exactly the same if the tables were turned.)

Google and Yahoo are arguing that the deal is nonexclusive, does not violate antitrust laws and that prices will not rise since they are determined by auction.

Still, sources close to all parties–Yahoo, Google and Microsoft (MSFT)–said the decision from government regulators, expected as early as this Wednesday, could still go a number of ways.

Under one scenario, the government could file a lawsuit and ask for an injunction to stop the deal from starting at all.

This move would be the most drastic of all. And, more to the point, it is hardest to prove, because there is no actual damage yet to point to as a result of the deal, even if the pair do control upward of 80 percent of the search market.

Under a second, the Justice Department could file a lawsuit opposing the deal, but not ask that it be stopped.

That means that the Yahoo and Google deal could go forward with implementation, even with the suit hanging over its head. It is a move that would provide a lot of data to determine the true impact of the No. 1 and No. 2 search players being in business together.

Under a third scenario, regulators could give Google and Yahoo tacit approval for the deal, with certain new rules about caps or monitoring that are agreed to in advance.

This option is the most complicated, since it is hard to determine what is dangerous and what is not in the fast-moving world of search. Will the Justice Department have a monitor sitting cluelessly next to Yahoo and Google engineers as they fiddle with the algorithm?

Still some sort of new rules to the deal are expected, if Justice takes a pass on a lawsuit.

“They are not going to hold a parade for us, and it is obvious they are interested in putting appropriate guardrails in place,” said one source close to Yahoo and Google. “But they might just say, ‘Go ahead, but we are watching you very carefully.’”

Under a fourth scenario, which Google is pushing for strongly, the Justice Department could simply pass on taking any action at all.

In that case, which seems unlikely, it is not without possibility that some advertisers or even Microsoft could go to court to seek their own injunctions, although that would be extreme.

Microsoft could also ask, given that the Yahoogle deal is nonexclusive, to make a similar deal with Yahoo. If it is rejected, the software giant could use that as proof that it is not.

But what is perhaps most interesting is that Yahoo and Google have not completely agreed as to how to handle this difficult process.

Yahoo, which has only recently become more active in lobbying for the deal, has been more willing to allow the government to set parameters in order to get regulatory blessing.

The company has also been quietly telling advertisers worried about it there are moves to come–Yahoo execs are obviously referring to a possible merger deal with Time Warner over its AOL unit–that mean that advertisers should be less scared of Yahoo becoming a satellite of Google.

Google, as is typical for it, has been more aggressive in its stance, holding out for less–if any–tweaking of the original Yahoogle deal.

Even its partner Yahoo thinks the powerful Internet giant has had a tin ear in this regard so far, with Yahoo execs cringing when Schmidt was widely quoted as saying that the deal would move forward with or without Justice Department approval.

The statement by Schmidt, in which he also added, “time is money in our business,” made him seem a bit arrogant about the role policymakers have.

Obviously, Schmidt misspoke, which all neophyte politicians tend to do now and again.

Today, he was much more circumspect, although he still managed to get a dig–or was it a warning?–in.

“My sense is, the Justice Department makes judgments on these issues independent of politics,” Schmidt said, priming the pump perfectly. “It would be unfair to Justice to imply [that supporting Sen. Obama] would make a difference.”

Yes, that would be completely unfair.

Please see this disclosure related to me and Google.

Yesterday, BoomTown took a rather strong stand against Google and its recent aggressive efforts to defend its outsourcing deal to sell some of Yahoo’s search advertising.

Given that the pair have a more than 80 percent combined market share in the search business, I and many others–advertisers, publishers and state and federal regulators–are a bit nervous about further concentration of market power in one set of hands, even if they are such Googley hands.

But in the interest of fairness and because I like to argue with myself–combined with some insights from some smart people I have kibitzed with on the issue–here is a counterpoint with three key reasons why Google and Yahoo might hold firm in launching the partnership, which sources said is likely to start on Oct. 9.

1.) The Justice Department is not actually serious about taking on Google.

While it is true that the government has hired seasoned litigator Sandy Litvack–the former antitrust chief in the Jimmy Carter administration–to consider whether it has a case against the controversial partnership, the move by the DOJ’s antitrust unit might be more political coverage than anything else.

Assistant Attorney General for Antitrust Thomas Barnett (pictured here), who will likely be leaving that post after the November election, has not been much of a trustbuster, to say the least, taking a mostly hands-off attitude toward business regulation.

Thus, he might be making the move to placate intense lobbying by Microsoft (MSFT) and to look like the DOJ’s antitrust unit can act.

Interestingly, Barnett had, according to a New York Times piece last year, “urged state prosecutors to reject a confidential antitrust complaint filed by Google that is tied to a consent decree that monitors Microsoft’s behavior. Google has accused Microsoft of designing its latest operating system, Vista, to discourage the use of Google’s desktop search program.”

And even more interesting, Barnett previously worked for a law firm that repped Microsoft on antitrust issues (although Barnett did not work on Microsoft cases).

2.) The Justice Department will lose if it decides to make a case against Google.

Let’s be clear–Google (GOOG) has done nothing wrong yet, because the Yahoo deal has not yet begun.

Well, except that it has been scarily successful in its primary business of search.

Google has argued that such success is no crime and that the deal would have strong user benefits.

The company has also argued that working with Yahoo (YHOO) will not raise online ad prices, part of Google’s basic argument that its auction-style business model where advertisers set the price makes that impossible.

But what its critics are essentially asserting is that, because of its dominance, Google should simply not be allowed to strike a partnership with the second largest player, Yahoo.

Fears include that rise in online ad prices, a Google control over the market that would make it impossible for others to compete and an increased ability to dictate terms to customers.

But, Google argues, that’s all speculative and unknowable until the partnership with Yahoo launches.

Thus, there’s not a whole lot for the Justice Department to hang a case on, in contrast to its case against Microsoft, which landed in court because of bullying behavior that actually took place before the case was waged.

So why should Google run away, when there is no tangible proof of abuse?

Better still, if the DOJ did take Google on and Google won, the Justice Department would be hard-pressed to come at Google again for a good long time.

3.) If Google caves and walks away, it damages Yahoo and makes for a bad precedent.

It is not likely that Google wants to make an enemy of Yahoo, because even in its weakened state, Yahoo is a better to have as a friend than as a foe.

And taking away an expected $800 million Yahoo estimates it will make in added revenue on the deal is not any way to treat a friend.

In addition, one could argue that walking away now is premature. As Google’s power grows, there will never be a better chance for it to win its arguments.

And if Google gives in to DOJ pressure now, essentially admitting it is too powerful, it might have to concede one thing after the next in the future–from distribution deals to acquisitions to whatever it might try to do.

Finally, while I still believe Google should not be in business with Yahoo, I think it is indeed going to stick to its typically stubborn guns, launch on Oct. 9 and then make tweaks that regulators might request based on how the partnership goes.

But, in order to do that most smoothly, it might be a good idea for Google execs to stop making so much noise defending themselves and to resist the urge to attack Microsoft so loudly.

It might even take a clue from the unusually quiet Yahoo, from whom not a peep has been heard on the issue.

Google could do with some of that self-control.

Because that famous line from “Hamlet” certainly applies: The search giant doth protest too much, methinks.

(By the way, besides a press conference by CEO Eric Schmidt this week on the Yahoogle deal, here are two Google posts defending the deal on its public policy blog. One is by Google Chief Economist Hal Varian and another by U.S. ad head Tim Armstrong.

Please see this disclosure related to me and Google.