Microsoft and Yahoo have won clearance from the US Department of Justice and the European Commission to implement their internet search alliance, which the companies hope will be a challenger to market leader Google.
Anti-trust regulators cleared the Microsoft-Yahoo tie-up without any restrictions.
Under the terms of the 10-year partnership, first announced in July, Microsoft's Bing will become the search engine on Yahoo websites, leaving Yahoo to focus on display advertising, core news, finance and sports properties, as well as on new ways to deliver Microsoft's search results to Yahoo users.
Microsoft will pay Yahoo an initial rate of 88 per cent of search revenue generated on Yahoo's owned and operated sites for the first five years of the agreement.
Yahoo expects the deal to enable it to earn revenue from search ads sold on its site, while saving the company costs it would incur if it had to run its own internet search engine. That will give Yahoo more capacity to invest in core web properties, new mobile services and its display-advertising business.
Yahoo's share of US search queries dropped three percentage points to 17 per cent in the past year, according to research group comScore. In contrast, Google strengthened its hold on first place with about 65 per cent of queries, while Microsoft's Bing gained share at Yahoo's expense, rising to about 11 per cent in January.
Yahoo chief executive Carol Bartz said the deal will allow her company to focus more on its "innovative search experience." Microsoft Chief Executive Steve Ballmer added the alliance would promote "more choice, better value and greater innovation" for customers.
Regulators with the European Commission found that advertisers and online publishers expect the deal to increase competition in internet search and search advertising by allowing Microsoft to become a stronger competitor to Google.
The Justice Department's clearance of the Microsoft-Yahoo partnership comes after it raised objections in 2008 to a proposed search deal between Yahoo and Google. Google withdrew from that deal in November 2008 in the face of the department's opposition.
Google said it competes with a number of search and advertising alternatives and didn't object to Yahoo's pact with Microsoft.
