Justice Department, E.U. to allow Microsoft-Yahoo search alliance

Both U.S. and European officials will allow Microsoft and Yahoo to combine forces in the search engine business -- a deal long criticized by industry leaders and anti-trust opponents.

The two tech giants first proposed the alliance last year, pitching the plan to port Microsoft's "Bing" search engine on Yahoo as the only way to drive competition against Google, which currently dominates the search market.

But while it at first seemed as if government officials in both the United States and European Union would protest the Microsoft-Yahoo arrangement, both granted it unqualified approval on Thursday.

Consequently, Microsoft and Yahoo announced they would begin "the process of implementing the deal" immediately.

“This breakthrough search alliance means Yahoo! can focus even more on our own innovative search experience,”  said Carol Bartz, the CEO of Yahoo. “Yahoo! gets to do what we do best: combine our science and technology with compelling content to build personally relevant online experiences for our users and customers.”

Microsoft too hailed the deal in a statement Thursday, noting the upcoming alliance would "promote more choice, better value and greater innovation to our customers as well as to advertisers and publishers.”

Both Microsoft and Yahoo opted to partner on a search engine early last year, after officials rejected a possible alliance between the struggling, latter company and its biggest rival, Google.

At the time, the Justice Department signaled it could nail the agreement on anti-trust grounds, forcing both companies to back off.

Consequently, industry experts assumed the DOJ would scrutinize the Microsoft-Yahoo deal in a similar respect, to the delight of consumer groups, who viewed it as a death knell to competition. Others touted the the Justice Department's review as a limus test of the Obama administration's anti-trust credentials -- specifically, its willingness to regulate the online advertising industry, which it has historically courted.

But the department allowed the deal -- which has a 10-year time limit -- to remain intact. Yahoo will soon adopt Microsoft's search engine, Bing, and the two will share advertising responsibilities and revenue, the companies announced Thursday.

They plan to unveil the results of "significant progress" by the holiday season, they said in a joint release. A full transition is possible by 2012, they added.

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