Microsoft search will appear on Yahoo websites, now the deal between the companies has been approved by both the European Commission and the US Department of Justice.
Microsoft has been given the go ahead to acquire an exclusive 10-year licence for Yahoo's search and advertising business, the European Commission said in a statement on Thursday.
"Pursuant to the agreements concluded by Microsoft and Yahoo, Microsoft will acquire a 10-year exclusive license to Yahoo's search technologies," said the Commission statement. "Microsoft will also hire Yahoo internet search and search advertising staff."
As part of the deal, Microsoft will retain 12 percent of the search revenues generated by its search app, Bing, on Yahoo's and partner websites during the first five years of the agreement.
In submissions to the Commission, Microsoft argued that the acquisition would make it a more credible competitor to Google, said the statement. Microsoft and Yahoo currently have 10 percent search market share in Europe, whereas Google has 90 percent, said that Commission statement.
Google said in a statement on Friday that it welcomed competition, and pointed out that it already competed for search and advertising revenue.
"There has always been robust competition in our industry, which keeps us on our toes and benefits users," said the Google statement. "We compete against a number of alternatives, including traditional search engines, vertical search sites, social networks, and other forms of online and offline advertising."
The Commission said in its statement that the Microsoft acquisition would not impede competition in the European Economic Area.
The US Department of Justice (DoJ) antitrust division also decided that competition in the US would not be affected by the deal, and that Microsoft and Yahoo would probably benefit in terms of performance.
"The proposed agreement likely will enable more rapid improvements in the performance of Microsoft's search and paid search advertising technology than would occur if Microsoft and Yahoo were to remain separate," said a DoJ statement on Thursday.
The deal will combine the back-end search and paid search advertising technology of both Microsoft and Yahoo, the DoJ added.
Microsoft said on Thursday that the deal will come into effect soon. "Implementation of the deal is expected to begin in the coming days and will involve transitioning Yahoo's algorithmic and paid search platforms to Microsoft, with Yahoo becoming the exclusive relationship sales force for both companies' premium search advertisers globally," the company said. These changes are expected to be completed globally by early 2012.
Microsoft chief executive Steve Ballmer said the deal would improve user choice. "Although we are just at the beginning of this process, we have reached an exciting milestone," he said.
"I believe that together, Microsoft and Yahoo will promote more choice, better value and greater innovation to our customers as well as to advertisers and publishers."
A Microsoft spokesperson told ZDNet UK on Friday that Microsoft had not paid any money to acquire the 10-year licence, which will see Yahoo get 88 percent of revenue from search and advertising.