United States and European regulators gave green light to a deal between Microsoft and Yahoo to integrate their search engine operations in a bid to challenge the invincible status of Google.

The agreement, which was announced last year, was pending, subject to regulatory approval as the pact was viewed detrimental in the interest of consumer and to the competition. The pact was struck in July 2009 for a period of the 10-year to take on Google, which controls about 65 per cent of the US search market.

Microsoft has 11 per cent and Yahoo 17 per cent of the internet search business. Under the agreement Yahoo will use Microsoft's Bing search engine on its sites and sell ads. Microsoft will acquire Yahoo's search engine expertise and will also get to keep 12 per cent of search revenues generated on Yahoo's websites.

Yahoo hired a new CEO Carol Bartz in January 2009, after billionaire investor Carl Icahn forced Jerry Yang to quit after a failed merger between Microsoft and Yahoo. In July, Bartz committed to the partnership, which Yahoo feels will sharply cut search-related costs.