Seattle:  Microsoft Corp. and Yahoo! Inc. plan to start integrating their internet-search businesses after winning regulatory approvals in Europe and the US for their efforts to challenge Google Inc.

The companies will begin implementing the combination in the coming days, according to a joint statement.

The agreement won't harm competition in the 27-nation EU, the European Commission (EC) said. The US Department of Justice also approved the deal.

Microsoft and Yahoo struck the 10-year agreement in July to take on Google, which controls about two-thirds of the US search market. Yahoo, which has lost almost a fifth of its market share in the past year, plans to use Microsoft's Bing search engine on its sites and sell ads next to the results.

"Now they can push forward," Colin Gillis, an analyst at BGC Financial LP in New York, who recommends buying Yahoo shares and doesn't own any, said.

Politicised

"It wasn't a given that you were going to get EC and US approval. The investor concern was that if this process got politicised, both companies are stuck in limbo."

Microsoft and Yahoo plan to complete the integration by the end of the year, at least in the US.

They plan to move US advertisers and publishers to the new arrangement before the 2010 holiday season, though they may wait until 2011.

All global customers and partners will be switched by early 2012, the companies said. Microsoft shares have lost five per cent this year. Yahoo gained 10 cents to $15.54. Google climbed $5.01 to $543.22 on Thursday.

While Mountain View, California-based Google is maintaining its dominance in the search industry, Bing has gained market share for eight straight months. Redmond, Washington-based Microsoft plans to claim more of the market when it completes the agreement with Yahoo.

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 European Commission said in a statement today.

The agreement is not likely to reduce competition in the US, the Justice Department said in a separate statement.