The $44.6 billion bid, which dates back to February 2008, would merge Yahoo!, the second biggest search engine after Google, with Microsoft's Bing search engine, which has been slow to gain a foothold in the market.
Google's leading market share in Europe allegedly tipped the decision in Microsoft's favour and the merger could create a rival big enough to crush the search engine's dominance, argue observers in favour of the deal.
"In the European Economic Area, Microsoft and Yahoo!'s activities in Internet search and online search advertising are very limited with combined market shares generally below 10%. Google, by contrast, generally enjoys market shares above 90%," said a statement from the EU's competition authorities yesterday.
The statement also said that the deal's approval was subject to Yahoo! having a five-year majority share of the search revenues.
"Microsoft will retain 12% of the search revenues generated on Yahoo!'s and its partners' websites during the first five years of the agreement, paying 88% to Yahoo! as a traffic acquisition cost," yesterday's statement read.
Microsoft and Yahoo! signed a 10-year search partnership last July, which needed EU and US approval to take effect.
US approval of the deal is still pending. According to sources quoted by Reuters, the US Department of Justice (DOJ) will give the Internet giants its blessing in March.
Google dropped its own advertising deal with Yahoo! in 2008 under pressure from the US DOJ.
