Microsoft and Yahoo apparently received clearance from both the European Commission--that's the EU's antitrust regulatory body--and the U.S. Department of Justice to complete their proposed search and advertising deal.

The 10-year agreement will see Microsoft taking over Yahoo's algorithmic and paid search platforms, while Yahoo handles sales-relationship duties for a substantial segment of both companies' online search advertisers (specifically, high-volume advertisers, SEO and SEM agencies, and resellers; Microsoft will apparently handle self-service advertisers). In other words, Bing will become Yahoo's underlying search engine, although Yahoo will continue to offer its own branded content and applications.

"The European Commission has approved under the EU Merger Regulation the proposed acquisition of the Internet search and search advertising business of Yahoo Inc. by Microsoft," the European Commission, whose regulatory actions have probably resulted in more than one chair being tossed in Microsoft's offices over the years, wrote in a Feb. 18 statement. "The Commission concluded that the concentration would not significantly impede effective competition in the European Economic Area (EEA) or any substantial part of it."

Hear that soothing, blissful silence? That's Yahoo CEO Carol Bartz's and Microsoft CEO Steve Ballmer's heads not exploding in gaudy bursts of rage.

According to a joint statement issued on Feb. 18, the two companies "hope to make significant progress transitioning U.S. advertisers and publishers prior to the 2010 holiday season, but may wait until 2011 if they determine the transition will be more effective after the holiday season. All global customers and partners are expected to be transitioned by early 2012."

I bet Google announces something really nifty in the search and advertising space this week, or at least a new Google Labs feature that lets you take back that tragically worded e-mail before it arrives in your nearest and dearest's inbox.

As I detailed in a previous Microsoft Watch post, Yahoo's percentage of the U.S. search market has been steadily declining. In December 2009, it held 15.3 percent, compared with Google with 65.4 percent and Bing with 10.4 percent. If that trend holds through 2010 and into 2011, it potentially reduces the gains Bing would have otherwise made by running Yahoo's searches, and by extension makes the deal between Microsoft and Yahoo a weaker thing. Both Bing and Yahoo have been integrating more features into their respective lineups in a bid to gain and retain users, which seems to be working out more for Bing than for Microsoft's new partner.

Nonetheless, the deal will likely work out better for Microsoft than if it had succeeded in its attempts to purchase Yahoo back in 2008 for $47.5 billion; had that acquisition gone through, Microsoft would have been tasked with trying to digest a massive company just as the global recession wreaked havoc on its bottom line. Microsoft and Yahoo both face an uphill battle against Google for U.S. search engine market share, but from Redmond's perspective this must be far better than the alternative.