Google canceled its plans for a search advertising partnership with Yahoo amid opposition from antitrust regulators and advertisers, Google's chief legal officer said in a blog posting on Wednesday.
Yahoo expressed dismay at Google's decision, saying it was "disappointed that Google has elected to withdraw from the agreement rather than defend it in court."
The U.S. Justice Department, in a statement issued on Wednesday, said it had told Google that it planned to file a lawsuit to block the deal on antitrust grounds.
"Had the companies implemented their arrangement, Yahoo's competition likely would have been blunted immediately with respect to the search pages that Yahoo chose to fill with ads sold by Google rather than its own ads," the Justice Department said.
Google and Yahoo delayed the implementation of their ad partnership to allow the Justice Department to scrutinize it for antitrust issues.
"After four months of review, including discussions of various possible changes to the agreement, it's clear that government regulators and some advertisers continue to have concerns about the agreement," the Google legal officer, David Drummond, said in his Internet posting.
"We're of course disappointed that this deal won't be moving ahead," he said.