Google have announced that they are abandoning their deal with Yahoo, that has been in the pipeline since June this year, in order to avoid a “protracted legal battle” with its regulators.

Part of the deal was that Google would provide some advertising around Yahoo’s search results, which would have been worth $800 every year for Yahoo.

Yahoo have admitted that they are disappointed that Google had decided not to fight for the deal in court. They were relying on the deal with Google to help calm shareholders that were unhappy about their rejection of Microsoft’s takeover offer.

Google has said that it will not allow a court battle to distract it from its core mission, stating in a blog “that would be like trying to drive down the road of innovation with the parking brake on.”

Yahoo’s management has been under a lot of pressure since they refused Microsoft’s $33 per share offer, which valued the company at $47.5 billion overall, especially as on Wednesday they were trading shares at $14 each.

Now that the deal with Google has fallen through, Yahoo may have to reconsider and try to re-negotiate a deal with Microsoft, even though Microsoft have publicly said that they are no longer interested.

Some shareholders of Yahoo are so angry about the refusal of Microsoft’s deal in the first place that one of them has tried to sack the entire Yahoo board and try to resurrect the Microsoft deal.

As the two biggest search engines, the US Department of Justice regulators were concerned about the potential deal between the two companies, who had delayed implementing their deal while it was considered by the regulators.

Microsoft and the Association of National Advertising were also among those who opposed the deal on the grounds that Google and Yahoo between them control over 80% of the search market. They suggested that the partnership would drive up online advertising rates, a claim that Google rejected this because its rates are set by an auction system.

The Department of Justice told Google that they planned to file a lawsuit in order to try and block the deal.

In a statement, Google have said that: had the companies implemented their arrangement, Yahoos 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.”