Google has withdrawn from a proposed search advertising agreement with Yahoo! after the U.S. Department of Justice announced it would not allow the deal to go through on anti-competition grounds, the online search giant confirmed, Media Guardian reported Wednesday.

"Google notified Yahoo! of its refusal to move forward with implementation of the agreement following indication from the Department of Justice that it would seek to block it, despite Yahoo's proposed revisions to address the DoJ's concerns," Yahoo! said in a statement. "Yahoo continues to believe in the benefits of the agreement and is disappointed that Google has elected to withdraw from the agreement rather than defend it in court."

Under the deal, Yahoo! would have opened up some of its ad space to Google, and the two would have shared the revenues. Yahoo! had hoped the deal would create US$800 million in revenue each year, according to Media Guardian.

David Drummond, senior vice president and chief legal officer at Google, stated the deal was not worth defending in court.

“Pressing ahead risked not only a protracted legal battle but also damage to relationships with valued partners. That wouldn't have been in the long-term interests of Google or our users, so we have decided to end the agreement,” Drummond stated on Google's blog.

The World Association of Newspapers and others, such as U.S. group the Association of National Advertisers, also spoke out against the deal.

In September, WAN released a statement pointing out that if the deal went through, it could potentially crush newspapers' ad revenue-generating chances online.

“WAN believes that the competition that currently exists between Google and Yahoo is absolutely essential to ensuring that our member titles receive competitive returns for online advertising on their sites, and for obtaining competitive prices when they purchase paid search advertising,” Gavin O'Reilly, president of the Paris-based WAN, stated in a letter.