Microsoft and Yahoo are discussing their planned search collaboration with European regulators to establish whether the deal needs to be subjected to a formal merger probe, Microsoft said yesterday.

"We are having informal discussions with the European Commission [EC]," said Jesse Verstraete, Microsoft's senior corporate communications manager.

The EC, meanwhile, refused to comment on the talks.

"It is up to the parties involved to decide whether they have to notify us," the Commission's competition spokesman, Jonathan Todd, said.

If Microsoft incorrectly concluded that a formal notification was not necessary then it could face fines.

One source close to Microsoft said the question under discussion with the European regulators is whether the proposed deal is a merger or simply a collaborative agreement.

The situation in Europe is different to the one in the US, where the Department of Justice last week asked the companies for further information about their planned deal, said the source, who asked not to be named.

"Google isn't as powerful in the US as it is in Europe, where it has a 90 percent share of the market for internet search," said the source. In the US, Google's market share stands at 75 percent, she said.

Microsoft therefore expects the deal with Yahoo to pose less of a problem for regulators in Europe, because it will be seen as a useful counterweight to the near-ubiquitous Google search engine, she said.

Broadband speed test

See also: Microsoft-Yahoo deal may fall foul of DoJ