Google and Yahoo are now co-operating with European Authorities over a probe into the proposed ad revenue sharing deal between the two web giants.
The deal is already under investigation in the States, where a coalition of companies and organisations has already voiced its concerns that the deal could negatively impact the Internet.
Google and Yahoo say that the deal will only be in effect for the North American market but the EU is now investigating following on from complaints from the World Association of Newspapers.
"In mid-July, we decided to open a preliminary investigation on our own initiative into potential effects of the Google-Yahoo agreement on competition in the European Economic Area (EEA) market", Jonathan Todd, a spokesman for European Competition Commissioner Neelie Kroes, told Reuters.
Both Google and Yahoo have issued statements.
Yahoo says: "Yahoo has been and will continue to work with the relevant regulatory agencies to provide officials with the necessary information about this business agreement, which we believe will strengthen competition in search and make advertisements more relevant for our users".
"The agreement is limited in scope to Yahoo's US and Canadian websites, and it will not have any significant effect on Europe. We are, of course, cooperating with the commission and are confident that they will reach the same conclusion", added Google spokesman Adam Kovacevich.