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Executives from Silicon Valley to Madison Avenue are keeping a wary eye on the Justice Department this week as it nears a decision on whether to try to block an Internet advertising partnership between Google Inc. and Yahoo Inc.

After months of studying the arrangement, government antitrust attorneys could move any day now to sue to stop it from taking effect – or they could abandon a potential court challenge and allow the partnership to proceed.

Under the terms of the deal, Google will sell some of the online advertisements displayed alongside search results on Yahoo’s site. Yahoo entered the partnership in June after rebuffing a $47.5 billion takeover offer from Microsoft Corp. – sparking a shareholder backlash.

With the Justice Department investigation shrouded in secrecy, it is unclear when a decision could come. But after Google and Yahoo agreed this month to a “brief delay” in launching their deal to allow the government to complete its probe – and perhaps to try to reach a settlement – many observers expect an announcement by midweek.

The stakes are high. The Justice Department investigation has pitted Google and Yahoo against not only their archrival Microsoft but also many of the advertisers that are their primary sources of revenue.

In a letter to Justice Department officials last month, the Association of National Advertisers warned that the Google/Yahoo partnership would leave advertisers with fewer options for placing online ads, raise the cost of online advertising and further cement Google’s control over the search advertising market. The Association of National Advertisers represents such large companies as Kellogg Co., Johnson & Johnson, American Express Co., Walt Disney Co., Kraft Foods Inc. and McDonald’s Corp.

For their part, Google and Yahoo argue that the deal will benefit both advertisers and consumers by delivering more targeted, more relevant ads.

They also maintain that because Google’s system for identifying and displaying ads is more lucrative than Yahoo’s approach, the deal will generate additional revenue for Yahoo that will it make it a more formidable competitor to both Google and Microsoft. When it first announced the deal, Yahoo projected the agreement would increase its operating cash flow by $250 million to $450 million in the first year.

The Justice Department review could play out in one of several ways for Google and Yahoo.

If the department does not make its intentions clear soon, the two companies could simply move ahead with their partnership and wait to see whether the government acts. While a court case would be unpleasant and cumbersome, there is no guarantee that a lawsuit would succeed – leading some to speculate that the Justice Department may just be bluffing in threatening to sue.

If the department does bring a court challenge, Google and Yahoo could fight, or they could simply walk away from the deal.

Or, to play it safe, the companies could offer up voluntary conditions – limiting the volume of ads subject to the agreement, for instance – in order to head off a possible lawsuit.

Still, that approach risks exposing Google to accusations that the partnership would have in fact crossed the line into anticompetitive behavior. Many people in the industry are doubtful that the two sides can agree on concessions that would enable the deal to pass antitrust muster, still make the partnership worthwhile for Google and Yahoo and not taint the companies.

Melissa Maxman, head of the antitrust practice group at Baker & Hostetler LLP, said Justice Department attorneys must answer a series of critical questions in determining whether to intervene in a deal such as the Google/Yahoo partnership. Those include: How much market share does each party have? Would the agreement further concentrate the market? How would the deal affect consumers, competitors and other players, such as advertisers in this case?

The challenge, Maxman noted, is applying standard antitrust measures to a deal like this. For example, the department will often measure market share geographically, but Internet companies have a global reach. And precisely delineating “product” market share is hard to do in online advertising.

Microsoft, for one, argues that the deal should be blocked because Google already controls more than 70 percent of the market for search-related advertising. If it teams with Yahoo, which controls as much as 20 percent of the market, the two companies could together have a 90 percent share, Microsoft has warned.

The nature of the Internet advertising business also complicates things. Both Google and Yahoo use auctions to sell the ads that run alongside search results on their sites. The companies maintain that even if they partner, the marketplace will still determine online advertising prices through separate auctions.

The Association of National Advertisers is unconvinced. In its letter to the Justice Department, the group warned that the agreement will effectively drive up prices for ads sold through Yahoo’s auctions since Yahoo will have access to ads sold by Google at a higher price.

Ultimately the battle over the Google/Yahoo partnership is about more than just the online advertising business. It’s about the survival of Yahoo as an independent company, and whether Microsoft or Google has more of a say in the future of the Internet and computing.

That war extends far beyond Washington and the tug-of-war over Yahoo. But for now, the Justice Department could help shape the outcome.