Elvis will be one of the big names on the merged company's books

The US federal Trade Commission (FTC) said it would not oppose the 50-50 merger, which will create a rival to market leader Universal.

The tie-up will create a company with revenues of as much as $5bn and leave four industry majors in control of about 80% of the world music market.

The news comes a week after the European Union green-lighted the deal.

"Upon further review of this matter, it now appears that no additional action is warranted by the commission at this time," the FTC said in a letter to each of the companies.

BMG said in a statement that the reviews by US and European antitrust officials had been "diligent".

"We now look forward to creating a global recorded music company comprising many of the world's most successful artists as well as a vast catalogue of recordings," it added.

Combining the subsidiaries of Japanese electronics German media conglomerate Bertelsmann, brings artists such as Beyonce, Aerosmith, Elvis and Usher all under one roof.

New giant

After approving the deal with no strings attached last week, EU competition watchdogs said initial concerns that the deal could lead to higher CD prices and fewer customer choices were unfounded.

The world's second and fifth largest music firms announced plans to unite in November last year, saying the deal would be a merger of equals.

But the merger does not include Sony's recorded music business in Japan.

The merged company, to be called Sony BMG, is to be based in New York.

The two argue that they need to join forces to tackle the crisis in the global music industry which has been hit hard by the explosion of illegal music downloading and proliferation of pirate CDs.

However, the deal has not been welcomed by smaller record companies who claim the deal could leave many independent labels fighting for survival.