EU launches antitrust probe into Google

EU launches antitrust probe into Google
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Tuesday, November 30, 2010 - 1:32pm

BRUSSELS – European Union regulators will probe whether Google Inc. has been manipulating its search results to stifle competition, funnel more traffic to its own services and protect its global stranglehold of the online search market.

The European Commission's move, announced Tuesday, is the first formal investigation by a major regulatory agency into these issues and could potentially result in billions in fines, as in the recent cases of Microsoft Corp. and Intel Corp.

Several competitors, one owned by Microsoft, say that links to their services appear too low on Google's general search results. They also claim that when Google offers similar services, such as online price comparison, it puts its own links higher on the sponsored search results, the ones companies have to pay for.

In addition, the Commission will look into whether Google prevented advertising partners from posting ads from Google's competitors on their sites and whether it was making it more difficult for customers to move data from their advertising campaigns to other ad platforms.

The issue could boil down to whether Google has a right to program its search engine the way it wants or whether it is abusing the market power it has accumulated by processing about two out of three search requests made worldwide.

This much is clear: Google's own services consistently have ranked at or near the top of its search results. In some cases, there's clear logic to the rankings because some of Google's properties, including its mapping service and YouTube video site, are considered to be among the best and most authoritative in their categories.

But other Google services, such as finance and health, that aren't as widely used or as well regarded also tend to get high rankings in the search results.

Google has steadfastly insisted that it avoids bias in its search results by using a closely guarded formula for determining rankings. But at other times, Google executives have conceded they sometimes give their own services preferential treatment, and have argued if users aren't happy with the results, they can easily migrate to another search engine such as Bing.

The three companies that lodged complaints in February are U.K.-based price comparison site Foundem, French legal search engine ejustice.fr and shopping site Ciao, owned by Microsoft through its own search engine Bing — which has struggled to wrestle online market share away from Google.

The investigation does not imply any wrongdoing by Google, which controls about 90 percent of the online search market in Europe, but shows that the antitrust watchdog is taking the complaints seriously enough to launch a detailed examination of the company's practices.

Several websites in the U.S. have also complained that their links have been unfairly buried in Google's search results and, in some instances, have even filed lawsuits in the United States. The company has also been the target of national antitrust probes in Germany, Italy and France.

The Commission has notified the U.S. Department of Justice of its investigation, which is likely to take "at least a few months," said Amelia Torres, the spokeswoman for Competition Commissioner Joaquin Almunia. It is too early to say whether Google might have to disclose its closely guarded search algorithm to regulators, Torres said.

Speaking to the European Parliament, Almunia said it was "far too early to say" whether there was definitely a problem with Google's conduct. "But we will investigate in-depth potential concerns as regards Google's conduct, notably on the way in which search results are set out," Almunia said. "Vigorous competition of all players, including smaller and innovative ones must be preserved for the future."

In a Tuesday statement, Google reiterated its belief that it hasn't done anything wrong.

"Since we started Google we have worked hard to do the right thing by our users and our industry — ensuring that ads are always clearly marked, making it easy for users and advertisers to take their data with them when they switch services, and investing heavily in open source projects," Google said in an emailed statement.

"But there's always going to be room for improvement, and so we'll be working with the Commission to address any concerns," the company said.

Google also said that "there were compelling reasons" why the complaining companies "were ranked poorly." It said Foundem "duplicates 79 percent of its website content from other sites, and we have consistently informed webmasters that our algorithms disadvantage duplicate sites."

ICOMP, a business group whose members include Foundem and which is sponsored by Microsoft, said it welcomed the Commission's investigation. "This is not just about search results," said ICOMP's legal council David Wood. "This is about the whole ecosystem of doing business with online content, online advertising companies and software companies."

There are no time limits for antitrust investigations. If the Commission finds that Google has indeed abused its dominant position it will send the company a formal statement of objections and could eventually levy a fine of up to 10 percent of revenue. For Google that would amount to $2.4 billion based on 2009 earnings figures.

Europe's antitrust regulator is not shy in confronting U.S. corporate giants — it already slapped about $2 billion in fines on Microsoft Corp. and euro1.06 billion ($1.4 billion) on Intel Corp. Earlier this year it launched an antitrust probe into IBM Corp.'s mainframe business.

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