The European Union will investigate whether Google Inc. has abused its dominant position in the online search market by deliberately lowering links to smaller rivals' sites in its search results.
The probe announced Tuesday is the first major investigation into Google's business practices anywhere in the world 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, said 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 placing 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 three companies that lodged complaints in February are British-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 per cent 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.
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, spokeswoman for Competition Commissioner Joaquin Almunia.
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.
"Rigorous competition of all players, including smaller and innovative ones must be preserved for the future."
Google maintains it is confident 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 per cent 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. The decision "acknowledges some of the issues stemming from online marketplace dominance," ICOMP's legal council David Wood said in a blogpost. "A thorough investigation is necessary to determine the workings of Google's black box."
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 per cent of revenue. For Google, that would amount to $2.4 billion US 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 $1.4 billion on Intel Corp. Earlier this year it launched an antitrust probe into IBM Corp.'s mainframe business.