Europe Zeroes In on Google

Antitrust Investigation Establishes Internet Giant as EU's Top Target

BRUSSELS—The European Union's antitrust cop began a formal investigation of Google Inc. that zeroes in on its core search and advertising businesses, cementing the Silicon Valley company's position as Europe's premier corporate target.

At issue is whether Google manipulates search results to disfavor providers of Web services, such as price-comparison tools, that Google competes with. The European Commission also is investigating allegations that Google restricts the advertisements that can be displayed by website operators who use some of its services.

The inquiry has been percolating since at least February, when Google disclosed that the commission, the EU's antitrust watchdog, was looking into complaints from other, smaller Web services.

Elevating the investigation to formal status puts the case on a more serious track that could lead to a finding that Google is breaking antitrust laws. Such a finding, if it arrives, is likely years away, however. And forcing Google to change its operations could be tough.

The probe isn't Google's first clash in Europe. The commission conducted a lengthy investigation of Google's purchase of DoubleClick Inc., before ultimately clearing the deal. European countries have complained about Google's Street View feature, which shows photographs taken on streets and which collected personal data from Wi-Fi networks. And Google agreed to reduce how long it keeps search records, after pressure from an EU advisory panel on privacy issues.

Under EU antitrust law, companies with a dominant position in their markets have a special responsibility to treat their rivals with care. EU case law puts restrictions on the extent to which dominant companies can "tie" ancillary products or services to their primary offering. Google has about 80% of the European search market, according to research company comScore Inc. In a landmark 2007 case, an EU court ruled that Microsoft Corp. improperly tied its Media Player software to the dominant Windows operating system to the detriment of competing media-software vendors.

The EU has vast power to impose fines—it has hit Microsoft and Intel Corp. with penalties in excess of $1 billion—but recently has had a harder time compelling a company to fundamentally change its ways.

Microsoft responded to the Media Player ruling by offering a version of its operating system without the software. But nearly no one bought it. Intel, which didn't admit wrongdoing in a case about its sales practices, agreed to provide information about its practices to the regulator and adjust some procedures. It has appealed the underlying ruling.

Google said Tuesday that it has never intentionally hurt competing services and that there are "compelling reasons" why complaining sites were "ranked poorly by our algorithms." The company has said that to confound spammers and make results more relevant, it regularly makes changes to the search formula that ranks sites. As a result, websites may find that their ranking can change suddenly. Google said it would work with the commission to address any concerns.

The complaints that prompted the investigation came from Ciao.de, a German subsidiary of Microsoft; Foundem.co.uk, a U.K. price-comparison site; and Ejustice.fr, a French site specializing in law-related queries, Google has said.

Google has pointed out that Foundem is a member of Icomp, an Internet-business trade group largely funded by Microsoft that has been critical of Google. Microsoft has acknowledged helping direct complaints by small companies to competition authorities but says it doesn't orchestrate them. Foundem says it isn't acting on Microsoft's behalf but that it has received legal help from Icomp.

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