Europe Opens Antitrust Inquiry Into Google

By JAMES KANTER and ERIC PFANNER

BRUSSELS — Europe opened a formal antitrust investigation Tuesday into accusations that Google abused its dominance in online search, exposing the company’s zealously guarded technology to unwelcome scrutiny in Brussels, where other American companies have fought lengthy legal battles in the past.

The investigation by the European Commission follows complaints from smaller Web businesses, which claim that Google downgraded their sites in its search results in order to weaken potential competitors for advertising.

The commission said it would was also look into whether Google might have given its Web services “preferential placement” in search results.

“Rigorous competition of all players, including smaller and innovative ones must be preserved for the future,” Joaquín Almunia, the competition commissioner, told members of the European Parliament. He added, however, that the decision to upgrade the investigation from a preliminary inquiry that was started this year did not mean “that there is definitely a problem.”


Google’s dominance on the Internet has been a sore point in Europe, where it controls more than 80 percent of the online search market, compared with about 66 percent in the United States, according to ComScore, a research firm. Google already faces antitrust inquiries, as well as investigations of its privacy and copyright protection policies, in several European countries.
In a statement, Google said it had strived to “do the right thing by our users and our industry.
“But there’s always going to be room for improvement,” the company said, “and so we’ll be working with the commission to address any concerns.”

A spokeswoman for Mr. Almunia, Amelia Torres, said the commission had notified the Justice Department in Washington about the investigation. Authorities in the United States have been examining Google’s acquisitions and actions for indications that its market power may be anticompetitive, but have not brought any formal proceedings.
Google had been eager to avoid a formal investigation in Brussels after watching other American technology companies, like Microsoft and Intel, battle the antitrust authorities there for years. The European Commission’s moves in antitrust matters are often followed up by American regulators at the state or federal level.

“I think we’ve all seen this movie before in the case of Microsoft,” Keith Hylton, a professor at the Boston University School of Law, said in an e-mail.
Google has become a powerhouse on the Internet by helping advertisers and publishers offer Web advertising space, as well as by selling search-related ads, which appear as “sponsored links” alongside the so-called natural search results.

The commission investigation stems from complaints by three companies: Foundem, a British price-comparison service; Ciao, a price-comparison service in Germany owned by Microsoft; and eJustice, a French legal-search tool. People with direct knowledge of the case, who were not authorized to comment publicly, said at least one additional complaint had been filed.
Foundem said that it suffered big financial losses when Google downgraded its search results and that Google unfairly favors its other online businesses, which include mapping, translation, video and electronic commerce services.

The commission said it would also examine whether Google lowered the “quality score” of competing search services, making it more expensive for them to buy sponsored links.
In addition, the investigation will look into whether Google imposed exclusivity obligations on Internet companies that use Google’s advertising systems, preventing them from placing ads from Google rivals on their Web sites.

In response, Google said AdSense, its program for advertising partner sites, stopped using exclusive contracts two years ago. The company says that when it downgrades a company in its search ranking, it is often because such sites merely duplicate content from other sites, making them less useful to consumers.

“We built Google for users, not Web sites, and the nature of ranking is that some Web sites will be unhappy with where they rank,” Google said.
The company says its high share of searches does not equate to a position of dominance on the Internet because of the rise of companies like Facebook and Twitter, which, like search, also serve a source of links to other Web sites.

Google has highlighted the role of its rival Microsoft in the antitrust complaints against it, noting its ownership of Ciao and the membership of Foundem in a Microsoft-sponsored lobbying group in Brussels, called Icomp.

The opening of the formal investigation allows officials to send detailed questionnaires to companies doing business with Google, as well as competitors, and to demand that they provide answers in similar detail. The commission wants companies to come forward with any information about possible competitive abuses by Google, while shielding them from fear of retaliation by Google, according to the people with knowledge of the inquiry.

Jacques Lafitte, who represents eJustice, said other companies would now be emboldened to step forward.
Virtually any company today with a large exposure to the Internet “has, one way or the other, a serious problem with Google,” Mr. Lafitte said.
Warren Cowen, chief executive of Greenlight, an agency in London that specializes in using search engines for marketing, said regulators should take some complaints about Google with a pinch of salt.

“Over 10 years, I’ve seen Google make all sorts of changes and updates that have affected all sorts of services, be they big or niche-y, and all of them felt very aggrieved,” Mr. Cowen said. “The world seems to think Google owes them something. But if it hasn’t got user loyalty, then its users will start to dwindle away.”
Investigators could reach a preliminary conclusion about whether Google has violated European competition law over the course of next year, and possibly within “a few months,” Ms. Torres said.

If found in violation of European competition law, the commission has the power to fine Google up to 10 percent of its annual revenue, which totaled more than $23 billion last year.
In a long-running antitrust case in Brussels, focusing on the Windows operating system, Microsoft paid fines of about $2 billion in the last decade, before settling last year. In another case, the commission fined Intel about $1.45 billion for abusing its dominance in the computer chip market. Intel has appealed that decision to a European Union tribunal.

Jonathan Zuck, president of the Association for Competitive Technology, an industry group supported by Microsoft and other technology companies, said he expected the investigation of Google to extend into other areas, just as the Microsoft inquiry broadened as it dragged on.
“This is not the Christmas present Google was hoping for,” he said.