Google faces EC antitrust probeEuropean antitrust regulators announced today that they've launched a formal, in-depth investigation into Google's (GOOG) treatment of its search rivals, setting the stage for yet another potential legal entanglement with antitrust officials over whether Google is unfairly taking advantage of its dominant market position.

The preliminary investigation kicked off in February, after three niche search services complained to regulators that Google allegedly placed links to their search services lower on Google's search pages than they deserved. Comparison-shopping sites Ciao from Microsoft (MSFT) and U.K.-based Foundem, along with France-based legal-search service ejustice.fr, complained to European regulators that Google instead preferred to place its own similar links higher on the results page, ahead of theirs.

The European Commission says it will take a close look into five areas of concern:
  • Whether Google abused its dominant market position in online search by lowering the rankings of unpaid search results of competing services that specialize in providing users with specific online content, such as price comparisons.
  • Whether Google gave preferential placement to the results of its own vertical search services in order to shut out competing services.
  • Whether Google lowered the "Quality Score" for sponsored links of competing vertical search services. The Quality Score is one factor that determines the price advertisers pay to Google.
  • Whether Google imposes exclusivity obligations on its advertising partners, which could prevent them from placing ads on their own Web sites and that of other computer and software vendors' sites. If this is true, the EC said Google could, in essence, shut out competing search tools.
  • Whether Google restricts the ability of its advertisers to take their ad campaigns and use them on competing online ad platforms.
Although the EC decided to launch a formal investigation, it noted that it's not a given that such allegations occurred.

Google responded in a statement: "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 to take their data with them when they switch services and investing heavily in open source projects. But there's always going to be room for improvement, and so we'll be working with the Commission to address any concerns."

Previously, Google has said its search-ranking placements are dictated by algorithms that determine which links have the most relevant and useful information, and those links are placed higher on its search pages.

But these three companies beg to differ, and they've also complained to state antitrust regulators in Texas, which earlier this year launched an investigation into the issue. To date, however, the U.S. Department of Justice hasn't announced an investigation into the issue of search results placement.

A New Antitrust Boss in Town

As Google comes under the EC's microscope, it has the potential to mark the first significant technology antitrust case for Joaquin Almunia, who was seated as the European Commission's Competition Commissioner in February. Almunia is taking over the post from Nellie Kroes, who tangled with Microsoft and levied a historic $1.35 billion fine on the software giant over failure to comply with the EC's earlier orders.

In noting the differences between Kroes and Almunia, one European antitrust attorney in private practice said in an email: "No substantive difference yet, because Almunia has not yet taken any important political decision in large tech cases. Keep in mind that there is no finding of infringement nor a political decision to go after Google or others. This step (like the IBM inquiry) are driven by procedure and internal deadlines, and (in this case) by a desire to concentrate proceedings in one authority's hand instead of having various kinds of cases pending in various countries on a national level risking inconsistencies. On balance, this is probably a good thing."

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