Regulators square up to Google dominance

It is the world's most popular search engine by a comfortable margin, but Google faces a serious threat to its credibility because of an EC investigation.

Artists paint a German Google Street View car at the Google stand at a technology fair in March this year.

Accusations that Google artificially rigs its search results are perhaps the greatest threat yet faced by the company founded on the maxim "don't be evil".

If proven, the charges could irreparably damage the global search giant's reputation.

The European Commission (EC) is investigating allegations, levelled by Google's competitors, that the search giant gives priority to results that relate to its own services in a way that hugely disadvantages consumers.

The EC has fined the computer chip maker Intel and software giant Microsoft billions of euros for similar abuses of power. If there is a provable case against Google, the EC has the power to fine the company up to US$2.4 billion (Dh8.81bn), or 10 per cent of its annual turnover.

The Google allegations are the tip of a growing iceberg of discontent regarding the search giant. The company has taken international flak for illicitly gathering consumer data while taking pictures for its Street View service. Some towns in Germany have already blocked Google from taking pictures of storefronts and homes. In Italy, Google's YouTube video service is accused of invasion of privacy. Google is also widely under attack by authors fighting its strategy of putting millions of books on the internet and also from newspapers outraged by the free use of their content on Google.

But industry watchers believe the EC investigation is the most serious challenge that Google has so far faced. The allegations not only accuse Google of unfair business practices towards competitors but also strike at the heart of its credibility in the eyes of its hundreds of millions of users. If allegations that the company is rigging its search results prove correct, then online consumers around the world could lose their faith in the search engine.

The French legal search engine Ejustice.fr, the British price comparison site Foundem and the German shopping site Ciao are alleging that Google has "abused a dominant market position in online search by allegedly lowering the ranking of unpaid search results of competing services which are specialised in providing users with specific online content such as price comparisons".

It is alleged that by giving preferential placement to the results of its own vertical search services, Google shuts out competing services. The EC will look into allegations that Google artificially lowered pricing levels for sponsored links of competing search services. It will also investigate claims that Google imposes exclusivity obligations on its advertising partners, preventing them from placing some types of competing advertisements on their websites.

For the moment, Google is trying to downplay the threat the EC poses.

In an official statement, Google said: "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 easier for users and advertisers to take their data with them when they switch services and invested heavily in open source projects."

According to Susan Wojcicki and Udi Manber, senior vice presidents at Google: "Given our success and the disruptive nature of our business, it's entirely understandable that we've caused unease among other companies and caught the attention of regulators."

They also outlined some of the principles by which Google claims to run its business. "Answering users' queries accurately and quickly is our number one goal … In the future, we will need to answer much more complex questions just as fast and as clearly. We believe ads are information too, which is why we work so hard to ensure that the advertisements you see are directly relevant to what you are looking for."

The identification of sales advertisements as relevant information has already irritated many users who mistakenly believe search engines operate with a purely scientific objectivity. Google is particularly popular in Europe. According to the research firm comScore, Google handles 80 per cent of European searches, compared with 65 per cent of searches in the US. Google has a headquarters in Dublin, significant facilities in Zurich, London and Belgium, and smaller centres in Denmark, Russia and Poland.

The EC's investigation will be forced to try to define new limits for the increasingly blurred line separating legitimate advertising strategies from abuse of market dominance, if only to reassure internet users.

It will be hard for a company whose name has entered the dictionary as a verb and which controls most of the internet search market to deny market dominance. But some analysts believe Google has not yet succeeded in dominating internet search to the extent its critics claim.

"Yes, it is dominant with over 60 per cent of the internet search market, but too dominant? Only if you are an alternative provider such as Bing or Yahoo," said Mike Davis, an analyst at the research company Ovum.

"This is a highly dynamic market and while Google is dominant today, that was the position of Yahoo not so many years ago," he added.

But he admits the EC has an aversion to IT giants such as Google and that the eventual decision will reflect this.

"The EC doesn't like monopolies. Ideally the EC would like to see a European rival to Google; there have been several attempts. My gut instinct is that Google will be deemed guilty by default," said Mr Davis.

Ironically, the allegations being investigated by the EC may exaggerate the longevity of Google's market dominance. Google still faces stiff competition from rivals who have everything to gain if the EC investigation proves the allegations to be correct. Microsoft and Yahoo are both hard on Google's heels with successful search engines of their own and may prove to be the ultimate beneficiaries of the investigation. An increased mistrust of Google could also open the door to new competitors as users begin to try alternative search engines.

As Google itself often says: "Competition is only a click away."