Google Faces A Serious And Multi-Pronged EC Competition Probe

Google (NSDQ: GOOG) is about to get its most significant scrutiny yet by the European Commission, whose antitrust department is opening a formal investigation in to claims that it abuses its search dominance.

The inquiry is centred on three serious kinds of allegations…

  1. that, in its organic search results, Google demotes the visibility of rival vertical search services in favour of its own
  2. that it “imposes exclusivity obligations on advertising partners, preventing them from placing certain types of competing ads on their web sites, as well as on computer and software vendors, with the aim of shutting out competing search tools”
  3. “suspected restrictions on the portability of online advertising campaign data to competing online advertising platforms”

The first point follows allegations made a year ago by Microsoft’s German price comparer, UK price comparer and French legal search site Ejustice that their organic listings were being demoted. The second and third issues are a response to growing concern in advertiser circles that Google wields too much power. It’s significant that each is being lumped together in to one big investigation after a year in which many have called for such scrutiny.

The net effect may be comfortable for Google – the laying bare of some operational details concerning its search algorithm. The EC notes “allegations that Google lowered the ‘Quality Score’ for sponsored links of competing vertical search services” and says “the Quality Score is one of the factors that determine the price paid to Google by advertisers”. It’s hard to imagine the EC being able to scrutinise properly without Google having to give over at least some details of its secretive code.

“A thorough investigation is necessary to determine the workings of Google’s black box,” says David Wood, legal counsel at the Initiative for a Competitive Marketplace (ICOMP), a European industry group with over 50 members.

This March, WPP CEO Sir Martin Sorrell, who claimed to be “Google’s biggest client”, described Google as “competitively dangerous” and said some advertisers find its dominance “frightening”: “We want to see more balance in the search marketplace … (Our clients) want to see some regulatory thought, investigation, clearance. The EU wants to see more transparency about search rankings. If there’s nothing to hide, then fine, everything will be hunky dory.”

Texas regulators this September began examining Google’s U.S. dominance. Google’s search engine share is higher in Europe than America, about 87 percent in countries like the UK.

Previously in Brussels, Google has had its DoubleClick acquisition cleared and consented to lower the time for retention of customer data, amongst other privacy aspects, including heat toward Street View from some states.

However, those issues appear peripheral relative to the forthcoming investigation, which is set to examine operations that the very fabric of Google.

There is no time limit on this investigation.

Google’s public statement on this comes from its product SVP and engineering president on its European public policy blog, which is normally where its chief legal counsel makes statements about such actions.