Google faces European Commission probe that threatens whole ethos

The news that Google is being investigated by the European Commission (EC) – over allegations that it favours its own products (such as Google Maps, YouTube and many others) while suppressing rivals – will have brought knowing nods up and down the land. It was inevitable, people intimated, that Google would eventually come into the sights of the EC. It's not so much a tall poppy syndrome, as a tall oak syndrome: the EC sharpens its axe as soon as it sees a big company, especially a non-European one that reigns in the technology space.

At stake is not just how the Google search results page might look in a few years' time; Google's entire ethos would be affected by an antitrust finding, hamstringing its usual eagerness to introduce new elements. That's what happened to Microsoft when it was found guilty in 2000 by a US judge of breaking the US's antitrust Sherman Act: the company's rampantly aggressive culture came to a shuddering halt, and has never regained its drive – as evidenced by its struggles to catch up in the search and smartphone markets, where Google is doing very well, thank you.

Website content

Within Google, the announcement of the EC investigation last week was greeted with some eye-rolling. In its public statements, the company has been emollient, though when it comes to Foundem, the "vertical search" company that was one of the plaintiffs whose complaints set the case rolling, it is, in Google terms, more pungent: "Foundem … duplicates 79% of its website content from other sites, and we have consistently informed webmasters that our algorithms disadvantage duplicate sites," said a spokesman. There have also been careful nudges pointing out that Icomp , the organisation pressing the EC to investigate, is closely tied to Google's search rival Microsoft, which is the trustee and "sponsor", and chooses Icomp's company directors.

Indeed, it has turned into one of those nasty lobbying battles. But that's actually not relevant: the EC investigation into Microsoft's antitrust practices was sparked by Microsoft rivals in 1993, before Sergey Brin and Larry Page had met. What matters is what the EC decides; it threw out accusations against Apple (once it changed its practices), and guardedly allowed Oracle's purchase of Sun in 2009. So censure is not inevitable.

The key question is, must Google, now that it has a 90% search share in Europe, act differently in regard to rivals' non-search products? In other words, is it a breach of antitrust law for it to put Google Maps above, say, Mapquest or Ovi Maps if you're searching for an address? Is Google allowed to determine what a legitimate advert is, and could it turn down those from rivals? And what would a Google that had been found to breach such rules look like?

The specifics of the case cover four areas. The EC will examine:

Whether Google lowered the rankings of the services provided by Foundem, Microsoft-owned Ciao and while giving its own "vertical services" (Google Maps etc) preferential treatment in unpaid search results.

Whether Google lowered the "quality score" for paid, sponsored links of the three competing vertical search providers, a complaint made by Foundem. (The quality score is a key factor in determining how much advertisers pay Google: if two advertisers use the same keywords, the lower-ranked QS must pay more to rank level with the one with the higher score.)

Whether Google imposes exclusivity obligations on its advertising partners, which could prevent them placing ads on their own sites and other computer and software vendors' sites. If this is true, the EC said Google could, in essence, shut out competing search tools; this complaint was raised by Microsoft-owned Ciao. (Google says it doesn't do this.)

Whether Google restricts the ability of its advertisers to take their ad campaigns and use them on competing online ad platforms. (Google says it doesn't, though advertisers can't use a Google AdWords tool to automatically copy data from one screen to another.)

Google has been working with the EC on the preliminary elements of the investigation for some months. But for the case against it to be proven, the EC would have to clear three hurdles. First, the EC has to define the market it is looking at, and show that it doesn't compete with others, and that players in it are not "interchangeable" (ie, that you're not talking about a commodity). Next, it has to define what constitutes "dominance" in the market – where share might be sufficient, but isn't necessarily the end point. Finally, it has to demonstrate abuse – showing that Google has "foreclosed" the market and limited users' ability to switch to other products.

But isn't that the same as Microsoft, which used its Windows monopoly to force its Internet Explorer browser on people? Microsoft responded then that anyone could download a different browser. The EC and Department of Justice didn't buy that argument. How is Google different?

"Cost of switching," says a lawyer for Google, who spoke on condition of anonymity. "For a PC, there's quite a cost in changing browser." (That's something Google knows, having spent huge amounts on billboard and web ads touting its Chrome browser, which has only achieved about 10% of the world market.) "For search, there's no cost in changing. You just go to another search site."

Advertising platform

But as the complaint shows, the EC might not necessarily treat Google as a search engine. It might instead treat it as an advertising platform – and the potential to show harm could be easier. Google is reckoned to have about 90% of the $18bn European online advertising market, which is strongly weighted towards search. And it is advertising, not search itself, which makes the money for Google. Which means that if the EC chooses a battleground that doesn't suit Google, there could be a dramatic upheaval.

"Google is being very conciliatory in their initial response," Ian Brown, a researcher at the Oxford Internet Institute, told Bloomberg. "Any company that has the market share Google does in Europe is going to have to be very careful." And that care is justified. If there's one place that Google doesn't want to end up, it's watching from the sidelines as a new competitor races past because it isn't bound by antitrust rulings. It's seen that happen to Microsoft, which is still cautious about new business areas because of its dominance with Windows and Office. "Microsoft used to try to slow the process down," says a Google source. "We would like it to move smoothly and methodically." But even then, there might not be an answer in a year's time. It may be 2012 before we know Google's true future.

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