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Europe opens wide-ranging antitrust investigation of Google

BRUSSELS — European regulators are tackling a puzzle that could shift the balance of power on the Internet: Is Google stifling competition by juicing its search results to favor its services over its rivals?

Hoping to find an answer, regulators announced an investigation Tuesday that will take the first major look into the heart of Google, focusing on the very thing that corporations from Coca-Cola to KFC go to enormous lengths to keep secret: in Google's case, the mathematical formulas that determine its search engine's prized recommendations.

The European Commission's move, the first formal investigation by a major regulatory agency into whether Google has been manipulating its search results to stifle competition, funnel more traffic to its own services and protect its global stranglehold of the online search market, could potentially result in billions of dollars in fines, as in the recent cases of Microsoft and Intel.

The commission slapped about $2 billion in fines on Microsoft and $1.45 billion on Intel. Earlier this year, it launched an antitrust inquiry into IBM's mainframe business.

The rankings of Google's results can make or break a business these days, whether it is a blogger or a multibillion-dollar company. Knowing how Google makes its decisions, or persuading regulators to dictate changes, could be of enormous value to competitors.

Word of the investigation caused Google's stock to tumble $26.40, or 4.5 percent, to close at $555.71. It was the largest one-day drop in the company's shares since mid July.

Although any confidential information that Google shares with regulators about its search algorithms probably would remain under seal, the company's executives may not want to run the risk of opening its trade secrets to outsiders, Boston University antitrust law professor Keith Hylton said.

"They are probably going to think long and hard about what to do in Mountain View (Calif.) and they may end up saying, 'Let's just cut a deal,' " Hylton said.

It's still too early to say whether the commission will ask Google to disclose the algorithms, said Amelia Torres, the spokeswoman for Competition Commissioner Joaquin Almunia.

It wouldn't be surprising if the commission's actions spurs similar investigations in the United States, Hylton said. "State attorney generals will probably look at this and see an opportunity to get their names on the front pages of newspapers, too," he said.

The investigation was triggered after several competitors — U.K.-based price-comparison site Foundem, French legal search engine ejustice.fr and shopping site Ciao, owned by Microsoft — complained that their services were being buried in Google's main search results.

The companies also contended that Google highlights its own services, such as online price comparison, in the advertising section of the search results. Google charges other companies to be listed in this prime space.

In addition, regulators will look into whether Google tried to prevent other websites in its advertising network from featuring the commercial messages from its rivals. They also want to know whether Google made it more difficult for advertisers to export their information to other online marketing platforms.

Google insists its search decisions are guided by a desire to quickly provide the most relevant and convenient information.

"We built Google for users, not websites," Susan Wojcicki and Udi Manber, two of Google's top executives, wrote in a blog post. "It may seem obvious, but people sometimes forget this — not every website can come out on top, or even appear on the first page of our results."

Patent translation

Google announced an agreement Tuesday to use its technology to translate patents into 29 European languages, a deal officials hope will smooth the way toward a simplified European patent system after years of infighting. Google's deal with the European Patent Office will make it easier for inventors and scientists from across the continent to read and understand patents. The EPO has 38 member countries. The European Commission says the agreement with Google should help do away with the huge translation fees that prevent growth and hurt small businesses. It is 10 times more expensive to apply for a patent in Europe than in the United States.

Google may purchase Groupon

Google may be close to buying online discount service Groupon in a deal worth as much as $6 billion in what would be the search company's largest acquisition ever, according to published reports by the technology blog All Things D and by the New York Times. Groupon, a 2-year-old startup based in Chicago, offers daily local bargains ranging from yoga classes to discounts from national retailers.

Europe opens wide-ranging antitrust investigation of Google 11/30/10 [Last modified: Monday, November 7, 2011 1:25pm]
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