European regulators launch a formal investigation in Google's search ad practices.
The European Commission today announced it will conduct an in-depth investigation of Google's business practices following complaints it has abused its position of dominance in the European search market.
The regulatory body said it will examine whether Google has been demoting organic search rankings for rival vertical search services while giving preferential treatment to its own in order to "shut out" competitors. It also plans to investigate Google's behavior in the paid search space in response to allegations it has lowered the Quality Score of search ads running on its site for services competing with its own, therefore reducing their visibility.
Additionally, the Commission raised concerns over "suspected restrictions on the portability of online advertising campaign data to competing online advertising platforms," and exclusivity obligations imposed on its advertising partners regarding the placement of competing ads.
"Google is facing increased regulatory scrutiny. The Commission has taken the step to launch a formal investigation now, which means they consider Google's alleged abuse a priority," Douglas Lahnborg, competition partner at law firm Orrick, Herrington & Sutcliffe told ClickZ, adding, "The Commission's opening of [a formal investigation] is clearly of serious matter for Google."
Google staff responded to the announcement via a post on the company's public policy blog this morning, stating, "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. Today, the European Commission has announced that they will continue to review complaints about Google's search and search advertising. We respect their process and will continue to work closely with the Commission to answer their questions."
The post authors, Susan Wojcicki, SVP of product management, and Udi Manber, VP of engineering, went on to highlight the company's approach to search rankings and search ads - including principles such as transparency and disclosure of paid placements - but did not directly reference the allegations outlined by the Commission.
Lahnborg explained that companies enjoying dominance of a market sector are subject to special legal responsibilities regarding their situation. "When you have a dominant position, as a general matter, you can't discriminate against competitors and you can't use your dominant position to drive competitors out of the market," he said.
According to comScore, Google accounts for around 80 percent of search queries across Europe, and closer to 90 percent in some markets such as the U.K. It's that dominance – as well as data privacy concerns - that has caught the attention of regulators in the past few years. Most recently, Google has been subject to European scrutiny regarding privacy concerns around the company's Streetview product.
According to Lahnborg, Google can now decide how it wants to approach the situation, either by presenting a settlement proposal to the Commission and changing its practices, or choosing to battle it out and deny it has a dominant market position or that it's doing anything wrong.
"If the Commission ultimately finds Google to have abused its market position, it can issue an infringement decision which typically would include a fine. There is a long way to go, however, before the Commission may reach such decision," he said.
At this point Google says it intends to work with the Commission, but has neither accepted nor denied the behavior in question.
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Jack Marshall was a staff writer and stats editor for ClickZ News from 2007 until August 2011.
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