Google faces trouble abroad

SAN FRANCISCO — Facing intensifying scrutiny from regulators, Google is conducting one of its most important searches yet: for an answer to its growing problem in Europe.

The European Commission has formally accused the U.S. technology giant of abusing its dominance in online shopping searches. It has also expanded the antitrust probe to look into whether Google uses its popular Android software to gain an unfair advantage over other applications and services on mobile devices.

The European Commission's antitrust chief, Margrethe Vestager, who on Wednesday issued the formal charges known as a statement of objections, warned Google that her inquiry could expand into other areas such as travel and maps.

At stake for the Internet giant: billions of dollars in fines and fundamental changes to how it conducts business, from the money it makes from online search in Europe to the prominent placement of its services and apps on mobile devices.

"The European process is not one in which American tech companies have prevailed," Boston University law professor Keith Hylton said. "That puts Google in the position of potentially having to make concessions that could be harmful to the company's business."

The commission's probe touches on the everyday activities of consumers across Europe, whether they are searching for the best online shopping deals or pulling out a smartphone to look up directions or watch a video. Google accounts for 90% of all Internet searches in Europe.

Google (GOOG) denies it has broken antitrust rules and insists its products benefit consumers and encourage competition.

"While Google may be the most-used search engine, people can now find and access information in numerous different ways — and allegations of harm, for consumers and competitors, have proved to be wide off the mark," Google's senior vice president of search Amit Singhal wrote in a blog post published Wednesday.

In a separate blog post, Google said its partnerships with phone makers are voluntary and benefit consumers and manufacturers alike. At issue is whether Google's practice of bundling apps such as YouTube and Maps with its Android software harms competing apps and services as well as device manufacturers which are forced to take the Google apps along with the rest of the Android software. Android is the world's most popular operating system with a market share estimated at 81%.

"The European Commission has asked questions about our partner agreements," wrote Hiroshi Lockheimer, vice president of engineering for the Android division. "It's important to remember that these are voluntary — again, you can use Android without Google — but provide real benefits to Android users, developers and the broader ecosystem."

The EU has been investigating Google for five years. Google nearly settled the case without any charges last year but the deal fell apart over objections from ministers in France and Germany and powerful tech groups.

The U.S. Federal Trade Commission investigated similar complaints against Google but ended the investigation in 2013 despite the recommendation by agency staff that the agency take action.

The antitrust case against Google is the largest pursued by European officials since Microsoft's decade-long antitrust brawl. That case ended in 2009 with Microsoft paying more than $2 billion in fines.

"This case is going to be the defining antitrust case for the Internet economy," said longtime Google critic Thomas Vinje, legal counsel for FairSearch Europe.

The case also promises to be a distraction for Google management — and could even stymie its momentum in Europe. Legal experts say it could drag on for months, even years.

"To us the most important risks associated with an eventual long term antitrust proceeding would be related to the risk that it could consume valuable management bandwidth, and impose limitations on Google's ability to innovate in search in Europe for years to come," Sanford C. Bernstein analyst Carlos Kirjner wrote in a research note.

It's unclear if there will long-term repercussions for Google's business.

Despite multibillion-dollar fines from the European Commission, Microsoft never lost its dominance in personal computers. And Intel, which is appealing its antitrust case, which has gone on for 15 years, is still a powerful chipmaker.

"At a minimum Google is in for a long and difficult fight if they choose to contest this all the way to the end," said Spencer Waller, a professor at Loyola University Chicago School of Law.

The Google probe comes amid heightened scrutiny of U.S. tech companies in Europe and a growing backlash against their dominance of this lucrative market.

European antitrust officials are taking a closer look at Apple's tax arrangements in Ireland and Amazon's in Luxembourg. Privacy officials are zeroing in on how Facebook handles people's online data.