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EU probe delves into heart of Google’s business
BRUSSELS (AP) - 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 Inc., 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 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. The company is also dealing with national antitrust probes in Germany, Italy and France.
The inquiry’s timing also threatens to complicate Google’s efforts to expand an empire that will bring in nearly $30 billion in revenue this year. U.S. officials are reviewing its $700 million acquisition of a leading travel technology provider, ITA Software.
The Mountain View, Calif.-based company has zealously guarded those formulas in much the same manner as the Coca-Cola Co. protects the recipe for its signature drink or KFC guards the ingredient mix for its chicken.
Although any confidential information that Google shares with regulators 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 and they may end up saying, ‘Let’s just cut a deal,’” Hylton said. “And that decision may not have anything to do with whether Google is in the right or in the wrong on this issue.”
If regulators conclude Google acted illegally, the company could face billions of dollars in fines, similar to what Microsoft Corp. and Intel Corp. faced in recent antitrust cases brought by the commission.
The investigation marks the first time a government has delved so deeply into Google’s core business practices, although there have been other antitrust inquiries that have touched upon the company’s dominance of the Internet’s lucrative search market.
It wouldn’t be surprising if the commission’s probe spurs similar investigations in the U.S., 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.
By John R. Bolton
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