Google finds itself facing combat on two fronts

Six years ago, two British internet entrepreneurs had their sights set firmly on the big time. Shivaun and Adam Raff's website, Foundem, was one of Britain's most popular price comparison destinations for flights, computers and electronic gadgets. Untold riches beckoned. Then, all of a sudden, the husband-and-wife team suffered a potentially crippling blow. In the summer of 2006, Foundem disappeared overnight from Google's search rankings. In the world of online retailing, it was akin to swapping Regent Street for Deptford. At the time of Foundem's demotion, Google was itself trying to break into the booming price comparison market. According to the Raffs, Google sought to do this by pushing its own websites up the search charts and demoting rivals. "There is no doubt that Google's anti-competitive practices caused immense harm to my company," Shivaun Raff said. The Californian internet colossus denies the allegations.Foundem, however, is not alone in accusing Google of using its search system to bolster its own online services. Along with at least a dozen similar complaints, Foundem's allegations form the centrepiece of a European commission investigation into Google. Over the following weeks, Brussels will decide whether to charge Google with breaching competition law, triggering its biggest anti-trust case since its costly and bitter war of attrition with Microsoft started more than a decade ago. Start of woes This is only the start of Google's regulatory woes. America's Federal Trade Commission is also reviewing whether the tech giant has abused its dominant position in the online search market. The parallel probes could land Google with blockbuster fines and open it up to lawsuits from competitors. They have also thrown into sharp relief the tension that lies at the heart of Google; can it be both the trusted gatekeeper to the internet while also building its own commercial websites outside of search? Every minute of every day, millions of searches are typed into the Google engine. People flock there because Google, more than rivals such as Yahoo and Microsoft's Bing, tends to deliver more pertinent results for its users. This is reflected in its share of the market. In America, two out of every three internet searches are performed through Google, rising to more than nine out of 10 in Europe. Its dominant position has produced gigantic rewards for the 13-year-old company. Last year, it reported a $9.7 billion (Dh35.6 billion) profit. Almost all of this came from the adverts and sponsored links that flank Google's search results. Manipulating monopoly Google, whose corporate mantra is ‘don't be evil', is accused of using its near monopoly to promote the new services. Eric Schmidt, Google's redoubtable chairman, had to fend off allegations that it had rigged the system during a three-hour grilling in front of the US Senate's anti-trust committee last year. One lawmaker, Mike Lee, accused the company of "cooking" its results as he brandished a chart showing Google Product Search achieving better search rankings than competitors. "I can assure you that we haven't cooked anything," Schmidt replied. He argued that internet users were never more than one click away from other sources of information on the web. Nevertheless, Google appears to have become twitchy at the heightened scrutiny into its business practices. In an apparent bid to win over Capitol Hill, the Silicon Valley company spent $5 million on lobbying in the first three months of the year — triple last year's outlay. Google may need to marshal more support as the regulatory noose tightens. In an escalation of its investigation, America's competition watchdog last month hired one of the country's most successful litigators to lead its probe. Beth Wilkinson is best known for securing the conviction of Timothy McVeigh, the Oklahoma bomber, and has not lost any of the 40 significant cases she has brought for the government or private law firms. Google's more immediate concern is in Brussels, where Joaquin Almunia, the commissioner responsible for competition, is just weeks away from deciding whether to charge Google with breaking the European Union's anti-trust laws. Google said: "Our size and success rightly generate scrutiny, which is why we've worked hard to explain how our business works, co-operating with the European Commission since this investigation began." Estimated value of fine The European commission has a history of coming down hard on American technology firms, hitting Microsoft with fines totalling €1.7 billion (Dh7.94 billion). If found guilty of abusing its dominant position, Google could be fined as much as $3.8 billion — or 10 per cent of its annual revenue. A negative ruling could also inflate the damages it may have to pay to competitors if Google is found to have abused its position. A French search engine, 1plusV, has already lodged a €295 million claim against the Californian giant. For this reason, Google will "almost certainly want to come to a settlement with the European Commission", Gregor Pryor, head of media and technology at Reed Smith, the law firm, said.