How Diller's Google prediction came true

It is five years since media and internet entrepreneur Barry Diller hit out at Google's growing power, making him the first US business leader to sound the alarm.

By serving up detailed information in response to search queries - rather than just links to other web pages - Google was unfairly squeezing out rivals and was "inevitably going to cause problems with customers and regulatory authorities", he told the FT at the time.

That prediction has finally come true. On Wednesday, the European Commission is set to announce the first formal charges against Google on competition grounds.

The regulators have zeroed in on the way people searching for specific products online are steered to Google's in-house results rather than to rival shopping sites, robbing others of traffic, according to two people familiar with the complaint.

The official protests to Brussels have touched on a much wider range of searches than this, covering not only online shopping but how Google treats specialised sites used for booking travel or picking a local restaurant or plumber.

Mr Diller himself, as head of online travel site Expedia, was reacting to Google's purchase of a travel search engine called ITA. As he feared, it was not long before Google was using ITA data to feed details of specific flights directly to users of its search engine, rather than pointing them to Expedia's web page.

Specialised, or "vertical", services like this account for some of the web's most valuable traffic, since people searching on things like product names or airline flights often follow through with some kind of purchase.

If it does not extend its complaint beyond product search, Brussels is set to disappoint many of the companies that have lined up to complain about Google's actions.

Among the first protests were those from European comparison shopping services Foundem and Ciao!, though they were soon joined by a wide range of others dealing with maps, travel, news and local services. Big US companies were among the most vociferous, including Expedia and fellow travel site TripAdvisor as well as local recommendations company Yelp.

Google's direct actions to favour its own product search may have hit shopping sites harder than its actions in other fields.

The search company tested various methods for "demoting" rival comparison shopping sites in its search rankings before hitting on one that it decided to roll out publicly, according to a partial report from the US Federal Trade Commission. The report, from the agency's competition staff, was inadvertently released to the Wall Street Journal. Google has always denied targeting specific rival sites to push them down its rankings.

Google told the US regulators that pushing some shopping sites out of its top results was meant to improve the overall range of results returned to users. "Google claimed that the goal of this algorithm was to 'increase the diversity of Google's search results for product related queries'," the FTC wrote.

The evidence was compiled by the US agency as part of its own investigation into Google that ended in 2013. The competition staff expressed concerns about the treatment of search results but advised, on balance, against action. They did recommend action against Google on other issues, though the FTC did not file a complaint.

The FTC said that it shared evidence gathered in its own investigation with regulators in Europe. The company compiled a list of comparison shopping specific sites that it wanted pushed out of the top 10 search results, the agency said, only to find that its own testers found its search results less useful.

It then tried writing an algorithm that would achieve the same effect, only to come up with the same result. "Raters tend to like them," one Google executive emailed about its testers' attitude to the sites it was trying to demote.

It was only after more experimentation, and changing the criteria by which testers rated its results, that Google was able to demote rival product sites in a way that showed a "slightly positive rating".

The US and EU apply similar legal standards for establishing anti-competitive behaviour, according to competition lawyers. As a result, Brussels' decision to move ahead with a complaint, in contrast to Washington, was a question of politics, said one lawyer who has filed a complaint against the company on behalf of a rival.

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