Europe accuses Google of illegally abusing its dominance

The EU's antitrust chief has formally accused Google of illegally using its dominance in online search to steer European consumers to its own in-house shopping services in the opening salvo of what is expected to be a defining competition case of the internet era.

Margrethe Vestager also announced the European Commission would open an investigation into Google's Android mobile platform amid allegations it forces wireless companies into uncompetitive contracts to use its software.

Ms Vestager made clear the move against Google Shopping was potentially just the first step in her case. She said her staff continued to investigate whether other Google services, such as its travel search function, similarly advantaged the company's in-house service providers. She vowed to widen the case if abuses were found.

"I am concerned that the company has given an unfair advantage to its own comparison shopping service, in breach of EU antitrust rules," Ms Vestager said. "Google now has the opportunity to convince the commission to the contrary."

In an outline of its so-called statement of objections, the commission said that the US-based tech giant "systematically positions and prominently displays" its own shopping service in search results regardless of its merits, arguing the conduct started in 2008.

The commission said the conduct enabled Google's service to achieve "higher rates of growth, to the detriment of rival comparison shopping services".

Shopping was the first area in which the commission received a complaint over Google's conduct, from the British price comparison site, Foundem. The complaints have since snowballed to include online travel services such as Expedia, as well as large players including Microsoft, and French and German publishers.

Google now has 10 weeks to respond and allay the commission's concerns. It also has a right to a hearing in the coming months, normally attended by national representatives, in which all the main arguments can be aired. If Google's defence is unsuccessful, it faces a large fine, theoretically as much as 10 per cent of the previous year's turnover, some $66bn in 2014.

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"There will be plenty of opportunities to discuss this with American counterparts," she said.

Google said in an internal email sent to staff on Tuesday ahead of Ms Vestager's announcement: "We have a very strong case, with especially good arguments when it comes to better services for consumers and increased competition."

The EU's antitrust case comes against the backdrop of European discontent with Silicon Valley and the economic disruption of the digital age. Once lauded for their innovative spirit, big US tech groups have come under criticism in Europe over their market dominance and the way they handle personal data, especially in the wake of the US internet surveillance scandal.

The commission's move comes after a torrid five-year investigation that Google came close to settling without charges last year. The draft deal collapsed after fierce objections were raised by ministers in France and Germany, and by some of Europe's most powerful telecoms and media groups.

In a further blow to the US group, the commission's probe will examine whether Google imposes uncompetitive terms on handset makers that ultimately favour its own lucrative apps, such as YouTube. Google rejects any allegations of wrongdoing and says Android is an open platform distributed free.

Ahead of the confirmation of the formal investigation into Android, Google said in its email to staff that consumers were free to choose for themselves which apps they wanted to download. "Many of the apps come preloaded on Android devices," for instance with Samsung's flagship S6 smartphone carrying apps from rivals like Facebook and Microsoft as well as Google, it added.

Although Google has faced antitrust questions on three continents for several years, the EU case is the first time the company has been accused of formal wrongdoing.

Ultimately, the commission has the power to levy fines of up to 10 per cent of Google's global turnover and can impose far-reaching curbs on its business practices. Almost 20 complainants against Google want the search engine to abide by strict rules that ensure its formula treats its own services - providing results for travel, shopping and maps - no differently from rivals.

Google could still seek to settle the case even after charges are brought. It could take at least a year and probably longer for the commission to make a final decision. Google would probably challenge any ruling that goes against it through the European courts, opening a legal war that could run for years.

The commission's long attempt to settle the case with Google under Ms Vestager's predecessor Mr Almunia has made it one of the most fraught and politically charged antitrust cases to be dealt with by Brussels.

Google supporters feel the commission's volte-face on a settlement reflected politics rather than an independent assessment. No EU antitrust case has ever been extended to three settlement offers, or been revived after complainants were formally warned that their case was about to be rejected.

On top of the pressure from Brussels, this week Google is also under scrutiny in France where lawmakers are considering an initiative that would force it to hand over its secret formula for ranking websites.

The French senate is likely to adopt a bill this week which would allow the country's national telecoms regulator to monitor search engines' algorithms, with sweeping powers to ensure its results are fair and non-discriminatory. The French initiative will become law only if it is adopted by the senate and the lower house of parliament and will also require government backing.

Reporting by Peter Spiegel, Alex Barker and Christian Oliver in Brussels, Anne-Sylvaine Chassany in Paris and Richard Waters in San Francisco

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