EU probe digging into heart of Google

Associated Press

BRUSSELS

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 also is 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.

Perhaps most troubling to Google, the European Commission conceivably could require it to divulge information about the algorithms that decide the links listed at the top of its search results.

The Mountain View, Calif.-based company has zealously guarded those formulas.

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.