By Jan Wolfe
(Reuters) - The U.S. Justice Department is preparing an investigation of Alphabet (NASDAQ:GOOGL) Inc’s Google to determine whether the technology company violated laws to ensure fair competition, two sources familiar with the matter said.
The potential investigation, first reported on Friday, is the latest challenge for Google which already faces a raft of complaints about its business practices from rivals, as well as Democrats and Republicans. EU regulatory actions have already led to multibillion dollar fines and reforms to Google's business practices.
The U.S. probe would focus on accusations Google gave preference to its own businesses in search results, one source said.
Google declined to comment on the possible probe.
The latest news underscores a growing U.S. backlash aimed at Silicon Valley companies, and marks one of the biggest steps yet by the Trump administration toward regulating a giant technology firm.
The following explains the antitrust concerns about Google from other companies, critics in Washington and the EU, and how a Justice Department probe could impact the sprawling U.S. company.
WHY ARE ANTITRUST REGULATORS INTERESTED IN GOOGLE?
Google's dominance of the search engine market has transformed it from a start-up into one the world's most valuable companies.
Google controls much of the technology used to buy online ads, and its Android operating system runs most of the world's smartphones.
Digital advertising revenue accounted for about 85% of revenue for Google's parent Alphabet last year.
Some web companies, including Yelp Inc and TripAdvisor Inc (NASDAQ:TRIP), have long complained that Google skews search results and uses its market dominance to unfairly promote its own services over theirs.
Google has said it is transparent about how it promotes its own services, and that its focus has been on benefiting consumers.
The U.S. Federal Trade Commission, which enforces antitrust laws along with DOJ, previously investigated Google's business practices. The 2013 settlement with the FTC was widely viewed as a victory for Google because the company was only required to make modest changes to its practices and was allowed to continue to highlight its own services in search results.
Under FTC pressure, Google agreed to end the practice of “scraping” reviews and other data from rivals’ websites for its own products, and to let advertisers export data to independently assess campaigns.
Europe's competition authority has taken a tougher stance against Google, handing down three fines totaling more than $9 billion in recent years.
In a 2017 deal with the EU, Google agreed to pay $2.7 billion to resolve claims it unfairly steered business toward its shopping platform. In March it was fined $1.7 billion in a case focused on illegal practices in search advertising brokering from 2006 to 2016.
COULD THE DOJ TRY TO BREAK UP GOOGLE?
Yes, in theory, but experts have said such action against a technology firm is unlikely.
The Justice Department would have to file a lawsuit and convince judges that Google has undermined competition.
It is rare to break up a company but not unheard of, with Standard Oil and AT&T (NYSE:T) being the two biggest examples.
Perhaps the most famous case is the government’s effort to break up Microsoft Corp (NASDAQ:MSFT). The Justice Department won a preliminary victory in 2000 but was reversed on appeal. The case settled with Microsoft intact.
Justice Department antitrust probes more often result in an agreement to change certain business practices.
WHY IS GOOGLE UNDER INCREASED SCRUTINY?
Google and Facebook Inc (NASDAQ:FB) collect personal data on users to target their advertisements.
Data privacy has become an increasingly important issue as massive breaches have compromised the personal information of internet and social media users.
Congress has long been expected to take up privacy legislation after California passed a strict privacy law that goes into effect on Jan. 1.
Some Republican Party lawmakers have also said Google, Facebook and Twitter Inc (NYSE:TWTR) discriminate against conservative viewpoints and suppress free speech. Representatives of the companies have denied the censorship claims.
Soon after news of the possible Google probe, Republican Senator Josh Hawley said on Twitter: "This is very big news, and overdue." As attorney general of Missouri, Hawley probed Google over allegations it misappropriated content from rivals and claims it demoted competitors' websites in search results.
Beyond Congress, Google's Washington critics have included the United States’ top general who in March said the Chinese military was benefiting from the work Google was doing in China, where the technology giant has long sought to have a bigger presence.
Google, which did not comment at the time, has previously said it has invested in China for years and plans to continue to do so, but that the company also was continuing to work with the U.S. government on projects in healthcare, cybersecurity and other fields.