Google faces first UK competition watchdog investigation under tougher digital rules

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Britain's competition watchdog has launched an investigation into Google to determine whether its position in search services should provide the US tech giant with special status, which could subject it to tougher conduct rules.

Britain's Competition and Markets Authority said on Tuesday it would investigate whether Alphabet's Google's position in search and advertising campaigns “delivered good results for British people and businesses.”

The investigation is the first under a new digital market competition regime that comes into effect this month. The new rules will see the CMA decide whether a small group of companies should be given “strategic market status” and enforce compliance with certain rules based on their size and influence in key digital markets.

The CMA's investigation is the latest regulatory setback for Google. In November, the U.S. Department of Justice said it was seeking to force the tech giant to divest its Chrome browser, a move aimed at curbing Google's influence on online searches.

Google said its search services “support millions of UK businesses by reaching customers in innovative ways” and that the company would “work constructively with the CMA to ensure the new rules benefit all types of websites”.

The CMA said it would review Google's position in search services and examine how it affects consumers, businesses, news publishers and rival search engines. The CMA said that Google accounts for more than 90% of all general search queries in the UK, and more than 200,000 UK advertisers use Google's search ads.

The new digital markets regime, part of the UK's Digital Markets, Competition and Consumer Act passed last year, will see certain large tech companies deemed to have significant influence in certain digital activities designated as SMS and interventions that force compliance with behavioral requirements or promote competition.

The system is designed to promote competition and protect consumers from potentially harmful behavior by the largest companies.

Sarah Cardell, chief executive of the CMA, said: “Our job is to ensure that people fully benefit from choice and innovation in search services and receive a fair deal, for example in how their data is collected and stored. “We Want to ensure all businesses, big and small, have a level playing field to succeed.”

The regulator said it would investigate whether Google used its position to block rival innovation, particularly in artificial intelligence, and to self-prefer its services, as well as how it uses consumer data and publisher content.

The CMA will have nine months to decide whether Google should be designated as an SMS company and said it would issue any conduct requirements at the same time. The agency said potential conduct requirements could include forcing Google to provide the data it collects to other businesses, or giving publishers more control over how their data is used.

A company is deemed to have SMS if it has a UK turnover of more than £1 billion, or a global turnover of more than £25 billion, has “substantial and entrenched” market power in digital activities and is strategically important . The status lasts for five years and SMS companies can be fined up to 10% of global turnover if they breach the rules of conduct.

The agency said earlier this month it would announce two investigations into digital activity in January, with a third investigation to begin in the spring.

Additional reporting by Tim Bradshaw