Britain’s competition watchdog is gearing up for yet another showdown with American big tech, over plans to force Google to shake up its search business.

In its first ruling under new powers to protect digital consumers, the Competition and Markets Authority (CMA) has said that Google provisionally qualifies as having strategic market status in its general search and search advertising services.

To tackle this market dominance, the regulator has suggested that Google should be more transparent, give publishers more control over how their content is used in search results, offer “choice screens” so users can pick different search providers and make sure businesses are ranked fairly on Google search. A final decision is due in October.

Some AI search features are included in this ruling but Google’s AI chatbot, Gemini Assist, is not, although the competition regulator is keeping this under review. Exactly what “choice screens” would look like and whether they might include AI services, such as ChatGPT and Perplexity, is under consideration.

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In response, Google said the regulator’s intervention presents a challenge to “critical areas” of its business in the UK and warned that British users could miss out on early access to the company’s new products. The CMA has said that its road map for changes at Google could lead to better results and help to boost growth, investment and innovation in the British tech sector and the economy as a whole.

Oliver Bethell, of Google, said: “This announcement presents clear challenges to critical areas of our business in the UK. We’re concerned that the scope of the CMA’s considerations remains broad and unfocused, with a range of interventions being considered before any evidence has been provided.”

Sarah Cardell, chief executive of the CMA, said: “Google is the world’s leading search tool and plays an important role in all our lives, with the average person in the UK making five to ten searches a day. It is equally critical for over 200,000 UK businesses which rely on Google to reach their customers. Google search has delivered tremendous benefits but our investigation so far suggests there are ways to make these markets more open, competitive and innovative.”

The competition regulator said it had uncovered concerns including Google’s control over search advertising pricing, unfair ranking of search results and limited transparency. There was also concern about Google’s deals with companies such as Apple and Samsung allowing it to become the default search engine on their devices and giving it an advantage over competitors.

The UK is not the only country where Google’s search business is under pressure. Under a similar act in the European Union, Google has been designated as a “gatekeeper,” which refers to firms that hold significant control over key digital markets and means it is subject to various obligations intended to foster fairer competition and prevent anti-competitive practices.

This includes rules that restrict Google from favouring its own services over rivals in search and advertising. In the United States, the Department of Justice is considering forcing the company to sell Chrome, after a court found that it unlawfully maintained a monopoly through a series of exclusive deals.

Bethell warned that the ruling could stifle innovation in the UK: “Delivering certainty matters to businesses like ours that relentlessly invest in innovation. It also matters to every UK business that benefits from services like Search to reach customers — and to every user that relies on Search to get things done.

“The UK has historically benefited from early access to our latest innovations but punitive regulations could change that. Proportionate, evidence-based regulation will be essential to preventing the CMA’s road map from becoming a roadblock to growth in the UK.”

This is the first investigation by the CMA since it was given new powers to regulate big tech under the Digital Markets, Competition and Consumers Act introduced last year. It was brought in to address the growing concerns around monopolistic practices and unfair market dominance by large tech companies.

The competition watchdog has been given sharper teeth to deal with companies that do not toe the line and can impose fines without the need for court proceedings of up to £300,000 or 10 per cent of a company’s global annual turnover, whichever is higher.

The regulator’s investigation into Google’s search services started in January this year. It opened a second investigation soon afterwards on Google and Apple’s position in “mobile ecosystems”, which include the operating systems, app stores and browsers that operate on devices.

The ‘aggressive chihuahua’ must not scare off investment

The idea that the Competition and Markets Authority (CMA) stifles economic growth and innovation has become a stick to beat it with. And Google has picked it up with gusto (Katie Prescott writes).

Just over two years ago, Brad Smith, president of Microsoft, said the company’s confidence in the UK had been “severely shaken” by the competition regulator’s decision to block its multibillion-dollar purchase of the gaming giant Activision.

His attack marked the peak of tensions between the CMA and Big Tech, in which the regulator was described on the Silicon Valley podcast All-In as an “aggressive chihuahua” deterring investment.

Smith later rowed back on his comments but there continues to be an uneasy relationship between the two sides and Big Tech companies are watching with trepidation as the CMA tries out the new powers it was granted by 2024 laws to protect digital consumers.

Politicians are watching too. In January the government told Britain’s regulators to “tear down regulatory barriers” that hold back economic growth at a summit in the Treasury, seen as a tacit criticism of some of their decisions. Legislators advised the CMA in May that it should leverage its new digital powers and focus on the interventions that support economic growth and investment.

It is not surprising that Google, which controls 90 per cent of the internet search market, has been labelled a dominant player. Equally, Google’s very vocal irritation at the thought of having its wings clipped was only to be expected. It will be interesting to see whether changes to its business will genuinely limit British consumers’ access to its products or if it is just trying to batter the CMA into submission with threats.

The CMA strongly asserts the importance of its independence and its role to make sure everyone plays by the rules and to create a level playing field. It has the unenviable task of welcoming the investment of Big Tech while keeping it in check; ensuring that Google can innovate and grow while allowing others to thrive in the same space.

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