Google faces Microsoft-style competition investigation

Google is to face an in-depth investigation which will seek to establish whether it has abused its dominance of the internet search market.

A formal antitrust inquiry, which may lead to antitrust proceedings, has been launched by the American Federal Trade Commission (FTC), which could cause a regulatory problem for Google similar to that which hit Microsoft a decade ago.

In a statement yesterday, Google said it had received notification from the FTC that it has begun a review of the business. Google said it would be working with the FTC to "answer questions about Google and our services".

Microsoft had to pay hefty fines as a result of the case against it. Measures were also introduced limiting its ability to develop a monopoly in the IT market. It is understood the Google inquiry will delve into the heart of the company's business model, examining how it manages its traditional revenue creator – search results advertising.

A five-member panel will alsoinvestigate if Google uses its dominant position in the search market to stifle competition by favouring its own websites, such as YouTube and Gmail, in its algorithm – the equation used to order the search results it returns.

Google has admitted to modifying how its results appear but says this is to improve the service offered to its users. The panel will send out subpoenas in coming days. Google, as well as companies it does business with, will be asked to provide evidence.

US media reports suggest that US senators have urged senior Google executives to testify.

In a letter to Google bosses Larry Page and Eric Schmidt, Senators Herb Kohl and Michael Lee said that any hearing would be incomplete without the views of one of Google's top two executives."

A spokesman for Google said that it has introduced transparency tools, including changes to its algorithm, and provided notice when a website is demoted due to spam violations.