Aug. 27 (Bloomberg) -- Google Inc., owner of the most popular Internet search engine, is being investigated by Italian antitrust regulators after the country’s newspapers said the company’s news service deprives them of advertising revenue.

Google’s Italian offices were searched by financial police today, the regulator said. The probe focuses on claims Google didn’t feature search results of newspapers that don’t make content available on Google News, the Rome-based competition authority said in a statement.

Google has faced criticism from publishers over its news and search services. A global association of newspapers last year opposed Google’s proposed partnership with Yahoo! Inc., arguing the two companies would have too much control of online advertising. Belgian newspapers in 2007 won a copyright suit blocking Google from linking to their articles on Google News.

“Publishers are a bit frustrated with Google, not only on a copyright infringement point of view, but also because of dominance of news and advertising markets,” Sophie Scrive, deputy executive director of the Brussels-based European Newspaper Publishing Association, said by telephone.

Google is reviewing the claims and said it allows companies to opt out of the news service and remain on its search engine.

Dominant Ad Broker?

“We respect the wishes of content owners, which is why we’ve made it easy to opt out of our services,” the company said in a blog posting. “However, when it comes to Google News, we have far more requests for inclusion than for removal. That’s because publishers understand that the traffic generated by Google News, and services like it, provide valuable traffic.”

Italian publishers claim Google won’t run their content on its search engine unless it also appears on its news pages, an “extremely penalizing condition,” the regulator said. The probe will examine whether Google’s actions have consolidated its position in brokering ad sales, the regulator said.

“Those who create content don’t reap the fruits of their work,” said Carlo Malinconico, chairman of the Italian association of news publishers that represents the country’s leading dailies including Corriere della Sera and La Repubblica. “We’re seeking to shed light on this phenomenon at a very difficult time for the news publishing industry.”

Newspaper Revenue

Google is being targeted by newspapers that are struggling to adapt to news consumption moving online, said Danny Sullivan, editor in chief of Search Engine Land, a Web site that tracks the industry in Newport Beach, California. Google lets news providers to be included in main search results even if they don’t want to be in Google News, he said.

Google, based in Mountain View, California, said it doesn’t show stories in their entirety on Google News. Instead, it shows a headline, a line or two of text and a link to the story.

“Once a reader clicks through the article, it’s up to the news publisher to decide how to profit from this free traffic,” Google said in the posting.

Newspaper revenue has fallen 10 percent to 30 percent in all European Union member states, the ENPA said in May. In April, the European Federation of Journalists sent a letter to the European Commission asking for help for the struggling newspaper industry on the continent.

“The more publishers suffer from lack of revenue, the more they don’t want to give it to Google, which charges for advertising,” said Michael Schuette, an antitrust lawyer in Brussels. “If it’s true that Google retaliates and refuses to offer their normal search function, that would be pretty outrageous and an obvious violation.”

The EU isn’t conducting an antitrust probe of Google, according to a spokeswoman who declined to be identified.

The U.S. Justice Department is reviewing Google’s proposed settlement of a book-scanning dispute as part of the company’s plans to create an online database of millions of titles. The European Commission, the EU’s executive arm, will hold a hearing on Sept. 7 about the settlement in Brussels.

To contact the reporters on this story: Elisa Martinuzzi in Milan at emartinuzzi@bloomberg.net; Matthew Newman in Brussels at Mnewman6@bloomberg.net.

Last Updated: August 27, 2009 15:39 EDT