By Diane Bartz and Alexei Oreskovic
WASHINGTON/SAN FRANCISCO (Reuters) - Larry Page should put in a call to Bill Gates.
Microsoft Corp's famous founder may know better than anyone else what the Google Inc chief executive would face if he engages in a protracted legal battle against U.S. antitrust regulators.
Google said on Friday that the Federal Trade Commission has started a formal investigation into its business, raising concerns among investors about a lengthy, distracting probe and potential legal action.
Microsoft suffered that fate in its two-decade fight with the U.S. Department of Justice and state attorneys over charges that it abused its monopoly in operating systems to crush competition in other areas.
After a high-profile trial, Microsoft finally settled the matter in 2002, and only last month emerged from government oversight.
"Bill Gates felt like he was being punished for being successful, and he never really recovered from the antitrust trial," said Michael Cusumano, Professor at MIT Sloan School of Management, who was involved in the trial. "Microsoft has suffered as a result. They're not as aggressive. They definitely lost their edge."
Whether Google's Page will handle the review of his company more dispassionately than Gates remains to be seen. The 38-year-old son of academics is known for a stubborn streak, championing ambitious technology and products whose near-term financial payoffs are not always clear.
Page, along with Executive Chairman Eric Schmidt, have resisted calls to testify before the Senate Judiciary Committee's antitrust subcommittee hearing on competition in the Internet search industry.
Some are concerned that Google's desire to stand firm against government intrusion -- as in its protests against censorship of search results in China -- will lead the company into a long battle that ultimately will do more damage than a quick settlement.
"The amount of time involved is almost beyond human calculation," says Bob Lande, an FTC veteran who now teaches at the University of Baltimore School of Law.
The weight of these legal battles, and uncertain investigations, could tell on the company over time. Google's shares are already under pressure as investors worry about the increasing competition it faces from Facebook and others.
Shares of Google began the year a touch above $600. The shares ended down 1.11 percent at $474.88 on Nasdaq.
"The longer the specter of an investigation hangs over any major company's head, the more it has a negative impact on everything from its ability to do business to its stock price," said Melissa Maxman, co-chair of the antitrust department at law firm Cozen O'Connor.
JUST THE BEGINNING
The company said on Friday that it will work with the U.S. Federal Trade Commission in a review of its business practices, but made clear it did not think it had done anything wrong.
"It's still unclear exactly what the FTC's concerns are, but we're clear about where we stand," Google executive Amit Singhal wrote on a blog post on Google's website.
The FTC is expected to address complaints from Google's rivals that its search results favor the company's own services. Google, which runs an estimated 69 percent of Web searches worldwide, can make or break a company depending on its search ranking.
The European Commission, and the attorney general in Texas launched investigations into similar issues last year, following complaints from companies specializing in market-specific searches, such as price comparison websites for electronics, travel or mortgages.
"This is just the beginning. You've got the EU investigating Google, you've got the Feds investigating Google. The state AGs have Google in the crosshairs. It's not a great position to be in," said Colin Gillis, technology analyst at BGC Partners. "You start having regulators tamper with your core business, that's something to be concerned about."
It is not certain that the FTC's investigation will lead to legal action.
"Typically less than one out of every 10 investigations lead to enforcement. This investigation faces daunting odds," said David Balto, a former FTC policy director.
"The complaints presented to the FTC are from disgruntled advertisers, not consumers. That is not a strong foundation to an antitrust case."
(Additional reporting by Alexei Oreskovic in San Francisco and Bill Rigby in Seattle; editing by Carol Bishopric)