The company could be fined up to 10 per cent of its revenue, a sum that could total billions of dollars [GALLO/GETTY]

European Union regulators are to investigate whether Google has abused its dominant position in the online search market in what will be the first major inquiry into the internet giant's business practices.

The competition watchdogs formally announced their investigation on Tuesday after complaints by rivals that Google gave their services "unfavourable treatment" in unpaid and sponsored search results.

Authorities will investigate whether Google's services are being given preferential placement in search engine results, some of which may lead to consumer spending.

One of the complainants, British search site Foundem, said in a that its revenue "pales next to the hundreds of billions of dollars of other companies' revenues that Google controls indirectly through its search results and sponsored links".

French legal search engine ejustice.fr and Microsoft-owned shopping site Ciao also lodged complaints against Google with the EU commission in February.

Lucrative market

If the regulator finds that Google has abused its market position, the company could be fined up to 10 per cent of its revenue, a sum that could total $2.4 billion based on its 2009 earnings.

However an investigation does not necessarily mean legal action will follow.

Google has maintained it is confident that it has not broken any rules.

"Since we started Google we have worked hard to do the right thing by our users and our industry - ensuring that ads are always clearly marked, making it easy for users and advertisers to take their data with them when they switch services, and investing heavily in open source projects," Google said in a statement.

"But there's always going to be room for improvement, and so we'll be working with the commission to address any concerns," it said.

The EU has previously confronted US-based internet companies, last year concluding a long-running antitrust case involving the Microsoft Corporation that lead to over $1bn of fines.

Approximately $12.4bn will be spent in the US this year on ads on search engines, with Google expected to rake in 73.3 per cent of that cash, according to eMarketer.