The European Commission is launching a formal investigation into whether Google has abused its dominant market position in online searches.
The EU's competition watchdog said the probe follows complaints from other online search providers that Google put them at a disadvantage in both its paid and unpaid search results.
Google's competitors also allege that Google lists its own services above those of its rivals.
The commission's investigation does not imply any wrongdoing by Google.
Google has maintained that it has not broken any competition rules.
If the Commission finds that Google has abused its market position, the company could be fined up to 10% of its revenue. That would put it on the line for a £1.5bn fine based on 2009 earnings figures.
The Commission has shown resolve in confronting US corporations and only last year concluded a long-running antitrust case involving Microsoft that led to over £640m in fines.
Three companies - UK price comparison site Foundem, French legal search engine ejustice.fr and Microsoft-owned shopping site Ciao - lodged complaints against Google with the commission in February.
Google controls about 90% of the online search market in Europe, and the investigation shows that the antitrust watchdog is taking the complaints seriously enough to launch an in-depth examination of the company's practices.
Google said: "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.
"But there's always going to be room for improvement, and so we'll be working with the Commission to address any concerns."
Shivaun Raff, chief executive of Foundem, which is based in Bracknell, told the Guardian: "We're very pleased the commission has taken this important step, but we're not surprised.
"European law says that if you have a dominant position in a market, you have a responsibility to behave in a way that doesn't crush competition in the market."
Google claimed that there were "compelling reasons" why sites were ranked low by its algorithms.
"Foundem, one of the sites that has complained publicly and to the European Commission, duplicates 79% of its website content from other sites, and we have consistently informed webmasters that our algorithms disadvantage duplicate sites."
But some commentators have defended Google for prioritising its own search results. A pro-Google blog by Danny Sullivan was headlined "the incredible stupidity of investigating Google for acting like a search engine".
"Google is a search engine. A search engine's job is to point you to destination sites that have the information you are seeking, not to send you to other search engines," he writes.
Microsoft and Intel were previously fined more than €1bn for monopoly practices. In 2008 the commission ruled Microsoft was guilty of not providing key codes to rival software makers.