The European Commission has opened an investigation of Google after receiving complaints of anticompetitive treatment from three European Internet companies, at least two of which are connected to Microsoft, as Google is quick to point out.

The sites accuse Google of unfair rankings in its search results.

Google late Tuesday denied it was operating afoul of European law and downplayed the investigation as a “fact-finding exercise.”

The EC may not wind up charging Google but the probe will be a big distraction for the company, which has only had close calls with regulators up until now.

Google said the complaints were made by Ciao! from Bing, a German online shopping site that Microsoft acquired in 2008, Foundem, a UK price comparison site that belongs to the Microsoft-created anti-Google pressure group ICOMP, and EJustice, a French legal search engine.

One of Google’s lawyers Julia Holtz blogged that Foundem claims “that our algorithms demote their site in our results because they are a vertical search engine and so a direct competitor to Google. ejustice.fr’s complaint seems to echo these concerns.”

Ciao has complained about Google’s standard terms and conditions and initially took its case to the German competition authority, but it now has been transferred to Brussels, she said.

“Though each case raises slightly different issues, the question they ultimately pose is whether Google is doing anything to choke off competition or hurt our users and partners. This is not the case,” she said.

In Google’s defense, she said, “We understand how important rankings can be to web sites, especially commercial ones, because a higher ranking typically drives higher volumes of traffic. We are also the first to admit that our search is not perfect, but it’s a very hard computer science problem to crack. Imagine having to rank the 272 million possible results for a popular query like the iPod on a 14 by 12 screen computer screen in just a few milliseconds. It’s a challenge we face millions of times each day.

“Our algorithms aim to rank first what people are most likely to find useful and we have nothing against vertical search sites – indeed many vertical search engines like Moneysupermarket.com, Opodo and Expedia typically rank high in Google’s results.”

According to the Telegraph, which broke the story, Foundem claims that when Google took it out of the penalty box in December, its traffic from Google searches increased “10,000% overnight.”

See here.