Google (Nasdaq: GOOG) must face most claims in a lawsuit alleging it illegally reads and mines the content of private messages sent through its Gmail e-mail service in violation of federal wiretap laws and also faces the prospect of a significant fine in France over privacy concerns.

France said Friday it will fine Google up to 300,000 euros ($402,180) for breaking rules on data privacy.

The French agency that regulates information technology says Google Inc. hadn’t satisfactorily responded to its June decision giving the company three months to be more upfront about the data it collects from users.

Regulators also want Google to let users opt out of having their data centralized – for example, when data from online searches, Gmail and YouTube are crunched into a single location.

In a statement Friday, France’s National Commission on Computing and Freedom, known as CNIL, said Google hasn’t made requested changes, including specifying to users what it uses personal data for, and how long it’s held. CNIL said it will now launch formal sanction proceedings, a process that could take months.

Google spokesman Al Verney said: “Our privacy policy respects European law and allows us to create simpler, more effective services. We have engaged fully with CNIL throughout this process and will continue to do so going forward.”

Now it’s up to Google to decide whether the relatively small fines are enough of an incentive to rethink its privacy rules. Europe’s a big market and one where Google has no serious competition.

U.S. Case

U.S. District Judge Lucy H. Koh in San Jose, California, on Thursday granted Google’s request to throw out state claims, while allowing the plaintiffs to refile. She refused to dismiss federal claims, rejecting the company’s argument that the plaintiffs agreed to let Google intercept and read their e-mails by accepting its service terms and privacy policies.

“The court finds that it cannot conclude that any party — Gmail users or non-Gmail users — has consented to Google’s reading of e-mail for the purposes of creating user profiles or providing targeted advertising,” Koh said in the ruling.

Users of Gmail and other e-mail services from states including Texas, Pennsylvania, Maryland and Florida contend that Google “does not disclose the extent of its processing,” according to a May 16 court filing. The case consolidates seven individual and group lawsuits.

“We’re disappointed in this decision and are considering our options,” Google said in an e-mailed statement. “Automated scanning lets us provide Gmail users with security and spam protection, as well as great features like Priority Inbox.”

‘Benefit Unrelated’

While explanations of how Google uses the information are blacked out in the complaint, plaintiffs say the Mountain View, California-based company exploits the content of messages “for its own benefit unrelated to the service of e-mail” and for profit, specifically to create user profiles and for its targeted advertising.

Google is also facing claims that the way it operated its Street View feature violated federal wiretap laws. A federal appeals court in San Francisco this month upheld a judge’s decision rejecting Google’s claims that the data it collected, including e-mails, user names, passwords and documents, wasn’t covered by the privacy protections of the U.S. Wiretap Act.

Google, operator of the world’s largest search engine, has argued that the complaint in San Jose should be thrown out because the law allows an “electronic communication service” to do automated scanning in the ordinary course of business to route and manage e-mail.

“Google can articulate a legitimate business purpose” that exempts it from liability under the wiretap laws, Whitty Somvichian, a lawyer for the company, told Koh at a Sept. 5 hearing.

‘Completely Automated’

The processes at issue “are a standard and fully disclosed part of the Gmail service” and the scanning of e-mail is “completely automated and involves no human review,” Google said in a court filing. E-mail providers such as Google “must scan the e-mails sent to and from their systems as part of providing their services,” the company argued.

The case is In re Google Inc. Gmail Litigation, 13-md- 02430, U.S. District Court, Northern District of California (San Jose).