The company faces yet another antitrust investigation.
Alphabet’s shares fell more than 6% on Monday after news that the Department of Justice is launching an antitrust investigation against Google. The investigation will closely examine Google’s search practices.
Alphabet’s shares have been down since April when the company last released its earnings report. In 2019, the company has consistently underperformed the S&P 500, and news of the DOJ probe doesn’t help matters.
According to Evercore analyst Kevin Rippey, this investigation could pose a problem for Alphabet and its investors. Rippey lowered his price target on Alphabet from $1,250 to $1,200 a share.
Google’s History of Antitrust Investigations
A DOJ probe could add a whole new layer of regulatory scrutiny for Google. But the company has navigated an antitrust investigation before … The FTC investigated Google on antitrust claims from 2011 to 2013.
FTC commissioners voted unanimously not to press charges, but they found that Google had harmed its competitors. A report showed several instances where Google used anti-competitive behaviors to cripple rivals.
Competitors like Yelp repeatedly argue that Google engages in anticompetitive behavior. And antitrust authorities in Europe levied a $1.7 billion fine against Google for promoting its own sites above competitors.
And the public is more divided than ever over whether companies like Google should be required to break up. Senator Elizabeth Warren has made it her mission to break up companies like Google and Amazon.
Sen. Warren recently stated that she wants regulators to undo “anti-competitive mergers,” like Google’s deal with smaller companies like Waze.
Can Alphabet Bounce Back?
In 2018, Alphabet brought in $138.6 billion in revenue and 85% of it came from advertising. Google currently controls more than 70% of search engine traffic.
So any regulations that restrict Google’s advertising practices have the potential to significantly hurt the company. And overall sentiment — both political and public — doesn’t seem to be on the company’s side.
This is the first time Google has been investigated by the DOJ. This could end up being the agency’s biggest probe of a company since its antitrust investigation of Microsoft in 1998.
How do you think the investigation outcome will affect Alphabet shares? What about the tech sector? Leave a comment and share your thoughts.
