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Google Shares Slip After Being Fined $2.7 Billion in EU Antitrust Ruling
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On Tuesday, shares of Google parent Alphabet Inc. (GOOGL - Free Report) are slipping, down about 1.2% in morning trading to $960.28 per share after the company was hit with a record antitrust fine of $2.7 billion (or about €2.4 billion) by European Union regulators.
The European Commission, the EU’s politically independent executive branch, ruled that Google denied “consumers a genuine choice” by utilizing its popular search engine to unfairly guide them to its shopping platform. In other words, Google has been giving illegal priority placement to its own shopping service in search results, while pushing rivals’ search results to areas where buyers were much less likely to click.
EU regulators stated that the tech giant must change this behavior within 90 days or face additional fines and penalties.
"What Google has done is illegal under EU antitrust rules," said Margrethe Vestager, the bloc's top antitrust official. "It denied other companies the chance to compete on the merits and to innovate. And most importantly, it denied European consumers a genuine choice of services and the full benefits of innovation."
Up until today, the biggest fine against an American company came against Intel Corp. (INTC - Free Report) ; the EU’s regulatory body fined the chip maker $1.2 billion back in 2009, and the Intel has been fighting to repeal that decision ever since. The $2.7 billion fine reflects about 2.5% of Google’s revenue last year.
But Google and Intel are certainly not the only two U.S. companies facing intense EU scrutiny. Facebook was fined this past May by antitrust legislators for misleading officials over its acquisition of WhatsApp. The Commission also more or less forced Amazon (AMZN - Free Report) to change it distribution agreements with e-book publishers after it raised antitrust concerns. Even Apple (AAPL - Free Report) is battling a European demand to repay a staggering $14.7 billion in back taxes to the Irish government.
Google, however, will likely pay the fine and move forward. But that doesn’t mean it has to like the decision. The company’s SVP and general counsel Kent Walker published Google’s defense, explaining in a blog post why the tech corporation decided to promote its own search results ahead of competitors.
"Showing ads that include pictures, ratings, and prices benefits us, our advertisers, and most of all, our users," Walker said. "And we show them only when your feedback tells us they are relevant. Thousands of European merchants use these ads to compete with larger companies like Amazon and eBay [(EBAY - Free Report) ]."
Walker goes on to say that Amazon in particular is a “formidable competitor,” and that because of this one company’s hold on e-commerce, Google doesn’t have as much of a monopoly on the market as some regulators may think.
Currently, GOOGL is a #1 (Strong Buy) on the Zacks Rank, and has gained over 20% year-to-date.
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Google Shares Slip After Being Fined $2.7 Billion in EU Antitrust Ruling
On Tuesday, shares of Google parent Alphabet Inc. (GOOGL - Free Report) are slipping, down about 1.2% in morning trading to $960.28 per share after the company was hit with a record antitrust fine of $2.7 billion (or about €2.4 billion) by European Union regulators.
The European Commission, the EU’s politically independent executive branch, ruled that Google denied “consumers a genuine choice” by utilizing its popular search engine to unfairly guide them to its shopping platform. In other words, Google has been giving illegal priority placement to its own shopping service in search results, while pushing rivals’ search results to areas where buyers were much less likely to click.
EU regulators stated that the tech giant must change this behavior within 90 days or face additional fines and penalties.
"What Google has done is illegal under EU antitrust rules," said Margrethe Vestager, the bloc's top antitrust official. "It denied other companies the chance to compete on the merits and to innovate. And most importantly, it denied European consumers a genuine choice of services and the full benefits of innovation."
Up until today, the biggest fine against an American company came against Intel Corp. (INTC - Free Report) ; the EU’s regulatory body fined the chip maker $1.2 billion back in 2009, and the Intel has been fighting to repeal that decision ever since. The $2.7 billion fine reflects about 2.5% of Google’s revenue last year.
But Google and Intel are certainly not the only two U.S. companies facing intense EU scrutiny. Facebook was fined this past May by antitrust legislators for misleading officials over its acquisition of WhatsApp. The Commission also more or less forced Amazon (AMZN - Free Report) to change it distribution agreements with e-book publishers after it raised antitrust concerns. Even Apple (AAPL - Free Report) is battling a European demand to repay a staggering $14.7 billion in back taxes to the Irish government.
Google, however, will likely pay the fine and move forward. But that doesn’t mean it has to like the decision. The company’s SVP and general counsel Kent Walker published Google’s defense, explaining in a blog post why the tech corporation decided to promote its own search results ahead of competitors.
"Showing ads that include pictures, ratings, and prices benefits us, our advertisers, and most of all, our users," Walker said. "And we show them only when your feedback tells us they are relevant. Thousands of European merchants use these ads to compete with larger companies like Amazon and eBay [(EBAY - Free Report) ]."
Walker goes on to say that Amazon in particular is a “formidable competitor,” and that because of this one company’s hold on e-commerce, Google doesn’t have as much of a monopoly on the market as some regulators may think.
Currently, GOOGL is a #1 (Strong Buy) on the Zacks Rank, and has gained over 20% year-to-date.
Sell These Stocks. Now.
Just released: today's 220 Zacks Rank #5 Strong Sells demand urgent attention. If any are lurking in your portfolio or Watch List, they should be removed immediately. These are sinister companies because many appear to be sound investments. However, from 1988 through 2016, stocks from our Strong Sell list have actually performed 6X worse than the S&P 500.
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