Instant View: DOJ files antitrust lawsuit against Alphabet's Google

(Reuters) – The U.S. Justice Department and 11 states filed an antitrust lawsuit against Alphabet Inc’s Google on Tuesday for allegedly breaking the law in using its market power to fend off rivals.

FILE PHOTO: A Google sign is shown at one of the company’s office complexes in Irvine, California, U.S., July 27, 2020. REUTERS/Mike Blake

The lawsuit marks the biggest antitrust case in a generation, comparable to the lawsuit against Microsoft Corp filed in 1998 and the 1974 case against AT&T which led to the breakup of the Bell System.

Alphabet’s shares were off 0.07% in late morning trade.

COMMENTS:

DANIEL MORGAN, SENIOR PORTFOLIO MANAGER, SYNOVUS TRUST COMPANY

“This represents a major shift in the U.S. Justice Dept’s stance towards Big-Tech Giants like Google. In the past all the rhetoric typically led to mild fines. This follows Facebook’s July of 2018 record-breaking $5 billion penalty, to settle Federal Trade Commission charges that the company violated a 2012 FTC order by deceiving users about their ability to control the privacy of their personal information. In September of 2019, Google LLC and its subsidiary YouTube, paid a record $170 million to settle allegations by the Federal Trade Commission and the New York Attorney General that the YouTube video sharing service illegally collected personal information from children without their parents’ consent. It looks like Alphabet will be forced to pay some additional fines going forward and submit plans to reconfigure its corporate structure to suffice the U.S. Justice Dept’s concerns.”

DAVID CICILLINE, CHAIRMAN, HOUSE ANTITRUST SUBCOMMITTEE, U.S. HOUSE OF REPRESENTATIVES

“Antitrust enforcement against Google is long overdue. The Subcommittee’s investigation uncovered extensive evidence showing that Google maintained and extended its monopoly to harm competition. It is critical that the Justice Department’s lawsuit focuses on Google’s monopolization of search and search advertising, while also targeting the anticompetitive business practices Google is using to leverage this monopoly into other areas, such as maps, browsers, video, and voice assistants.”

DAVE HEGER, SENIOR EQUITY ANALYST, EDWARD JONES

“The lawsuit will likely take years to be argued in court, and at this stage, the DOJ is not proposing any extreme remedial action, such as breaking apart the company. Such recommendations could be made, however, further into the proceedings. We feel that with over $120 billion of cash, Alphabet is financially able to fight the allegations and pay fines that might result from any government actions. We continue to feel positive about Google’s long-term growth from search advertising, YouTube advertising, and cloud computing, and we are maintaining our Buy rating.”

MICHAEL PURVES, CHIEF EXECUTIVE, TALLBACKEN CAPITAL ADVISORS, NEW YORK

“The market is ignoring this because it’s sort of been factored in for a while. We’ve seen these antitrust things, with Microsoft back several years ago, and we’ve seen Google get slammed with these giant fines – basically it ends up being like parking tickets. Like in Europe, they get these multi-billion dollar fines, and it sucks, and they pay it, and then life goes on. So Google is going to litigate. And the thing is the litigation takes place over a period of years, not months. It’s very hard to price it in. You have to assume this kind of stuff is not going away. Google’s margins are ultimately going to be punished here a bit because they’re going to have take fines or have to redefine their business model in some way. But (Google is) not necessarily going to be disrupted.”

JAKE WARD, PRESIDENT, CONNECTED COMMERCE COUNCIL (3C)

“(The lawsuit) is political theater under the guise of protecting market integrity.”

“Fierce competition among digital companies vying for small businesses’ advertising and marketing dollars has produced an abundance of free and low-cost digital tools that countless small businesses use to run and grow their business in normal times and that comprise the Digital Safety Net that helps sustain them in times of crisis,” Ward said in a statement.

ANDREW GAVIL, PROFESSOR AT HOWARD UNIVERSITY SCHOOL OF LAW AND SENIOR OF COUNSEL, CROWELL & MORING LLP

“It is easier to file an antitrust lawsuit than it is to win one.”

“(States joining the lawsuit is) one of those things where it adds heft but makes it complicated.”

ART HOGAN, CHIEF MARKET STRATEGIST AT NATIONAL SECURITIES IN NEW YORK

“It’s not that there are no other players in search but people seem to like Google more. So I don’t know how you restrict search from one of the players.

“You say that Google can control half of it and the others can control the other half.. I’m not sure how that will play out.”

“The second thing is we say that – ‘Google we are going to break you up, you are too large.’ Often times looking at companies this size, for some of the parts, the valuations will be worth more than whole of the company as it is now. It’s true with Amazon as well, like the Amazon Web Services.”

“It’s very hard for investors to make a decision at this stage.”

“This will be the first time Google has to go to Washington and sit down with regulators and talk about their business.”

“In a much longer run, there might be a different Google with some of the parts, may be that’s the end result.”

KIM FORREST, CHIEF INVESTMENT OFFICER, BOKEH CAPITAL PARTNERS, PITTSBURGH

“It feels like 1998 all over again, with Google replacing Microsoft. It really does feel like the same kind of structure of the lawsuit that Microsoft went through in the 90s.”

“I don’t think anybody wanted to select their own browser. Ultimately they could. This is stuff people weren’t paying for.”

“What we’re talking about in this new Google lawsuit is the advertisers being hurt. It’s going to raise the price of advertising if you have a monopoly. In the browser wars and even in this you have to ask yourself is a monopoly better serving the participants of the market in the long run? Regardless, governments see monopoly and jump into action.”

“On the plus side, as an advertiser you want to get your ads to the right people. Having a monopoly that understands the people you want to reach is better than you calling every tiny newspaper in America … sometimes you can’t stuff the genie back in the bottle.”

“I love magazines and newspapers … Advertising has been killed by Google and social networks because that’s where the eyeballs are.”

“In the short term it doesn’t mean anything to investors. In the longer term this is just one more shot at the tech oriented media platforms … this is just one more arrow legislators and regulators are going to be able to throw at electronic or internet advertising platforms. Are advertisers going to elsewhere? I say no because that’s where the eyeballs are for better or worse.”

NEIL CAMPLING, HEAD OF TMT RESEARCH, MIRABAUD SECURITIES, LONDON

“It’s like locking the proverbial door after the horse has bolted! Google has already got the monopolistic position, has invested billions in infrastructure, AI, technologies, software, engineering and talent. You can’t simply unwind a decade of significant progress, or create new alternative powerhouses or tech ecosystems out of thin air.”

ROBERT PAVLIK, CHIEF INVESTMENT STRATEGIST, SENIOR PORTFOLIO MANAGER, SLATESTONE WEALTH LLC, NEW YORK

“(The DOJ) can charge them all they want but these companies probably have more money than the Treasury. In order for anything to have real bite, you need Congress and they want to break them up.”

“But given the fact there’s so much animosity, even though they agree something needs to be done with big tech it’s going to take a long time push through. But you’ll probably see pressure on the stocks.”

“(Big tech’s) leadership role would change but their parts are worth more than the whole. As a shareholder I’d say ‘break them up.’ I’ll probably make more money.”

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