Google Swimming Upstream
After Germany’s competition authority issued a press release in the first week of January 2022, stating that Alphabet was going to come under closer control, the share price of Google’s parent company slumped by 4.59% to $2,755. Indeed, this was the company’s “Worst weekly performance since the start of the Covid-19 pandemic”, reported Bloomberg, with shares losing 5.4% of their value. Analysts pointed to higher US bond yields as a cause for the depreciation, since these normally drag down high-priced stocks. Alphabet had a very successful 2021, with share prices up by 65% from the beginning to the end of the year. However, the company’s slow start to 2022 comes after a period of intense regulatory scrutiny on the part of competition regulators all over the world, from Russia to the Netherlands and the USA. Let’s review some of the legal challenges Alphabet has recently faced and try to peer toward the company’s future. A must-read if you plan to invest in Alphabet share prices as CFDs.
The Netherlands, UK, USA
In November 2021, consumer groups in the Netherlands, Poland, Sweden, and four other European nations accused Google of illegally tracking the browsing activity of millions of its users. The European Consumer Organization (BEUC) sent out a report stating that Google promotes the use of the “location history” and “web and app activity” settings on its platforms, which enable this kind of consumer tracking. “In particular, the report shows that users’ consent provided under these circumstances is not freely given”, said the BEUC. In the UK in November, a parallel class action suit against Google was in the works, until the Supreme Court put an end to it. Consumer rights activist Richard Lloyd had spearheaded the case against Google, alleging that they illicitly took the personal data of over 5 million iPhone users between 2011 and 2012.
As if this weren’t enough, Google was slapped with a similar lawsuit to the value of $5 billion dollars in the USA, which stated that the company “Cannot continue to engage in the covert and unauthorized data collection from virtually every American with a computer or a phone”. Returning to the Netherlands, the local consumer authority ACM (Authority for Consumers and Markets) also made an accusation against Apple in December, claiming that the American company’s in-app purchase policies broke competition laws. This charge was made in the context of the company’s dating apps, and Apple was granted until January 15th to set changes in place on its app store.
Back in May 2021, Russia’s consumer watchdog made the severe allegation that Google was guilty of enabling “illegal protest activity”. The authority was unhappy with the appearance of a number of YouTube videos that encouraged young Russians to support protests made against the jailing of Alexei Navalny, a vocal critic of the Russian leadership. The watchdog threatened to slow down internet speeds for Russian Google users if the content – considered objectionable because of its supposed violence, drugs, and extremism – was not removed within 24 hours. Two months before, Twitter users in Russia had found their access to the platform was restricted by authorities.
As the year was closing off Moscow grew hostile again, fining Google $98 million for refusing to delete objectionable content. One interesting point is that the fine was, unusually, calculated based on the company’s turnover. Less than a day later, Meta also faced the displeasure of Russian authorities, finding themselves served with a 26 billion rouble fine for similar reasons. Within that week, Twitter also received a finefor related charges, this one 3 million roubles. Russian Prime Minister Vladimir Putin is interested in establishing a state-controlled internet in order to solve problems of undesirable content. In fact, earlier in 2021, a law was passed requiring Russian computers and smartphones to be fitted with state-approved software.
The Months Ahead
Analyst Richard Bowman expects Google’s earnings to slow down in 2022, with the implication that this could drag share prices down. He is not overly pessimistic, however, and believes its stock is reasonably priced and will probably bounce back from any dip it might experience. Those planning to invest in big tech companies like Alphabet or Apple should watch out for regulatory news from all over the globe in the near future. It remains to be seen how all of Google’s regulatory pressure will pan out in weeks to come, and how this will affect its share prices. In addition, if world economies are to emerge further from the effects of the pandemic, the consequences for these companies need to be assessed as they arise.