Alphabet just dropped almost 7% on report that U.S. is mulling antitrust probe

Alphabet Inc. tumbled to its lowest price in five months as the U.S. Department of Justice mulls an antitrust probe into the Google parent.

The preparations, disclosed by a person familiar with the matter on Friday, mark the Trump administration’s first major step to scrutinize the potentially anti-competitive conduct of a giant technology firm.

American antitrust officials are under increasing pressure from both Democratic and Republican lawmakers and advocates of tougher enforcement to step up scrutiny of technology giants like Google and Facebook Inc. While European officials have aggressively pursued antitrust cases against American tech firms, including Google, the U.S. has been mostly hands-off.

Google, with a sprawling empire of businesses that could feasibly be targets, is in the dark about the focus of the investigation and hopes to learn more this week, according to another person familiar with the situation.

Alphabet shares fell as much as 6.7 per cent to US$1,032 Monday, the lowest since January and the biggest intraday decline since April 30.

At stake is the internet giant’s position as one of the most profitable companies in history. Despite the opacity surrounding the U.S. focus, Google already has a well-defined set of arguments for pushing back against antitrust challenges, honed over years of doing battle with regulators, especially the EU.

 

Alphabet shares tank 6% as Justice Department reportedly prepares for Google antitrust probe

  • The probe would look into Google’s search practices and other businesses, according to The Wall Street Journal.
  • The news comes as public debate on whether big technology companies should be broken up.

“While precedent suggests that Google enjoys broad discretion over the direction of search results, the questions arising from an investigation will challenge the possibility of multiple expansion,” says Evercore ISI analyst Kevin Rippey. 

Alphabet tanks on reports of possible DOJ probe — Here’s what three experts are watching now

Alphabet shares tanked on Monday after a report said the Justice Department is readying an antitrust investigation against Google.

Shares dropped 6.7% on Monday.

The probe would look into Google’s search practices and other businesses, The Wall Street Journal reported Friday. Citing sources, the report said third-party critics of Google have been in contact with the department on the matter. It was not clear whether the company had been contacted by DOJ.

Alphabet declined to comment. An investigation could also bring trouble to investors, Evercore ISI analyst Kevin Rippey said in a note Monday.

“The investigation comes at a time when the stock’s bull case is challenged by concerns of an abrupt revenue slowdown last quarter,” Rippey wrote. “GOOGL has successfully navigated an antitrust investigation before (2011-2013), and emerged unscathed after a two year inquiry, as the FTC voted 5-0 not to pursue further action. That said, Android and the Play Store have not been pressure tested in a precedent US-led investigation, adding to the complexity of assessing the spectrum of outcomes.”

Alphabet’s Class A shares were trading at $1,040.58 on Monday.

The news comes as public debate on whether big technology companies should be broken up. Presidential candidate Sen. Elizabeth Warren, D-Mass., said in a March post that she wants to name regulators to undo “anti-competitive mergers.” Such mergers include Google’s deals with smaller companies like Nest and Waze.

“It is hard to quantify implications without further information but this could serve as an overhang on Alphabet shares for some time,” Stifel analyst Scott Devitt said in a note.

Antitrust concerns spilled over into other major tech companies. Facebook shares dropped 8% after The Wall Street Journal reported the Federal Trade Commission can look into the social media company’s business practice and how they impact competition.

Amazon shares also slid more than 4%.

—CNBC’s Michael Bloom contributed to this report.

 

Published at Mon, 03 Jun 2019 16:01:35 +0000