Alphabet just dropped almost 7% on report that U.S. is mulling antitrust probe
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.
- 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.
Shares dropped 6.7% on Monday.
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.”
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