Alphabet (GOOG, GOOGL) stock faced a rough end to the trading week, with both share classes dropping by nearly 4% on Friday. This decline significantly outpaced the S&P 500 index’s modest 0.2% slip on the same day, primarily driven by a significant development on the regulatory front in Europe.
EU Antitrust Case Hits Google
At the heart of Alphabet’s stock woes is a long-standing antitrust battle between its core subsidiary, Google, and the European Union. In 2018, the EU ruled that Google had actively stifled competition in the search engine market through its dominant Android mobile operating system. This ruling resulted in a substantial fine of 4.1 billion euros (approximately $4.7 billion), which Alphabet, unsurprisingly, appealed.
Appeal Faces Major Setback in Top EU Court
The tech giant’s appeal landed before the highest court in the EU, the Court of Justice of the European Union (CJEU). In a significant blow to Google’s case, the CJEU’s advocate-general – the court’s chief advisory official – issued a recommendation suggesting that Google’s appeal should be dismissed.
The advocate-general, Juliane Kokott, articulated that “Google held a dominant position in several markets of the Android-ecosystem and thus benefited from network effects that enabled it to ensure that users used Google Search.” This view supports the original EU finding that Google leveraged its Android dominance unfairly.
While the advocate-general’s recommendations are not legally binding, the CJEU justices historically tend to follow their advice. This makes the recommendation a strong indicator that Alphabet’s appeal is likely to fail and the hefty fine will be upheld. Alphabet has not yet issued a public statement regarding this latest legal hurdle.
More Than Just a Fine
While the 4.1 billion euro fine is substantial, it’s worth noting it was slightly reduced from the original penalty exceeding 4.3 billion euros. For a company as vast and financially powerful as Alphabet, absorbing this fine if the appeal is lost is certainly manageable.
However, the potential defeat in the CJEU represents more than just a financial cost. It underscores Alphabet’s continued vulnerability to antitrust lawsuits and regulatory actions, particularly within the European Union, which has shown an increasing willingness to challenge the market power of major tech companies. This persistent regulatory risk adds a layer of uncertainty for investors.
