Here’s why Google shares rose after US antitrust suit
The United States of America et. al. v. Google LLC could turn into a management headache that ties up lawyers in courts for years and forces the company to change how it conducts the business that makes up about 60% of sales and even more of its profit. Other cases may be filed, too.Updated: Oct 21, 2020, 03:07 IST
Google was hit by the biggest US antitrust case in a generation on Tuesday, when the Department of Justice alleged the company is using monopoly power in the web search market to freeze out competition.
The United States of America et. al. v. Google LLC could turn into a management headache that ties up lawyers in courts for years and forces the company to change how it conducts the business that makes up about 60% of sales and even more of its profit. Other cases may be filed, too.
After all that, shares of Google’s parent Alphabet Inc. climbed 1.4% to close at $1,551.08 in New York.
So why didn’t the stock taking a hit?
For starters, the lawsuit had few major surprises and many elements that investors expected. Bloomberg and other media already reported that Google’s search default deals would be a focus of the DOJ, and some Wall Street analysts had written research about this.
There’s also speculation that any eventual remedies won’t have a deep, lasting impact on Google’s ability to make money from its leadership in search advertising. Mark Shmulik, an analyst at Sanford C. Bernstein, told investors on Tuesday that the firm sees “limited risk” to Google from the suit.
In the end, the US government could force Google to stop paying partners, such as Apple Inc., billions of dollars to make its search engine the default on their devices and browsers. And even if users have more choice, they may end up gravitating toward Google anyway.
It also could have been much worse for the company. Some critics have been calling for Google to be broken up, separating the search engine from other services that are intertwined in valuable ways, such as YouTube, Maps, advertising technology, the Chrome browser and Android operating system.
There’s no guarantee Google comes through the antitrust ordeal unscathed, of course. State attorneys general are planning other action, including a complaint over the company’s conduct in the digital-advertising market, where it controls much of the technology used by advertisers and publishers to buy and sell display ads across the web. Other states, including Colorado and Iowa, are investigating Google’s search practices and said their probe will conclude in the coming weeks.