Two years ago, almost to the day, yours truly penned a warning that Alphabet (NASDAQ:GOOGL, NASDAQ:GOOG) would inevitably face a true antitrust effort. It wasn’t necessarily a reason to sell shares. But, it was something current and prospective owners of Alphabet stock couldn’t afford to ignore.
That movement became official in July, when the Department of Justice formally launched an antitrust review of a cadre of companies that have been collectively called ‘Big Tech.’ Though no specific names were offered at the time, there was little doubt the DOJ’s top targets were Alphabet’s Google, Amazon (NASDAQ:AMZN), Apple (NASDAQ:AAPL) and Facebook (NASDAQ:FB).
Since then, Alphabet has confirmed it received an “investigative demand” for documents from the Justice Department.
The matter has been ramped up, and amped up, in the meantime. In addition to a potential federal case being made against Google, 48 U.S. states are collectively launching a parallel but separate antitrust case of their own. Then earlier this week, Margr ethe Vestager was named the European Commission’s executive vice president for digital matters, for an unprecedented second term.
Vestager has made a name for herself, largely by drawing a clear line in the proverbial sand, and enforcing. Her work led to stiff punitive fines of Apple and Alphabet’s Google, although Vestager’s protective bent is applied liberally to companies small and large, for any and all good reasons.
One impasse in and of itself could be dismissible. With the better half of the western hemisphere’s regulators and lawmakers all taking aim though, it’s difficult to see how the GOOGL stock price will be able to escape unscathed.
The World Finally Agrees Big Tech is Too Big
The states’ case against Google is as vague as the DOJ’s effort is non-descript.
Speaking as the lead plaintiff for the attorneys general collective, Texas attorney general Ken Paxton argues: “We have seen evidence that Google’s business practices may have undermined consumer choice, stifled innovation, violated users’ privacy and put Google in control of the flow and dissemination of online information.”
The nature and substantiation of that evidence remains unclear, as does the intent of the Department of Justice’s antitrust probes. Vestager appears to have no specific agenda either.
There’s a key detail no owner of Alphabet stock can afford to overlook at this time, however. For the first time ever (to the degree they have now), legislators are looking for ways to disempower Big Tech. And, they’re doing it at a time when a wide swath of consumers support the containment effort.
They’ve good reason to. Facebook reportedly paid to have voice-based conversations facilitated through its Messenger platform transcribed into digital text. Amazon employees have confirmed they listened to conversations within earshot of its Alexa devices, which hears everything even if Echo owners don’t think it’s listening.
As for Google’s part in abusing its position as a digital middleman, there’s no particular smoking gun that’s obvious to consumers. That’s what the federal and now state-driven investigations may find.
Regardless of what those investigations might drudge up, it’s difficult to see the probes as not being part of a much larger culturally driven, societal minded pushback.
This is new territory for all so-called Big Tech names. The facts may no longer matter nearly as much as opinions and perceptions do.
Bottom Line for Alphabet Stock
Should the investigations in the U.S. determine any true wrongdoing, the remedy is unclear. Across the pond, so to speak, there’s no decided outcome either. All the work points in two broad directions.
One of those directions is a sweeping breakup of big technology companies into their smaller components. The mindset is understandable, though the result would mean little. The Google search engine makes up the bulk of Alphabet’s business, and even if YouTube was somehow stripped out, the digital video venue would still have access to Google’s technological knowhow. Amazon’s AWS is already run separately from its e-commerce business.
At best, the 48 states behind the complaint as well as the Department of Justice could punitively fine big tech companies for dealmaking that knowing stifled competition. They could prevent more of the same in the future, but the die is already cast by the past.
The other direction legal and regulatory efforts are pointing are legitimately more alarming to Alphabet stock owners though. Perhaps without even fully knowing how, lawmakers are aiming to prevent tech giants from collecting a mountain of details about anyone who regularly uses the web. The effort may also seek to give those individuals an opportunity to remove their personal details from a big tech profile of them.
It’s a concern, simply because that highly-granulated, detailed information about the billions of people that use the internet is the source of big tech’s earnings power. That’s especially true for Google and Facebook, which predominantly sell ad space.
Whatever the case, the legal effort to make it happen that started two years ago has just reached critical mass.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities. You can learn more about him at his website jamesbrumley.com, or follow him on Twitter, at @jbrumley.