Many of the world’s biggest tech stocks are based in America. Occasionally, these companies overstep and face government scrutiny. That has been a big theme in the tech industry over the past several years. Giants like Amazon (NASDAQ:AMZN) and Facebook (NASDAQ:FB) face questioning over everything from monopolistic behavior to use of their platforms for spreading disinformation.
One of the most infamous U.S. cases involved Microsoft (NASDAQ:MSFT), and goes back decades. Accused of using its Windows dominance to cripple web browser competition, the company was nearly split up and fought an ongoing antitrust battle with U.S. regulators for 21 years.
However, it’s European regulators who often bring down the hammer. In 2013, European courts levied a record $732 million fine against Microsoft for failing to live up to an agreement to allow Windows users an easier way to download competing web browsers.
Europe continues to be a regulatory hornet nest for U.S. tech companies. Here are three tech stocks that are currently facing European Union antitrust investigations.
Tech Stocks Facing European Antitrust Scrutiny: Alphabet (GOOGL)
Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) has had a rough time of things in Europe.
The European Union has filed multiple antitrust investigations into Google. The company has been penalized for display search result practices, moves that hobbled competitors to its AdSense program and abusing the dominance of its Android operating system in the mobile phone market.
The company’s latest fine of $1.7 billion was levied last May. That brings the total fines assessed by European regulators against Google since 2017 to a whopping $9.3 billion.
Google continues to appeal the rulings and resulting fines, but sooner or later seems likely to have to pay the piper. Even $9 billion in fines is a relative slap on the wrist for a company with Google’s revenue. However, the rulings are forcing the company to make changes in its business practices in Europe, and could encourage American regulators to step up their own investigations.
Apple (AAPL)
Apple (NASDAQ:AAPL) has found Europe to be a costly market in recent years, including a 2016 E.U. ruling ordering the company to pay Ireland $ 14.3 billion in back taxes. Apple is currently appealing that one, but in the meantime, it is also facing multiple antitrust investigations.
The E.U. is considering an investigation into App Store fees, after a complaint filed by apple Music competitor Spotify (NYSE:SPOT). And in November, it was announced that the E.U. is investigating complaints that Apple Pay is stifling competition from other electronic payment solutions.
Besides the prospect of stiff penalties, the growing emphasis on services revenue for AAPL makes these E.U. antitrust investigations worrisome.
Amazon (AMZN)
The European Union formally opened an antitrust investigation into Amazon last July. Regulators are concerned that the e-commerce giant is using sales data to gain an unfair advantage over third-party sellers on its marketplace program.
Matthew Sopha, Clinical Assistant Professor, W. P. Carey School of Business, Arizona State University contacted InvestorPlace via email with some comments on these E.U. investigations and how they might impact the approach taken by U.S. regulators.
Sopha writes:
“… given the lack of action by all three major branches of the US Government in this space, I am not too confident that anything immediate will be done against these very large, very powerful tech entities. Where you may see movement is in Europe, which may translate to policy for these companies in the US.”
In the case of Amazon, which has faced antitrust scrutiny in the U.S. over its Amazon web Services cloud computing unit, Sopha outlines one possibility:
“What you also might see is some companies proactively move to spin off larger internal entities into separate companies to “get ahead” of any type of enforcement. As a hypothetical, you might see Amazon spin off AWS into a separate entity to preemptively build goodwill with agencies like the FTC, were that body to show even more initiative in this space.”
E.U. antitrust investigations of U.S. tech companies have the power to shake up the European market, inflict significant financial penalties, and influence American regulatory policy. Even if they escape unscathed in the U.S., these companies may still make changes to their business model as a result. So keep an eye on what’s going on in Europe for a preview of what could happen here with today’s tech giants.
Brad Moon has been writing for InvestorPlace.com since 2012. He also writes about stocks for Kiplinger and has been a senior contributor focusing on consumer technology for Forbes since 2015. As of this writing, he did not hold a position in any of the aforementioned securities.
