The U.S. Department of Justice on Tuesday filed antitrust charges against Alphabet's Google, leaving open the question of whether the search giant will have to divest some of its ad business in order to satisfy regulators. Google stock dipped on the news.
The DOJ claims Google's dominance in digital advertising harms competition in the department's second antitrust case versus the internet giant in just over two years. Eight states joined the lawsuit: California, Colorado, Connecticut, New Jersey, New York, Rhode Island, Tennessee and Virginia.
To ward off the new lawsuit, Google earlier had reportedly offered to split parts of its advertising business into a separate company. But the DOJ continued its probe.
"The DOJ has already indicated that it won't be satisfied by a superficial restructuring, and it's unlikely to accept nominal fees either, which means Google may be forced to sell off one or several parts of its ads business," said Evelyn Mitchell, analyst at Insider Intelligence, in an email.
Earnings For Google Stock Due Feb. 2
Google stock fell 2.1% to close at 97.70 on the stock market today.
In a blog, Google fired back.
"DOJ is demanding that we unwind two acquisitions that were reviewed by U.S. regulators 12 years ago (AdMeld) and 15 years ago (DoubleClick)," said Dan Taylor, vice president of global sales in the blog. "In seeking to reverse these two acquisitions, DOJ is attempting to rewrite history at the expense of publishers, advertisers and internet users. Both of these acquisitions enabled us to invest heavily in developing new and innovative advertising technologies. These deals were reviewed by regulators, including by DOJ, and allowed to proceed. Since then, competition in this sector has only increased."
He added that Amazon.com has added ad market share. "Last year, Microsoft acquired Xandr — an advertising platform that, like Google and many of its competitors, has a full ad tech stack that serves advertisers and publishers," said Taylor. "This acquisition enabled Microsoft to sign a landmark deal to build Netflix's advertising business. The government did not challenge this acquisition."
GOOGL Stock: Earnings Due
Google's fourth-quarter earnings are due Feb. 2.
The DOJ in October 2020 filed an antitrust lawsuit charging that Google has monopolized internet search and search-related advertising. That case is scheduled to go to trial in September.
Due to its huge cash holdings, Google stock has shrugged off three fines totaling $9.3 billion levied by the European Union on antitrust grounds.
Google on Jan. 20 said it will cut 12,000 jobs, or roughly 6% of its global workforce, adding to a growing wave of layoffs among U.S. technology companies. The layoffs follow a hiring spree at the company.
Technical ratings of Google stock are subpar. Google stock holds an IBD Composite Rating of 46 out of a best possible 99. The best growth stocks have a Composite Rating of 90 or better.
Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on 5G wireless, artificial intelligence, cybersecurity and cloud computing.
