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Why Alphabet Stock Is Under Attack

By Rich Smith - Jan 27, 2021 at 11:22AM

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Europe puts Google in the crosshairs over competition and data collection concerns.

What happened

Shares of internet search giant Alphabet (GOOG -2.87%) (GOOGL -3.10%) fell 5% in early trading on the Nasdaq Wednesday, probably because of press reports of new governmental action against the tech giant in Europe that emerged midday Tuesday.

As of 10:50 a.m. EST, shares of the Google parent company remain down 2.9%.

Scales of justice with EU and French flags in the background

Image source: Getty Images.

So what

As Business Insider reported early in the day, the European Commission has asked "a host" of advertising firms to comment on Google's practices in Europe, specifically, how Google runs its digital advertising service and how it gathers data on consumers. The EC is said to be collecting information that it might later use within the context of a proposed Digital Markets Act to sue Alphabet to restructure its business.  

Later in the day, Bloomberg followed up with a story on how one of Europe's most influential leaders, French President Emmanuel Macron, is warning U.S. tech giants to refrain from any "unfair practices."  

Now what

It's not just Europe that's concerned about Alphabet's market power. Last week we discussed antimonopoly concerns raised by multiple U.S. states as well, but European leaders are deploying language that's actually quite inflammatory, with EC President Ursula von der Leyen decrying the "immense power of the big digital companies" and Macron describing unfair competition as an attack on European democracy.

The heightened temperature of the debate elevates the risk that, under a proposed Digital Services Act (a new law proposed in tandem with the Digital Markets Act), for example, Google might face fines of as much as 6% of global revenue if it fails to remove "illegal content," reports Bloomberg. If Google is found to be favoring its own products over those of competing companies, the fines could reach into the billions of dollars -- with the added risk that competition authorities might seek to "break up" Alphabet.

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Alphabet Inc. Stock Quote
Alphabet Inc.
$2,266.97 (-2.87%) $-67.06
Alphabet Inc. Stock Quote
Alphabet Inc.
$2,257.16 (-3.10%) $-72.30

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