The recent lawsuit against Google (GOOGL), the so-called search engine gatekeeper to the internet, marks the return of the US Government’s role in disciplining the country’s largest and most powerful monopolies. As alleged, Google is a classic monopoly that has used wrongful means to keep its competitors at bay. They are also accused of striking exclusive deals with major partners like Apple (AAPL) to ensure that their search engine is the default option in most of the phones across the world.
Though Google’s response is that its services are free and do not harm the consumers, which may not stand for long. The same logic did not work out in Microsoft’s (MSFT) case when it faced a similar lawsuit for its Internet Explorer, which was free as well.
Earlier the US House of Representatives panel submitted the report regrading the working of companies like Facebook (FB), Amazon (AMZN), Google, and Apple. The probe had started in July 2019. These behemoths have been on the radar in different geographies for buying out their competitors or forcing the vendors to avoid working with these competitors. By that way, the monopoly of these giants remain intact in ecommerce, social media, search engine and mobile phone and operating system environment.
Though blips are going to come every now and then, this may not deter the position of strength for these companies. Also, if we believe history is going to repeat itself, then these companies are going to come out stronger from these lawsuits.
This Is Not Google’s First Lawsuit
This lawsuit is not new for Google as it was faced with similar lawsuits in the past, not only in the US but in Europe, as well. Though in Jan 2013, the Federal Trade Commission (FTC) decided against pursuing the case against Google. But after a few years, Google was hit with a record 2.42 billion Euro fine in 2017 in Europe. On 20th March 2019, the European Commission imposed a hefty fine of 1.49 billion pounds on Google for abusive practices in online marketing. Hence the risk of lawsuits and fines are going to continue to be there for the next few years.
But each of these events has just been a temporary blip in the stock price and the google stock continued to go up in the last 7-8 years without any interruption. In 2019, Google made over 80% of it is total revenue through selling advertisement placements. The more user data that Google collects it can benefit more from targeted advertisements.
What About Google’s Competitors?
When it comes to other tech giants we mentioned, each of them has almost tripled in market cap in the last 5 years. Apple, Amazon, and Google have already become trillion-dollar companies, and Facebook is just a few steps behind. It appears these tech behemoths are going to weather the storm and come out stronger. In the post-COVID world, the new normal is going to be the order of the day, with social distancing and remote working becoming more prevalent. These tech giants are going to make the most out of this situation and are going to be bigger in size and power. As more money follows these few tech giants the lobby of these companies would be immense.
However, if the lawsuit against Google adversely affects its profitability due to hefty fines, the company that will get the most out of this situation would be Microsoft. It owns the next biggest search engine in the world (Bing) and also it owns the biggest professional networking space (Linkedin). Furthermore, the biggest competitor for Google Chrome is Internet Explorer, which can benefit immensely if Google faces an adverse impact tp all of its businesses.
When it comes to social media and streaming space, the company that can benefit from this turmoil would be Facebook as it aspires to compete with YouTube. Ironically, this would strengthen its monopolistic position in the social media space. Finally, if the Android empire fails, the obvious beneficiary would be Apple and a greater number of people would switch to the IOS world for better customer experience. A recent stock split has been also beneficial to its shareholders.
However, if all these tech behemoths face the wrath of the judicial system in the US, the next set of winners and competitors would emerge from the garages and we would witness the tech empire built once again from the scratch.