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Alphabet Inc (GOOGL) Fine Could Be the First of Many

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The European Union's decision to levy a $2.7 billion fine against Alphabet Inc (NASDAQ: GOOGL ) over Google Shopping drew a sharp reaction in GOOGL stock Tuesday morning, including from this investor.

Hot Tech Stocks to Buy: Alphabet (GOOGL)

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Wait. Google has a shopping service ?

It does, apparently. One of the things that Google Shopping does is price comparisons. By promoting its own comparisons over others, the EU says Google has broken the rules on competition.

They not only want the cash - equal to half the company's net income in the March quarter - but they demand it stop and explain itself, or face another $12 million per day in fines. That's equal to 5% of Alphabet's daily revenue.

The initial result was a 1.3% fall in the price of GOOGL stock in per-market trading. Add that to a nearly $20-per-share fall in trading June 26, and the $1,000/share trades of early June look like a very distant memory.

But that's not the most important part of the story.

GOOGL Isn't the Only Target

The action shows that the "halo effect" of America's big tech companies is completely busted in the time of President Donald Trump. Regulators are going to treat America's tech monopolies the same way they'd treat Russian or Chinese monopolies, as unwanted foreign advances.

There are certainly plenty of targets.

Amazon.com, Inc. (NASDAQ: AMZN ) could easily find itself in the crosshairs because, unlike Google, it does offer shopping services, of considerable scale. Its willingness to compete with customers who use its infrastructure, from cloud to delivery, could easily draw scrutiny.

But there are other issues. Europe and American tech were already facing a host of contentious issues at the start of the year , and with the U.S. government no longer seen as an ally - this country's reputation abroad has suffered a hit under Trump - there is no longer any reason for international commissions not to play hardball.

Apple Inc. (NASDAQ: AAPL ) still is appealing a $14.6 billion tax bill over its use of Ireland as the sole repository of its European profits. Facebook Inc (NASDAQ: FB ) is said to have misled regulators in its acquisition of WhatsApp , and its embedding of "like" buttons to track user behavior. Uber is facing a host of local regulators, who claim its ride-hailing service is unfair competition with their tax monopolies.

If America is no longer Europe's ally, why should Europe go easy on any of these questions? Europe is American tech's biggest overseas market, so what are these companies worth now?

Google's Response

Google's corporate blog has issued a rebuttal it calls "the other side of the story." People prefer links that take them to the products they want, the company writes, rather than websites where they must repeat their searches.

"Thousands of European companies use these ads to compete with larger companies like Amazon and eBay Inc. (NASDAQ: EBAY )," the post by senior vice president and general counsel Kent Walker notes, but he then proceeds to throw Amazon under the antitrust bus and run over it a few times.

"Amazon…has become the first port of call for product searches," the blog post notes. "As Amazon has grown, it's natural that some comparison services have proven less popular than others. We compete with Amazon."

The short version? Pick on Amazon.

First Shot Across the Bow

There are a host of issues, from terrorism to the "right to be forgotten," where European regulators are at loggerheads with big U.S. tech companies. The protection of "Made in the USA" is gone from these companies, and I expect today's decline in GOOGL stock won't be the last such hit. Regulators around the world will start pursuing U.S. tech companies very hard, in every venue they can find.

U.S. tech no longer represents freedom. It represents Trump. Tech investors will pay for that.

Dana Blankenhorn is a financial and technology journalist. He is the author of the historical mystery romance The Reluctant Detective Travels in Time , available now at the Amazon Kindle store. Write him at danablankenhorn@gmail.com or follow him on Twitter at @danablankenhorn . As of this writing he owned shares in FB and AMZN.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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