Google Inc (NASDAQ:GOOG), (NASDAQ:GOOGL) acts as a monopoly, maybe not in the American sense of the word, but certainly in the European sense of the word. The European Commission sent a Statement of Objection to the Mountain View, California company this morning, escalating the investigation it is carrying out into the company’s business practices.
According to the commission Google unfairly advantaged its own services, with its shopping service mentioned in particular, using its monopolistic position in web search. The company will now face a broader investigation from the regulator, seeking to establish whether the company compelled hardware manufacturers to use its services on their smartphones and tablets.
Trading Google’s monopoly
Directly after the European Commission revealed its intention to further investigate Google’s monopolistic behavior, shares in the company collapsed momentarily in pre-market trading. At time of writing the firm’s shares were selling for 528.85, down 0.29% for the day so far. The company’s precarious position in Europe, which makes up the majority of its international revenue streams, is concerning investors.
Google now has 10 weeks to respond to the European Commission. On April 23 the company will reveal its earnings numbers and host a conference call to discuss them. On May 14 the company will host its annual shareholder meeting. Investors and analysts will have plenty of time to question CEO Larry Page, and co-founder Sergey Brin about the future of the company’s European business.
Sanford C. Bernstein & Co analyst Carlos Kirjner estimates that 35% of Google revenue comes from its European businesses. The firm has 90% share in search in many markets on the continent, far ahead of the approximately 65% of the US search market that the company holds today.
The most startling prospect, that Google could actually be broken up by the European Commission, is a grave worry for shareholders. Google certainly manages to garner quite a lot of its outsized revenue from internal synergies. The European Commission now says that those synergies have been used in a way that’s illegal.
Google investigation stays growing
The European Commission investigation into Google will now widen to include the company’s Android devices. After several settlements with the Mountain View, California search giant over the last decade, it’s not clear how far the regulator will seek to take the current case. The solutions to previous problems were clearly found to be less than satisfactory given the letter that the company sent this morning.
The European Commission is now looking into the restrictions that Google places on the content of advertising, and the way the company uses content generated by third parties. The European Commission may demand that Google change its behavior or, though it’s pure speculation, the regulator could eventually decide to compel the business to split itself into pieces in Europe.
EU Competition Commissioner Margrethe Vestager had this to say about the Google inquest, “If the investigation confirmed our concerns, Google would have to face the legal consequences and change the way it does business in Europe.”