A new antitrust ruling against Alphabet could potentially lead to a breakup.
Shares of Alphabet (GOOG -3.01%) (GOOGL -3.04%) were sliding today on a report from Bloomberg last night that the U.S. Department of Justice was considering a full-scale breakup of the company following earlier lawsuits, including a ruling by a judge last week that said payments to companies like Apple and Samsung to be the default search engine on their devices constituted an illegal monopoly.
As of 11:35 a.m. ET on Wednesday, Alphabet stock was down 3.2%.
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The vise tightens on Alphabet
According to Bloomberg, making the case to break up Alphabet is one of the options the department is considering after last week’s ruling about the company’s efforts to monopolize online search through exclusive agreements.
It’s important to note that there has been no official move to break up the company, and this is just a news media report. But the recent ruling requires the government to make proposals for restoring competition to the search market, so Alphabet is likely to face some kind of punishment or restriction.
Separately, former CEO Eric Schmidt slammed the company in an interview, saying that it had lost its competitive edge by overly embracing work-from-home policies and other work-life balance initiatives, and that it’s falling behind rivals in AI like OpenAI and Anthropic.
Could Alphabet really be broken up?
Rushing to sell Alphabet stock on today’s news seems premature. The most likely outcome from last week’s ruling seems to be that Google will no longer be allowed to be the default search engine on iPhones and other devices, but that doesn’t necessarily mean it would lose its market share dominance since its leadership is arguably based more on force of habit and its reputation as the best search engine. There could be more severe consequences, though.
Whatever happens, investors should follow the issue, especially with an election around the corner. A new administration in the White House could push tech regulation in one direction or the other.
Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet and Apple. The Motley Fool has a disclosure policy.
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