Shares of Google parent Alphabet Inc (ticker: GOOG, GOOGL) traded down by more than 1 percent after European regulators hit the company with a record $2.7 billion fine for violating antitrust rules. Unfortunately for Google investors, the $2.7 billion fine may be just the beginning of their European headache.
“Google has abused its dominance as a search engine by giving illegal advantages to another Google product, its shopping comparison service,” EU commissioner Margrethe Vestager says of the fine.
Google appears poised to appeal the ruling in front of the European Court of Justice. Google senior vice president and general counsel Kent Walker defends Google’s actions in a written response on Tuesday, calling Amazon.com ( AMZN) a “formidable rival” in Europe.
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“We will review the commission’s decision in detail as we consider an appeal, and we look forward to continuing to make our case,” Walker says.
While Google bulls may be quick to dismiss a $2.7 billion fine for a company that reported $89.5 billion in revenue in 2016, the fine may pale in comparison to what’s coming. Google is also the target of two additional investigations by the EU. One of the investigations is related to Google’s use of its Android smartphone operating system to promote Google products, while another aims at Google’s advertising products and free-market competition.
EU guidelines allow regulators the freedom to fine companies up to 10 percent of their global turnover for antitrust violations, meaning that Google could be on the hook for an additional $18 billion. Assuming Google appeals all of its fines, that defense also won’t come cheap.
Finally, if Google loses its appeals, it will be forced to adjust its search algorithm to comply with the regulations it violated. Modifying its search algorithm, smartphone operating system and advertising products could be costly and time-consuming endeavors for Google. There’s also no clear indication as to just how much of an impact these potential changes could have on Google’s business in Europe.
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These changes could be on the way sooner than investors expect. Google has 90 days to comply with EU regulations or faces noncompliance fines of up to 5 percent of the company’s daily global turnover.
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Google Investors Have a Lot on the Line in Europe originally appeared on usnews.com
