Alphabet could soon face antitrust challenge from EU: report

Regulators in the European Union are zeroing in on Alphabet’s lucrative Google ad tech business, meaning the tech giant could soon face antitrust challenges to a major part of its operations on both sides of the Atlantic.

The European Commission, the EU’s antitrust watchdog, is expected to file charges against Alphabet (GOOG, GOOGL) as soon as Wednesday, according to a Bloomberg report that cited sources familiar with the matter.

Regulators there, like those in the US, plan to dispute the legality of Google’s online advertising business, which controls most of the technology to buy, sell, and serve advertisements online.

The threats represent a danger to a big portion of Alphabet's business. In 2022, ad sales drove approximately 80% of approximately $224.5 billion in revenue.

In the European Union, Google and other major tech firms must adhere to newly enacted laws that promote competition – The Digital Markets Act, and a companion law, the Digital Services Act. Penalties for violations of the laws can range up to 10% of a company's global revenue.

The new laws seek to enhance competition by prohibiting large tech companies from favoring their own products and services over those from third parties, and also require enhanced transparency.

The potential EU action adds to Alphabet's legal troubles. US antitrust authorities and US states have also filed antitrust lawsuits against the company.

In January, the US Justice Department and eight US states brought an action saying Google unlawfully leveraged its monopoly in the $278.6 billion online advertising market to block competitors from entering. Nine additional states have since joined in the litigation.

The Justice Department also alleges in a separate suit filed against Google in 2021 that the company is operating an illegal monopoly in the online search business.

In its dispute over Google’s advertising business, the DOJ is asking the court to order Google's divestment of certain ad tech entities, specifically its Ad Manager suite, which would include its publisher ad server DFT, also known as DoubleClick or GAM, and its ad exchange AdX.

Even before the EU's latest laws took effect, the European Commission assessed significant antitrust fines against Google. About a decade ago the regulator imposed a $10 billion penalty for blocking search engines from its Android phones.

Years later in 2017, 2018, and 2019, the Commission targeted Google for allegedly abusing its market dominance in online search, mobile device apps, and online advertising, respectively.

In 2019, the Commission fined Google 1.5 billion Euros for adding restrictive clauses in its contracts with third-parties. The Commission said the terms blocked rivals from placing search adverts on certain websites.

Regulators in the US have looked into Google before. In 2013, the FTC declined to take action against Google after an agency investigation into its search business.

The decision followed a $22.5 million fine imposed on the company the prior year to settle claims that it violated a privacy settlement with the FTC agreeing that it would avoid placing “cookies” on and serving targeted advertisements to users of Apple’s competing browser, Safari.

Alphabet isn't the only big tech company under new pressure from regulators. The Federal Trade Commission will soon file a lawsuit seeking to squash Microsoft’s (MSFT) planned acquisition of “Call of Duty” maker Activision Blizzard (ATVI).

The suit, which the FTC will file Monday, would prevent the Xbox maker from completing its deal to buy Activision Blizzard until the commission wraps up its own lawsuit against the move.

The FTC filed its original lawsuit objecting to the $69 billion Activision Blizzard deal in December 2022, saying it would, "enable Microsoft to suppress competitors to its Xbox gaming consoles and its rapidly growing subscription content and cloud-gaming business."

Alexis Keenan is a legal reporter for Yahoo Finance. Follow Alexis on Twitter @alexiskweed.

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