If yesterday was a rough day for Google after 10 states accused it of abuse in its dominance in online advertising. Today was worse. Another 30 states added to Google’s legal issues by accusing the technology giant of illegally arranging its search results to push out smaller competitors. The suit also accuses Google of making exclusive deals with phone makers like Apple to promote Google search service over smaller search engines like Firefox.
Google has long sought to create an informational universe controlled by its networks. With this ambition, Google is accused of pushing out smaller, niche search directories like Yelp or Tripadvisor. Instead, Google has replaced these search directories with its own reviews where users don’t even have to leave the Google Search Results Page to get their answer.
If it seems like there is a cascade of lawsuits occurring against tech stocks lately, you wouldn’t be mistaken. Last week, the FTC and 40 state AG’s accused Facebook of a monopolizing the industry by buying smaller rivals like Instagram. Regulators are seeking to break up Facebook. A move that would logistically be very difficult but could make for a greater regulatory environment for the FANG stocks. Tech stocks, and namely the FANG stocks (Facebook, Apple, Netflix, Google) have had a meteoric rise as of late and have been largely unchecked by federal regulation.
With the American public heavily dependent on Google and Facebook for their connection to news and information, any major disruption seems unlikely. However, with new state lawsuits, the major tech companies could be facing legal hurdles that could lead to new volatility reflected in their share price.