U.K. Regulator Threatens Google Stock with Search Competition Shakeup
Alphabet Inc. (GOOGL) faced a dip in its stock value over concerns related to the ongoing U.K. investigation into Google Search. The Competition and Markets Authority (CMA) has been examining the search engine since January 14, 2023, which has now extended beyond ten months. Their findings have implications for Google’s significant role in digital markets.
U.K. Investigation and Strategic Market Status
The CMA has designated Google with strategic market status due to its extensive control over search and search advertising. This designation reflects Google’s “substantial and entrenched market power” although it does not indicate wrongdoing. The CMA clarified that this status does not impose immediate requirements on Google but opens discussions for potential interventions.
Future Actions Considered by CMA
In the forthcoming months, the CMA plans to consult on proportionate measures that may enhance competition. These initiatives could require Google to provide users with alternatives to its search engine, which poses risks to Google’s revenue model.
- Google holds over 90% of the U.K. search market.
- More than 200,000 U.K. businesses rely on Google to connect with customers.
Will Hayter, the CMA’s executive director for digital markets, emphasized that promoting competition could lead to new opportunities for businesses of various sizes, boosting innovation and investment across the U.K. economy.
Impact on Google’s Business Model
Google has already voiced its concerns regarding the CMA’s potential actions. The company warned that such interventions could lead to price increases and hinder innovation. Oliver Bethell, the senior director for competition at Google, mentioned that proposed measures could stifle U.K. innovation and slow down AI-based advancements.
U.K. Digital Markets Regime
Starting January 1, 2025, the U.K. will implement a new digital markets regime, empowering the CMA to take targeted actions to improve competition within digital markets. This reform aims to promote innovation and drive growth within the U.K. economy.
The CMA’s investigation and subsequent designation of Google as a strategic market entity signify a significant regulatory shift. This case represents the first time the CMA has employed its newly acquired authority to designate a tech firm in this manner.
Market Outlook for GOOGL
In the context of these developments, GOOGL’s stock has garnered a consensus rating of “Strong Buy” from analysts. Currently, the stock’s highest price target is set at $300, while the consensus price target stands at $253.66, indicating a possible upside of 5.02%.
