Alphabet (GOOGL) shares flattened today on fears that its Google search engine may be forced to make changes following a 10-month-long U.K. investigation.
Elevate Your Investing Strategy:
- Take advantage of TipRanks Premium at 50% off! Unlock powerful investing tools, advanced data, and expert analyst insights to help you invest with confidence.
The Competition and Markets Authority (CMA) handed Google so-called strategic market status for its “substantial and entrenched market power” in general search and search advertising services.
The status also extends to Google’s AI Mode and AI Overviews but not to Gemini AI.
More Choice
Designating a firm with the status is “not a finding of wrongdoing and does not introduce any immediate requirements”, the CMA said.
But it said it would consider “proportionate, targeted interventions,” with the CMA set to start consulting on possible measures later in the year.
It could mean forcing Google to give internet users the option to use an alternative search engine. That would be problematic for Google given the importance of search to overall revenues – see below:
Will Hayter, executive director for digital markets at the CMA, said: “By promoting competition in digital markets like search and search advertising we can unlock opportunities for businesses big and small to support innovation and growth, driving investment across the U.K. economy.”
Price Rises
Google accounts for more than 90% of searches in the U.K., while it is also used by more than 200,000 U.K. businesses to reach customers.
Google warned about possible price rises and an impact on growth and innovation from the CMA “intervention.”
Oliver Bethell, senior director for competition at Google, said: “Many of the ideas for interventions that have been raised in this process would inhibit UK innovation and growth, potentially slowing product launches at a time of profound AI-based innovation. Others pose direct harm to businesses, with some warning that they may be forced to raise prices for customers.”
Digital Regime
The UK’s new digital markets competition regime came into force on 1 January 2025, allowing the CMA to take targeted and proportionate action to ”improve competition in digital markets, helping to drive innovation, investment and growth across the UK economy.”
It launched an investigation into Google’s general search and search advertising services on 14 January and consulted on its proposed decision in June that Google should be designated with strategic market status.
The move marks the first time the CMA has used its new powers to designate a tech firm with strategic status as it looks to tackle the dominance of IT giants.
Is GOOGL a Good Stock to Buy Now?
On TipRanks, GOOGL has a Strong Buy consensus based on 29 Buy and 8 Hold ratings. Its highest price target is $300. GOOGL stock’s consensus price target is $253.66, implying a 5.02% upside.
