Alphabet Inc.’s Google (GOOGL) was sued by dozens of U.S. states alleging the company misused its domination over the sale and distribution of apps through its Google Play Store, Bloomberg reported. Shares closed at $2,529.48 on July 7. (See Alphabet stock charts on TipRanks)
The complaint filed on Wednesday stated that Google uses monopolistic strategies to prevent competition and ensure that app developers are forced to go through its Play store channel to reach its customers.
The complaint also accused Google of collecting huge commissions of up to 30% on app purchases.
Citing Samsung as an example, the lawsuit stated that Google paid the android manufacturer a hefty fee to stop it from developing its own app store. Also, Google was accused of paying off developers that distributed their apps outside of its Play store when Fortnite maker Epic Games Inc. started doing so.
The lawsuit is led by New York, Utah, North Carolina, and Tennessee.
New York Attorney General Letitia James called Google “the gatekeeper of digital devices,” making consumers pay more for daily used software.
Utah Attorney General Sean Reyes called Google’s monopoly “a menace” and stated that Google’s conduct has made consumers pay “hundreds if not thousands of dollars more” for purchases made through apps.
The lawsuit has caught the eyes of both opponents and supporters of the dominant tech platform, with each side voicing their opinions.
In response to the lawsuit, Wilson White, Google’s Senior Director of Public Policy, called the lawsuit meritless and said in a blog post, “Android and Google provide openness and choice that other platforms simply don’t.”
White added, “This lawsuit isn’t about helping the little guy or protecting consumers. It’s about boosting a handful of major app developers who want the benefits of Google Play without paying for it.”
Effective July 1, Google revised its service fees received from developers and made it more progressive: 15% on the first $1 million earned (99% of developers who pay any fee earn less than a million dollars), and then 30% for earnings above $1 million.
Argus Research analyst Joseph Bonner reiterated a Buy rating on the stock with a price target of $2,800, implying 10.7% upside potential to current levels.
Bonner believes that although the company is faced with multiple antitrust lawsuits, they will take years to play out. While the new antitrust laws do pose a threat to Alphabet, he states that legislation may face difficulty in a divided Congress.
Based on 26 Buys and 2 Holds, the stock has a Strong Buy consensus rating. The average Alphabet price target of $2,809 implies 11.1% upside potential to current levels. Shares have gained 68.2% over the past year.
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