Recent Facebook and Google Fines Total Over $14B, Are there More Fines to Come?

Written by: Jay Yi, MBA; Edited by: Chris Thompson, CFA, MBA, P.Eng

 eResearch | On August 9, 2019, the attorney generals of all 50 U.S. states and territories announced antitrust investigations of Alphabet Inc. (NASDAQ: GOOGL; LSE; 0RIH; DB: ABEA; “Google”) with the probe mainly focused on online advertising, and eight states in addition to Washington D.C. are currently investigating into Facebook, Inc. (NASDAQ: FB; LSE: 0QZI; DB: FB2A) regarding monopolistic powers and data security.

Both tech conglomerates have already received massive fines this year: (1) in March 2019, Google received a US$1.6 billion fine from the EU who has been investigating Google’s search engine and advertisement algorithm for almost a decade; (2) in July 2019, Facebook received a US$5 billion fine from the Federal Trade Commission (FTC) regarding the illegal sharing of consumer data to Cambridge Analytica.

Since 2017 Google has received four major fines regarding anti-trust litigations that added up to a total of over US$9 billion, and from the same time period, Facebook has received two fines which included a US$5 billion fine related to Cambridge Analytica that was the largest penalty ever imposed on a company for violating consumers’ privacy rights.

The EU, FTC, House judiciary lawmakers, and the White House are all taking aim at Google and Facebook for reasons including monopolizing actions, inappropriate use of data, protection of consumer rights, and various other anti-trust issues.

The tech giants are constantly fighting back with Facebook in court defending its case this month stating that users suffered no “tangible” harm and had no legitimate privacy interests in information they shared with friends on social media.

In response, U.S District Judge Vince Chhabria stated “Facebook’s motion to dismiss is littered with assumptions about the degree to which social media users can reasonably expect their personal information and communications to remain private.”

Chhabria’s statement exploited the core reason why regulators find these tech conglomerates at fault, because these companies made assumptions on decisions with self interest rather than being cognizant of the consumer and the economy. Facebook and Google both developed business in a new industry that was not understood by regulators and consumers, and they took advantage of it.

In comparison to the U.S., countries such as China are heavily regulated as the government strictly reviews and controls anti-trust violations while making sure there is stable competition in the market, such as in the telecom market when China split up the largest company within the industry to increase competition. It will be interesting to see if the U.S. government feels a need to make definitive moves to break up these large conglomerates.

Could Facebook and Google face the same fate that happened when AT&T was split apart into the Baby Bells in 1984?

 //

 Facebook, Inc. (NASDAQ: FB; LSE: 0QZI; DB: FB2A)

• Headquartered in California, United States, Facebook is a social media and social networking company that utilizes its online platform for advertisements and data aggregation.
• It is currently involved in a controversial case as Facebook announced its own development of a global cryptocurrency called Libra, which the U.S. government thinks will risk the stability of the U.S. monetary policy.
• FB currently trades at US$186.63 per share with a market capitalization of US$532.4 billion.

Alphabet Inc. (NASDAQ: GOOGL; LSE; 0RIH; DB: ABEA)

• Headquartered in California, United States, Alphabet is a multinational conglomerate of technology companies that was created through a corporate restructuring of Google in 2015.
• It is now the world’s fifth largest technology company with continued leadership in its search engine.
• GOOGL currently trades at US$1,204.88 per share with a market capitalization of US$835.1 billion.

//