Consequences of the European Union Charges Will Have a Great Impact on Google Inc (GOOGL)’s Overall Business

The EU is accusing Google Inc (NASDAQ:GOOGL) of cheating competitors by distorting internet search results in favor of its own services. In a statement made public today, Margrethe Vestager, E.U. Commissioner for Competition said Google Inc is artificially favoring its own services, such as its shopping service, in general internet search results, which under E.U. law constitutes abuse. In his interview with CNBC, Mark Mahaney of RBC Capital Markets pointed out that the consequences of the E.U. charges will spread beyond the $6 billion fine and will have a great impact on Google Inc’s overall business.

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“There are fundamental issues that this raises for Google. Maybe that fine isn’t that much of an issue but what if there is a change in business practices? Google is a company that is driven by these algorithms; in trying to perfect the monetization, perfect customer satisfaction, each minute on the page. So, if somebody is going to step in and regulate that ability away that should be a negative for Google in the long term. And the margin makes us a little less constructive on the stock,” Mahaney said.

The European Union will also be looking into Google Inc’s Android software for mobile devices, which features various Google Inc branded apps and logos on smartphones and tabs made by numerous mobile device manufacturers across the globe. Mahaney believes the $6 billion fine is that overhang which started hovering over the company’s stock three to four years ago when it first started receiving anti-trust allegations, at home and internationally. Mahaney maintains these are not surprise damages for Google Inc (NASDAQ:GOOGL)’s stock.

Simon Hobbs of CNBC expressed his worries about the big picture of the European Union versus Google Inc. In his view companies like Facebook Inc (NASDAQ:FB),, Inc. (NASDAQ:AMZN) and Google Inc that are spending billions of dollars to establish data centers in Europe will be at a great loss if the European Union decides to ring fence their facilities under E.U. concerns. Hobbs also gave his own assessment of the issue and said Microsoft Corporation (NASDAQ:MSFT) might be the main player behind the scenes. According to him, Microsoft Corporation has paid the penalty for breaking European anti-trust laws, and is now pursuing the E.U. through the European system to give a black eye to Google Inc.

However, on the stock side of this issue, Mahaney maintained that $6 billion is not a large sum of money for Google Inc (NASDAQ:GOOGL) to handle, out of $60 billion cash it has on hand, but he warned that any overall change in Google Inc’s practices will have obvious long-term effects on its margins and stock.

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