After months of speculation, the Justice Department officially filed an antitrust lawsuit against Alphabet, Inc. GOOG GOOGL on Tuesday alleging subsidiary Google has engaged in anticompetitive practices to maintain monopolies in search and advertising.
The Claims: The DoJ complaint accuses Google of locking out competitors via exclusionary agreements, such as paying billions of dollars to mobile-phone manufacturers, carriers and browsers to use Google as their default search engine.
The Justice Department claims Google owns or controls channels that account for 80% of U.S. internet search volume, and Google has the scale and resources, including more than $120 billion in cash, to maintain that market dominance and block any meaningful competition in online search.
Google Responds: Google rejected the DoJ’s claims in a statement.
“Today’s lawsuit by the Department of Justice is deeply flawed. People use Google because they choose to—not because they’re forced to or because they can’t find alternatives,” Google said.
The company said it would be responding to the lawsuit in further detail later on Tuesday. Google has previously argued that its search business is typically free for consumers to use and is therefore not harmful in the way a typical monopoly is.
Google may also argue it has competing search engines, such as Microsoft Corporation MSFT search engine Bing and Verizon Communications Inc. VZ search engine Yahoo!. However, Google accounted for 79.4% of desktop searches and 92% of mobile searches in the month of August, according to The Wall Street Journal.
After reading the DoJ case, CNBC's Jim Cramer said he is even more bullish on Alphabet stock.
“I just think it’s another ‘loser case’ by the government. And by the way, the sum of the parts is worth far more than $1,500,” Cramer said.
Benzinga’s Take: Alphabet shares traded flat on Tuesday, suggesting investors weren’t caught off guard by the lawsuit or the charges. If Cramer is correct, a potential breakup of Alphabet or a victory over the Justice Department in court could ultimately serve as a bullish catalyst for the stock.
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