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Shareholders sue Google, claim it hid anticompetitive ad practices

Aggrieved investors claim tech giant fibbed to inflate stock prices... and it backfired

Google parent Alphabet is facing a proposed class action lawsuit from investors unhappy that the company's alleged advertising monopoly, and the subsequent DoJ investigation into this, led to "significant losses and damages."

The lawsuit [PDF], filed in the Northern District of California yesterday by lawyers representing government employee investment management company AMI, accuses Alphabet, as well as its CEO Sundar Pichai, CFO Ruth Porat, and CBO Philipp Schindler of knowingly concealing monopolistic advertising behavior from shareholders.

This new suit seeks to establish a class of anyone who purchased Alphabet shares between February 4, 2020, and January 23, 2023, the day before the Department of Justice announced its second antitrust investigation into Google's actions. 

That second investigation accused Google of monopolizing the buying and selling of digital advertising by, among other things, acquiring competitors, forcing publishers and advertisers to use its tools, distorting ad auction competition, and manipulating ad auction outcomes. If this DoJ probe leads to a guilty verdict, it could result in Google being forced to sell its Ad Manager suite and other advertising arms to restore a competitive environment.

While much of the language in the AMI lawsuit echoes the charges brought by the DoJ and eight states, AMI's lawyers go a step further to accuse Alphabet and its named leaders of knowing the company's actions were anticompetitive and having decided that taking these actions was necessary to sustain Alphabet's revenues. 

That put Alphabet's leadership in a position to either face the music and take a stock hit, or make a series of statements between 2020 and 2023 that "were materially false and misleading at all relevant times" - or so claims the lawsuit, which is alleging it took the second path.

While the January suit filed by the DoJ is still winding its way through the early stages of the legal process, a 2020 antitrust case involving Google's alleged monopoly on search has just started to become interesting.

Much of that 2020 antitrust suit is similar, inasmuch as it accuses Google of being anticompetitive and exclusionary in regards to its search practices, and while not directly calling for Google's breakup, language in that suit implies such an outcome is possible.

The search monopoly lawsuit became more interesting as the discovery phase began late last month. As part of that process, the DoJ asked the court to sanction Google for allegedly destroying chat messages that should have been preserved as evidence.

It remains to be seen whether this shareholder lawsuit against Alphabet will succeed, as it's alleging financial damages in the wake of Google's latest antitrust lawsuit. A look at Alphabet's class A stock (GOOGL) indicates that it rose in the wake of the 2020 lawsuit, and didn't begin to experience a downturn until early 2022 - the same time most of its peers recorded losses, too. GOOG, the company's class C stock, has generally moved in line with its class A counterpart.

It's true that GOOGL did lose value shortly after the advertising antitrust lawsuit was launched in January, as AMI's legal team argues, but by early February it had climbed to a higher value than it was before the DoJ announced its latest antitrust action. 

Google's stock has been up and down, though generally down, since then, but has risen of late, possibly on news that Google is expanding its AI efforts to better compete with Microsoft and OpenAI

It may be difficult for the plaintiffs to prove they were substantially materially harmed. Google's stock price was volatile enough over the past year - just like its peers - without accounting for DoJ investigations. The fact Google's stock appears to be recovering just weeks after its latest antitrust summons may make it hard to convince a court that advertising antitrust revelations actually hurt investors. ®

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