While quite a few Big Tech companies are facing scrutiny globally over the alleged monopolies that they have built, Google deserves a special mention as the company is facing some serious regulatory headwinds, especially in the US. Google’s troubles might only compound as the Consumer Financial Protection Bureau (CFPB) is reportedly looking to place the company under its supervision.
Here we’ll discuss why CFPB could contemplate such a move and how it might impact GOOG stock. We’ll also analyze whether CFPB’s move if it were to happen, would hold ground as Donald Trump assumes office next year.
CFPB Was Created for Oversight of Financial Companies
For context, the CFPB was created in 2008 for better regulatory oversight of financial institutions. It describes itself as a “21st century agency that implements and enforces Federal consumer financial law and ensures that markets for consumer financial products are fair, transparent, and competitive.”
In a nutshell, its mandate is to protect consumers from any unfair practices by financial institutions. When the CFPB was created, the bulk of financial activity happened within the traditional banking ecosystem which predominantly included banks.
However, the financial services ecosystem has changed dramatically over the last decade. We have many companies offering financial services digitally, some of which happen to be tech behemoths.
Tech giants like Apple, Amazon, and Alphabet all have their own financial operations. For quite some time now, CFPB under its Director Rohit Chopra has been seeking to regulate digital payment providers – Google Pay for instance.
CFPB has Been in Crosshairs with Conservatives
Meanwhile, the CFPB has been in the crosshairs with conservatives who typically bat for fewer regulations. Trump says that he will form an advisory Department of Government Efficiency (DOGE), headed byElon Musk and Vivek Ramaswamy.
According to Trump, DOGE will be set outside the government and would suggest measures to “slash excess regulations, cut wasteful expenditures, and restructure Federal Agencies.” During his campaign, Trump had promised friendlier regulations and tax cuts. No wonder US stocks – especially in the banking sector – rallied sharply after his election.
During his first tenure, he relaxed the Dodd-Frank Law to reduce the regulatory oversight of small and midsize banks. Markets expect Trump to relax banking regulations even further so it remains to be seen whether CFPB’s bid to get regulatory oversight stands ground after he is inaugurated next year.
Most experts expect that Chopra will either resign ahead of Trump’s inauguration or be removed by Trump once he is in office. The timing of reports suggesting a CFPB oversight for Google are interesting though as they come days after Trump’s election. The agency still has time until Trump’s inauguration to officially announce that it intends to regulate Google.
Google Anyways Faces Regulatory Headwinds
Google has anyway been facing severe regulatory scrutiny and in August a judge ruled that its search engine has been exploiting its dominance and that the company violated Section 2 of the Sherman Act. It was the first time in decades that an antimonopoly decision went against a large tech company.
Google faces two cases from the US Department of Justice. The first relates to its search business while the other is about its dominance in advertisement technology. One of the options being contemplated is breaking up the company. It has already had to open up its lucrative mobile app store to third parties, which will result in increased competition from rival developers.
Trump’s Return to the White House Might Provide Some Relief to Google
To be sure, Trump is no fan of tech giants and conservatives have long seen them as biased against them. During the presidential election, conservatives claimed that searches favored Kamala Harris.
Google clarified that the differing search results were because there was a county named Harris in Texas. Meanwhile, Alphabet stock has risen since Trump’s election as markets expect him to relax regulations and cut taxes.
He also says that he is against breaking up Google and at an event last month said, “If you do that, are you going to destroy the company? What you can do without breaking it up is make sure it’s more fair.”
Google Is Stopping Political Ads in the EU
The EU has been at the forefront of taking on US tech giants. For instance, Apple is not offering its flagship Apple Intelligence in the region over “regulatory uncertainties.”
Meta on the other hand had to offer an ad-free paid version of Facebook and Instagram in the EU amid concerns over user privacy. Elon Musk’s X (formerly Twitter) is also often in conflict with EU regulators. The region has imposed massive fines on several US tech companies, including Google, for breaking its rules.
Earlier this week, Google said that it would stop political ads in the EU. “The European Union’s upcoming Regulation on Transparency and Targeting of Political Advertising (TTPA) unfortunately introduces significant new operational challenges and legal uncertainties for political advertisers and platforms,” it said in its release.
Among others, Google said that “the TTPA defines political advertising so broadly that it could cover ads related to an extremely wide range of issues that would be difficult to reliably identify at scale.”
GOOG Stock Fell Yesterday
GOOG stock fell yesterday amid concerns over higher regulatory scrutiny. CFPB has been among the stringent regulators in the country and any move to bring Google under its regulatory oversight is naturally negative for GOOG stock.
One of the reasons Google has underperformed the Nasdaq Composite this year is concerns over the Justice Department’s lawsuits against the company. The other reason is of course fears of it losing market share in the search market to OpenAI’s ChatGPT. Many believe that Google was behind the curve in its artificial intelligence (AI) initiatives even as Microsoft-backed OpenAI raced ahead.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
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