ALEX BRUMMER: Google faces a reboot as US authorities open up a new front against big tech
The decision by the US Justice Department to embark on an anti-trust lawsuit against Google represents the most important such case in a generation.
Indeed, some competition experts compared it to the interventions of Teddy Roosevelt, the president who moved against the monopoly of Standard Oil of New Jersey a century ago.
At the time, John D Rockefeller’s Standard Oil controlled more than 90 per cent of world supplies.
Google is accused of distorting the advertising market by discriminatory pricing which favours those who pay for premium positions on its searches
A recent Congressional inquiry determined that Google controls 87 per cent of the searches on the web and has crushed rival browsers such as Apple’s Safari, Mozilla’s Firefox and Yahoo by erecting barriers which made it the default search engine on desktop and mobile devices.
The timing of the case, with less than three weeks to the presidential election, marks a change of tack for President Trump’s Justice Department.
The case has real legs and is supported by 11 Republican state attorney generals. As a lawsuit it will be all but impossible to halt by a change in control at the White House, and will open the door to cases against other big tech firms.
Already, the Federal Trade Commission is probing Facebook’s acquisition strategy and the attorney general in New York is probing the company.
Among the complaints against Google is that it has distorted the advertising market by discriminatory pricing which favours those who pay for premium positions on its searches.
It then uses that income by technological and other means, such as lucrative commercial deals, to require others to make it the default search engine.
Its rise is one of the inspiring business stories of the age. It was founded in 1998 in a San Francisco garage by Larry Page and Sergey Brin, both now multi-billionaires.
They stepped back in 2019, handing control to engineer Sundar Pichai.
With some £93billion of reserves in its bank account, Google has no shortage of resources to fight the case.
Previous US Justice Department cases against IBM and Microsoft were settled. The case against the original US telecoms monopoly, AT&T, ended with the company being prised apart into a series of independent regional telecoms companies.
Google-owner Alphabet’s shares were unmoved by the anti-trust action.
But the US authorities have opened up a new front against big tech, which will linger as a source of speculation and uncertainty for years to come.
Watchful eye
Hargreaves Lansdown (HL) is on a journey to get its governance in order ahead of any Financial Conduct Authority (FCA) finding of culpability in the Neil Woodford investment scandal.
Woodford remained on HL’s Wealth List of favoured funds until its implosion in June 2019, exposing an astonishing 25 per cent of HL investors to serious losses.
The profits at HL and its extraordinarily generous margins have marched on and chief executive Chris Hill is back in the money through his bonus payout.
A key plank of restoring its reputation is strengthening a compliant board, which has been feeble on scrutiny. Recent appointments have improved the asset management experience and addressed diversity.
Veteran fund manager Adrian Collins has been hired as a ‘non-independent’ director speaking for the 23.9 per cent share stake held by founder Peter Hargreaves, who cannot be overjoyed by the Woodford imbroglio.
Such arrangements are not unusual when there is a dominant family holder.
HL’s good fortune is that the wheels of financial justice move slowly. It took just three months for Alison Levitt QC to produce a searing report on wrongdoing at online fashion firm Boohoo, looking at supply chains and governance.
Some 15 months after the Woodford crisis there is no sign of even an interim report on the FCA probe. If new chief executive Nikhil Rathi wants to make a difference, he could do no better than put a rocket under those responsible for investigations.
Dettol redux
When Reckitt Benckiser bought infant formula group Mead Johnson for £13.8billion in 2016 it was meant to be a path to future growth for the hygiene and health group.
Reckitt could never have imagined that it would be unfashionable disinfectants Dettol and Lysol which would drive expansion.
Covid-19 has done just that, with sales soaring 13.3 per cent in the third quarter.
It’s an ill wind…