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EU Confirms Alphabet (GOOGL) Scrutiny for App Pre-Installation

Alphabet Inc.’s GOOGL growing influence on modern commerce is increasingly making it the subject of scrutiny. The company faces most of its regulatory challenges from Europe, including one related to its exclusive deals with smartphone makers and telecom operators that is said to be violating competition rules.

The European Commissioner for Competition Margrethe Vestager confirmed in a speech on Monday that the antitrust commission is closely investigating whether Google is trying to reduce competition by forcing pre-installation of its own apps. The investigation is centered on Google’s demand for pre-installing 11 of its apps to smartphone makers and operators offering Google’s services.

Vestager stated, “Our concern is that, by requiring phone makers and operators to preload a set of Google apps, rather than letting them decide for themselves which apps to load, Google might have cut off one of the main ways that new apps can reach customers.”

Google in response denied the allegation and stated “Anyone can use Android with or without Google applications. Hardware manufacturers and carriers can decide how to use Android and consumers have the last word about which apps they want to use.”

Google is already being investigated in EU over allegations that it’s misusing its search results to benefit its own shopping service.

Meanwhile, to make things worse, News Corporation NWSA filed a formal complaint against Google with the European Union. The complaint argues that Google is displaying so much news content in its search results that it deters people from clicking on the publisher’s site. As a result, publishers are losing ad revenue.

Vestager said that investigations are underway and no conclusions have been reached yet. However, if Google is found to have broken the rules, it might have to pay billions in penalties.

Microsoft Corp. MSFT paid $560 million to EU in fines for combining its media player with the Windows operating system. The EU is also investigating, Inc. AMZN over claims that the company forced ebook publishers to provide it with the details of better deals offered by its competitors.

“In spare rooms all across Europe right now, people are putting their time and savings into building the next Amazon, the next Google, the next Facebook. And the last thing we should do is to tell them we disapprove of those companies’ success,” said the Commissioner. “On the contrary, we should tell them success is welcome – but the right way for a big company to stay successful is to keep competing, to keep innovating. Not to misuse its power to stop others from innovating,” she added.

At present, Google has a Zacks Rank #3 (Hold).

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