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Google, Facebook and Apple take a hit from reports of antitrust probes

Javier E. David
Editor focused on markets and the economy

The stocks of Google (GOOG) parent Alphabet, Apple (AAPL) and Facebook all fell on Monday, amid concerns that tech giants are in the crosshairs of potential government action.

In recent days, The Wall Street Journal reported that the Department of Justice (DOJ) is weighing antitrust action in an effort to rein in Google’s business and search practices.

On Monday, The Journal reported on Monday that the Federal Trade Commission was also looking into a possible antitrust probe against Facebook. The social network has been hit from all sides by allegations of improper use of personal data, and accusations that social platforms have been biased against conservative-leaning voices.

Separately, Reuters also reported that the Justice Department was considering taking action against the iPhone maker, as part of a broad review of technology companies.

The news pressured the shares of Apple, Google and Facebook — all components of the “FAANG” group of high-flying tech stocks that include Netflix (NFLX) and Amazon (AMZN). Google and Facebook suffered the most, with both stocks swooning by more than 6% in intraday trading.

Stocks were broadly weaker, as investors fled blue chip and technology shares in the S&P 500 (^GSPC), the Dow (^DJI) and the Nasdaq (^IXIC) on fears of a global trade war.

Google CEO Sundar Pichai testifies at a House Judiciary Committee hearing “examining Google and its Data Collection, Use and Filtering Practices” on Capitol Hill in Washington, U.S., December 11, 2018. REUTERS/Jim Young

In an environment where Silicon Valley’s biggest names are already under fire for privacy violations, the possibility of new regulatory action spooked investors.

The report also raised concerns among analysts that Google may face higher regulatory costs and — in a worst-case scenario — be forced to divest of key parts of its lucrative business model.

“A DOJ probe would likely take more than 5 years to resolve and, if it were to happen, a breakup would be distracting for management, add [general & administrative] expenses, and potentially impact the long-term valuation creation by Alphabet companies that could be operated more cautiously,” analysts at Bank of America-Merrill Lynch said in a note to clients.

“To break up Google ... the DOJ would likely have to file a lawsuit and convince judges that Google has undermined competition,” the bank added.

While such a move would be rare, it’s not entirely out of the realm of possibility, BofA said, noting the government’s pursuit of Standard Oil, AT&T (T) and its failed attempt to break up Microsoft (MSFT).

Google declined to comment on the report, and a representative for the DOJ also declined to comment, citing the department’s practice to “not confirm, deny, or otherwise comment on the existence or nonexistence of investigations.”

Javier is an editor for Yahoo Finance. Follow Javier on Twitter: @TeflonGeek

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