Shares of Alphabet (GOOG, GOOGL -6%) are trading at a five-month low after The Wall Street Journal reported that the Justice Department is set to open an antitrust probe against Google related to its core search and other businesses.
Antitrust concerns are nothing new for Google. The US government closed an investigation into the company without taking action in 2013, but the company's market position has continued to strengthen. Alphabet has already paid three separate multi-billion fines from The European Commission over recent years. The company has found itself in the cross hairs of politicians more recently from the far right and far left as allegations regarding content censorship and market share surround the company.
Google remains subject to scrutiny due to its dominant market share in search. Google search market share remains above 90% in the US while Google's Chrome market share is just under 50% in the US and nearly two-thirds worldwide. That gives Google tons of power in the digital advertising market, where its policies have a big impact on smaller internet competitors.
What's more, Android is the dominant mobile operating system globally and YouTube is similarly dominant in online video. The Google Cloud Platform is a distant third to Amazon (AMZN) and Microsoft (MSFT), while Waymo is said to have a lead in autonomous driving.
Last night's news comes at a time when investors have grown frustrated with Google's slowing advertising revenue growth. In late April, the company posted first quarter revenue growth of 17%, the slowest in four years. The company is quite opaque with its disclosures and didn't necessarily pin down the reasons for the slowing growth other than tough comparisons and foreign exchange headwinds. That has increased concerns that Amazon has started to become a viable third player in the digital advertising space as the duopoly with Facebook gets challenged.
Antitrust concerns are weighing on mega cap technology peers who also face potential regulatory risk: Facebook (FB) -3.5%, Amazon (AMZN) -3.0%. Again, regulatory risk does not come as a huge surprise, but it does represent a potential serious headwind for these leaders in the Nasdaq 100 (QQQ) -0.7%.