Europe’s antitrust fine against Google takes a big bite out of Alphabet’s profit

Google’s parent company, Alphabet Inc., can easily afford the $2.7-billion write-down it’s taking to cover a big antitrust fine in Europe. But the company might find it harder to shrug off the rest of the European regulatory assault headed its way.

In June, a European Commission ruling slapped Google for abusing its market dominance in search by unfairly directing visitors to its comparison-shopping service, Google Shopping, to the detriment of its rivals. The regulators not only imposed a huge fine, they also insisted that Google change the way it provides search results in Europe.

Alphabet is still mulling over an appeal of that ruling. But it could take years to get a ruling at the European Court of Justice. And that case is only the first of several such investigations that have embroiled Google in Europe, a situation that raises uncertainty about its ability to operate freely there in the future.

On Monday, Alphabet reported second-quarter earnings were $3.5 billion, down 28% from $4.9 billion in the same quarter last year; that figure includes the effect of the $2.7-billion European fine. The Mountain View, Calif., tech giant’s revenue was $20.9 billion after subtracting commissions it paid out, which was up 19% from $17.5 billion in the year-earlier quarter.

Google faces the prospect of additional fines if it doesn’t change the way it displays Google Shopping results in Europe by late September.

“These things tend to hobble a company’s behavior even if there isn’t a decision,” said Jonathan Taplin, a former USC professor and author of “Move Fast and Break Things: How Google, Facebook and Amazon Have Cornered Culture and Undermined Democracy.” “I don’t think it’s the end, I think it’s the beginning.”

Google has offered to make concessions on multiple occasions in an attempt to settle Europe’s 7-year-old antitrust probe. But previous offers were still considered to drive the vast majority of clicks toward Google’s services — its key source of revenue from advertisers.

That’s what makes the current negotiations over what it can do to avoid further fines confusing, says Mark Ballard, head of research for Merkle, an ad agency that represents Gap, Crate & Barrel and other big online-ad spenders.

“There’s a lot of uncertainty,” he says. “Until we see that plan, it’s going to be hard to predict what kind of impact this will have.”

Alphabet shares rose 0.5% to $998.31 during regular trading. After the company released its earnings results, its shares dropped more than 3% in after-hours trading, to $968.

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