Google Fined $2.7 Billion By E.U. Regulators For Shady Search Results, Plus Nestle Is Making Moves

By 06.28.17

Here’s your hand-crafted Brew for June 28th

QUOTE OF THE DAY

“We’re still in the process of verifying all the facts.” — Cannabis delivery startup Eaze’s head of PR, regarding a data breach that hit Eaze. Don’t worry though, the weed’s fine.

Market Snapshot

No Trust

After seven years of investigation into Google’s “comparison-shopping shenanigans,” E.U. regulators have finally slapped the tech company with a fat $2.7 billion fine.

It’s the largest European antitrust penalty ever, confirming suspicions that even when fined, Google won’t settle for second place.

But the penalty represents only 3% of Google’s $92 billion in cash…meaning the E.U.’s big “slap on the wrist” might feel more like a scratch.

Still, if Google fails to remove the current shopping features and pay the violation within 90 days…that scratch will grow…by $12 million a day.

“Who, me? Nah, it was the other guy.”

Google swears it’s playing by the rules (we’ll come back to this), but the E.U. is calling bullsh*t.

The seven-year investigation concluded what a two-second Google search could have told you—Google’s comparison-shopping tool always hovers at the top of the page.

What the search couldn’t have told you? Google might have been actively demoting the comparison-shopping tools of its rivals.

So, as Google’s little trick drove 45x more site traffic to Google in the UK, rival services saw an 85% drop over the same period.

And no wonder—Google controls the front page (which drives 95% of all clicks).

As for rivals? They’ve been falling to page four…and who even knew there was a page four?

But is the E.U. just causing a fuss?

Margrethe Vestager (the EU’s antitrust chief) has been on a hell-fired bounty hunt of Silicon Valley firms.

Vestager demanded Apple (-1.43%) repay $14 billion in back taxes to the Irish government and even Facebook (-1.96%) fell in her crosshairs for its “misleading” takeover of WhatsApp.

But Google genuinely believes it’s just giving the people what they want: the best search results delivered to them on a silver platter via in-search shopping.

And while it might be hurting European comparison-shopping sites, by removing this feature, Google stands to lose billions in advertising revenue.

Who do you think is right?

(Seriously, we want to know. Send us a response here).

Shoppin’ Spree

The world’s largest food and beverage company, Nestle (-1.58%), will be buying back $21 billion in shares—only two days after Daniel Loeb’s request to do so…

Oh, you don’t know Mr. Loeb? The brash hedge fund manager who holds a $3.5 billion stake in Nestle? Well, he didn’t just ask for a share buyback.

His vision for Nestle:

  1. Refocus spending on high-growth goods (coffee, pet care, infant nutrition, you know—the real sellers).
  2. Get rid of its 23% stake in L’Oreal (too much shampoo was gettin’ in the chocolate).
  3. Shed all non-core business operations (does the confectionary business ring any bells?).

For a 2,000+ brand conglomerate, changes don’t happen overnight. But in the short run, $21 billion in buybacks should keep Danny boy quiet…for now.

Square Up

Square—the company that’s brought small purchase transactions to the palm of your hand since 2009—might be offering you your next line of credit.

That’s right. If Square’s new debit card wasn’t enough, CEO Jack Dorsey is hoping loans of up to $10,000 will be.

While selling through Dorsey’s army of 225,000+ small businesses means more $$$ via a 10% annual fee, the grass isn’t always greener (aka defaults).

Square’s stock has soared 75% since its 2015 IPO—but a default here and a default there, and Dorsey just might be tweeting for help.

What Else Is Happening…

  • West coast fast food joint Carl’s Jr. was fined $1.45 million for underpaying workers.
  • Ford’s (-0.94%) bike-sharing program, GoBike, is kicking off in the Bay Area.
  • Several multinationals, including Merck and WPP, were hit with a fast-spreading ransomware attack.
  • Sprint (+2.12%) put a hold on the T-Mobile merger as partnership talks with Comcast (-0.86%) and Charter (-0.84%) arise.
  • NBC Sports will offer direct-to-consumer Premier League soccer games, no cable subscription needed.

Economic Calendar

  • Monday: No events today
  • Tuesday: Consumer Confidence (+)
  • Wednesday: General Mills Earnings; Crude Inventories
  • Thursday: McCormick and Company, Nike, Walgreens Earnings; GDP
  • Friday: Michigan Consumer Sentiment; Personal Income

Water Cooler

Gimme 5…Hedge Fund Managers

Running a hedge fund is one of the most sought-after roles in the investment world, but it can be a treacherous journey to the top. We already know Mr. Daniel Loeb made it there—now, here’s a few more of his successful compadres.

  1. Bill Ackman (Net Worth—$1.4 billion): The founder of Pershing Square made his way into the spotlight after taking a massive short position in Herbalife.
  2. George Soros (Net Worth—$25.2 billion): The founder of Soros Fund Management made a name for himself after he “broke the Bank of England” in 1992. The man bet against the pound and walked away with $1 billion in his (very deep) pockets.
  3. Steve Cohen (Net Worth—$13 billion): The founder of SAC Capital (now Point72 Asset Management) gained notoriety after a series of insider trading scandals. He’s one of Wall Street’s biggest bad boys and is even depicted in HBO’s television drama, Billions.
  4. Carl Icahn (Net Worth—$15.9 billion): The founder of Icahn Capital Management is an extremely hands-on investor best known for the “Icahn lift.” Translation? As his stake in poorly-managed or undervalued companies increases, so does the company’s stock price.
  5. John Paulson (Net Worth—$7.9 billion): The founder of Paulson & Co started turning heads when he placed a bet against the subprime housing market right before it collapsed. Paulson cashed in about $4 billion.

The Breakroom

Interview Question of the Day

You’re standing before two doors. One leads to heaven and the other to hell. There are two guardians, one by each door. You know one of them always tells the truth and the other always lies, but you don’t know who is who.

If you can ask only one question to find a way to heaven, what would you ask?

(Solution)

Who Am I?

  1. I earned my MBA from Harvard Business School.
  2. I served on the board of Starbucks from 2009 through 2012.
  3. I was named one of Time’s most influential women in 2013.
  4. I’ve been the COO at the same tech company since 2008.

(Who am I?)

Stat of the Day

$6.3 trillion

That’s how large the global app economy is projected to grow to by 2021. It was about $1.3 trillion last year.


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