Will Google Incorporation (NASDAQ:GOOGL) be broken up?

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By Erik Waters on November 28, 2014 Company

It is not that the European Parliament can break Google Incorporation (NASDAQ:GOOG), but it has recently voted for it. According to the parliament, the company should be divided into several different parts with the search options completely separated for all the other services that the company offers. The parliament has taken this step on the basis of its wrong understanding of the market monopoly and market dominance. Let’s have a look at the basic report for further details.

The European Parliament has recently voted with a ratio of 458 to 173 in its recent meeting in Strasbourg whereby the parliament passed a resolution saying that the company’s search engine should be separated from all of its other functions so as to remove any biases or prejudices that the search engine’s results might have.

This vote does not involve any anti-trust investigation. However, the legislative branch in the United States is not very happy with the vote. The legislator is of the view that the recent move made by the European Parliament has disturbed the internal affairs of Google Incorporation (NASDAQ:GOOG).

It is important to mention here that the power of EU parliament is strictly suggestive, and thus, the resolution passed by the parliament is of no legal force. The sole power to pass and enact legislations lies with the European Commission. Although the resolution does not carry any weigh, it shows what the members of the parliament think about the issue, or to be more precise, how well the lobbying process is working.

Many companies who were losing to Google Incorporation (NASDAQ:GOOG) in the search engine results were in the process of lobbying the European law-making institution. The purpose was to get a legislation passed for a complete restructure plan of the company.

Although the ideas used for the lobbying process sound noble; for instance, the dominance of the market and monopoly by Google, but at the bottom of all this, it really is an effort made by the management of losing companies to secure their revenues.

It is true that concepts like monopolies exist and can be found in practicality, but there are a number of tests that need to be applied before passing a legislation based on public policy. Te first one is to ask as to whether the company enjoys market monopoly or not. And if it does, how was that monopoly achieved. Was it through the free market processes or was it due to some legislation. The second question is as to how that monopoly can be removed. If the customers prefer the products of one firm over the other due to the brand name, then there isn’t really much that you can do.

The European parliament, while passing the legislation, has not taken into account all these questions. Chances are that this legislation will be dismissed at the European Commission meeting.

Google Incorporation (NASDAQ:GOOG) has a total market capitalization of $369.06 billion with a P/E (price to earnings) ratio of 27.39.