Alphabet's shares experienced a drop on Thursday.
A prominent news source cast a shadow over Alphabet's (GOOG (-3.54%), GOOGL (-3.59%)) shares on the penultimate trading day of the week. Both of its listed stocks experienced a minor dip, decreasing by almost 2%. This decline was more significant than the 0.6% drop observed in the S&P 500.
Strict federal oversight on the horizon?
In the morning, The Washington Post published an article suggesting that the Consumer Financial Protection Bureau (CFPB) is considering placing Alphabet's primary business unit, Google, under direct federal supervision. Two anonymous sources familiar with the discussions provided this information.
If carried out, this move would subject Google to regular inspections and tight monitoring, akin to the oversight seen in the banking sector. The CFPB, established following the 2008-2009 financial crisis, aims to shield consumers from predatory practices by American firms. Although its initial focus was on the actions of financial sector companies, it has also taken action against businesses in other industries.
Both Alphabet and CFPB officials declined to comment on the matter.
Timing is everything
The publication timing of the article is intriguing, as it comes shortly after Donald Trump's election. Trump, known for his skepticism of excessive government regulation, is not a fan of the agencies like CFPB. Critics on the right have accused tech giants, including Google, of political bias. Specifically, Google was accused of swaying search results towards Democrat candidate Kamala Harris before the election, among other allegations.
It's plausible that this leaked information is an attempt to gain favor with the incoming administration that has a less-than-enthusiastic view of agencies like CFPB. Regardless of the motivation, if the report is accurate, we should brace ourselves for a fierce confrontation between the agency and Alphabet's legal team.
In light of the potential oversight, Alphabet might need to reframe its investing strategies in finance to accommodate the increased scrutiny. If the federal supervision becomes a reality, managing money within Google's primary business unit could become more challenging due to the stringent regulations.
Should the Consumer Financial Protection Bureau enact this move, it could also impact other tech companies facing similar allegations of political bias, potentially leading to a wave of changes in the tech investment ecosystem.
