Court Appoints Co-Lead Plaintiffs and Lead Counsel in Alphabet Securities Litigation

By order on Wednesday, Chief Judge Richard Seeborg appointed lead plaintiffs and counsel in the Northern District of California class action against Alphabet. The breach of fiduciary duty case will now be spearheaded by plaintiffs Bucks County Employees’ Retirement System and Fire Retirement System of the City of Detroit while Scott+Scott Attorneys at Law LLP has been appointed lead counsel.

Last week, the plaintiffs filed their verified stockholder derivative complaint arguing that Google’s parent company, Alphabet Inc., and its officers and directors steered the company awry through anticompetitive and monopolistic business practices, costing it millions in investigations and defensive litigation.

Alphabet allegedly used numerous tactics to engage in the wrongful behavior. The 151-page filing specifies seven, including “(i) leveraging its dominant position in general search to expand to other markets and eliminate competition in vertical search; (ii) forcing anticompetitive tying agreements on manufacturers and mobile carriers for its Android mobile devices in order to secure a monopolistic applications store charging supracompetitive fees; (iii) monopolizing in-application payment processing on Android; (iv) unfairly leveraging in ad servers, exchanges, and markets, resulting in supracompetitive fees for publishers, advertisers, and consumers, among other anticompetitive conduct in those business segments; (v) unfairly extracting supracompetitive fees from small publishers and the destruction of the competitive header bidding that arose in response to Alphabet’s original anticompetitive conduct in the ad purchase tools market, among other anticompetitive conduct in this segment; (vi) locking competitors out of voice-assisted search access points and future search access points to maintain general search monopoly; and (vii) unlawfully acquiring and agreeing with competitors to destroy competition and prevent nascent competitors from gaining market share.”

In one instance, the shareholders accuse Google of entering into exclusionary contracts that prevent general search services competitors from entering the market. To this end, the complaint points to an alleged agreement between Google and Apple whereby the former agreed to hand over a substantial chunk of its search advertising revenue generated on Apple computers in exchange for Apple setting Google’s general search services as the default general search engine on the Apple computers’ default browser, Safari.

The complaint says Google pays Apple $8-12 billion annually to facilitate this agreement, representing 15% to 20% of Apple’s worldwide net income. The shareholders contend this long-standing agreement has harmed competition by preventing Google’s would-be search competitors from “the use of vital search access points and distribution channels” on all Apple devices for nearly 15 years.

The complaint states three counts of breach of fiduciary duty against the various officer and director defendants, and one count of unjust enrichment and corporate waste. An initial case management conference is scheduled for March 8.