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America January 9, 2023 3 mins read

Google Investors Appeal Rejection of Suit Accusing Company of Violating EU Antitrust Law

America ı By Samuel Lopez

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(USA Herald) -- This is the case of Alphabet Shareholder Derivative Cases, in the Court of Appeal of the State of California, Sixth Appellate District.

Google investors are appealing a California court's rejection of their shareholder derivative suit, which accuses the tech giant's founders, former CEO, and certain board members of breaching their fiduciary duty by causing the company to systematically violate European Union (EU) antitrust law.

The investors claim that these actions resulted in over $9 billion in fines for Google. In 2020, the court ruled that the investors failed to show why it would have been futile to bring their concerns to the company's board before filing their derivative claim on behalf of Google's holding company, Alphabet Inc.

During oral arguments on Tuesday, a lawyer for the investors argued that the requirement to bring the concerns to the board should have been waived because Google's leaders and board members faced a substantial likelihood of liability.

The lawyer, Mark Lebovitch of Bernstein Litowitz Berger & Grossmann LLP, stated that Google was ultimately run by a "triumvirate" of controlling stockholders: founders Larry Page and Sergey Brin, along with Eric Schmidt, former CEO and chair of Google-Alphabet. Lebovitch told the panel that "this case is about the controllers of one of the largest and most powerful companies in the world intentionally flouting the law." He also argued that the majority of the board lacked independence from these three Google officers.

The suit claims that Google's illegal actions included giving Google Play preferential treatment over rivals on its Google Search engine, using its Android operating system to require device manufacturers and mobile network operators to favor Google's search and web browser products, and using its dominance in online search advertising to force third-party websites to enter into exclusivity agreements.

In addition to Alphabet and the aforementioned executives, the suit names the company's CEO Sundar Pichai and board members L. John Doerr, John L. Hennessy, Ann Mather, Alan Mulally, Shirley M. Tilghman, and K. Ram Shriram.

A lawyer for Alphabet and the individual defendants, Boris Feldman of Freshfields Bruckhaus Deringer, told the panel on Tuesday that his clients did not take any unlawful actions and were challenging the fines imposed over the purported violations of European law.

Feldman also argued that he couldn't find any derivative suit involving antitrust violations in which a court waived the requirement that shareholders submit a demand to the board before suing.

He stated that "if the court were to reverse, this would be the first derivative case ever in a complex antitrust regulatory situation that by fighting, instead of surrendering, the directors became personally liable."

Feldman argued that Google's leadership was never told by its counsel that the company's business practices were illegal and that they were simply "fighting an aggressive regulatory body."

The investors' brief to the appellate court stated that Google's leadership knew from actions taken by the EU against Microsoft that its conduct would be considered anti-competitive.

It also claimed that key pieces of evidence, including a July 2012 presentation from Google's counsel to Page, Brin, Schmidt, and the board, were given short shrift by the trial judge. In the presentation, Google's counsel warned the group that the company's business model would be considered anti-competitive by the European Commission.

The investors' brief stated that "counsel did their job; the defendants refused to do theirs, which was to bring their company into compliance with the law." The brief also claimed that statements made by other Google executives in the presentation underscored the illegality of the company's actions.

 

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Samuel Lopez

With over 20 years of experience in the legal and insurance sectors, Samuel applies his profound legal acumen to investigate and accurately report on the facts.

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