Courtesy of Benzinga.
According to a report by Reuters, the Google (Nasdaq: GOOG) offices in Seoul, South Korea were raided on Tuesday by the Korea Fair Trade Commission.
The raid by the Korea Fair Trade Commission is said to stem from complaints made in April by Google’s Korean internet search rivals NHN Corporation and Daum Communications. The two companies have complained that smartphones running Google’s Android operating system use Google as their default search engine and that Google pressures smartphone manufacturers into making it difficult to switch to its competitors’ search engines.
This marks the second time this year that Google’s South Korean offices have been raided by the authorities. Earlier this year, Google was the focus of an investigation in South Korea after it was accused of illegally collecting user location data. The news of the latest Korean raids comes at a time when Google is already facing greater criticism of its business practices in the United States and Europe
The search engine giant has found itself increasingly on the defensive over allegations that it unfairly uses its leadership position in the internet search and smartphone operating system markets to the detriment of its competitors. Google finds itself in a situation similar to that of Microsoft (Nasdaq: MSFT) during the 1990’s, when Microsoft was the target of numerous antitrust investigations in the United States and Europe over allegations that it was using its control of the personal computer operating system business as unfair leverage when entering new markets such as the internet browser business. The legal challenges faced by Microsoft meant that much of the company’s senior management spent years dealing with legal issues instead of focusing on creating innovative products.
There are a number of companies whose fortunes could improve if Google continues to face legal and regulatory hurdles.
Microsoft and Nokia (NYSE: NOK) stand to gain if Google loses market share because it has to adapt its business practices to please regulators across the globe. The two companies announced earlier this year that they would join forces in order to improve their lagging performance in the lucrative smartphone sector. Microsoft in particular stands to benefit if Google stumbles because Microsoft competes with Google across so many business sectors, including smartphones, internet search and even software.
Although Apple (Nasdaq: AAPL) already has a loyal following and large market share in the smartphone market, Apple can’t help but benefit from any troubles facing Google’s Android operating system.
Chinese internet search giant Baidu (Nasdaq: BIDU) is one company that has already benefited directly from Google’s overseas troubles. After getting into a fight with the Chinese government over its business practices in China, Google emerged the loser and lost market share and market value to Baidu. While Google is already having enough trouble doing business in China, its legal woes in so many international markets could embolden Chinese authorities to put further pressure on Google, which Baidu would be sure to take advantage of and could lead directly to Baidu’s share price climbing higher.
