Google’s Next Antitrust Battle

The Justice Department vs. Google

For months, investors have largely shrugged off the mounting regulatory threat hanging over Big Tech. That calm could be tested with the Justice Department set to lock horns with Google on Monday a landmark antitrust trial on its profit engine that could add to calls that the group be broken up.

The stakes are huge for Google and Big Tech. The government is going after the company over its $200 billion advertising business, which accounted for three-quarters of its revenue last year. Its 2023 lawsuit accused Google of “anti-competitive” behavior by acting as the industry’s key buyer and seller of digital ads.

Google has had a run of setbacks. Last December, a jury ruled that the company violated antitrust laws by extracting fees and limiting competition on its app store; and last month, a federal judge ruled that Google maintained an illegal monopoly in its highly profitable search business. Together, they are a huge challenge to its business model just as artificial intelligence propels rivals like Microsoft, and the new technology poses a potentially existential threat to search.

Tech investors are already on edge. Google shares are down more than 20 percent since hitting a record high in July. And worries about a slowing economy and whether huge investments in artificial intelligence will pay off have dented tech stocks. Last week, the Nasdaq Composite fell nearly 6 percent, its worst weekly performance since January 2022.

The new case is focused on Google Ad Manager. Critics have argued that the tool gives the company an unfair advantage in selling digital ads, as it locks online publishers and advertisers into a single platform, giving Google supply-demand insights from both.

The government, along with states including California, New York and Tennessee, argues that Google violating the Sherman Antitrust Act, a bedrock law at the heart of major competition cases for over a century.

Google counters that the case could alter the economics of the internet. “The DOJ’s case risks inefficiencies and higher prices — the last thing that America’s economy or our small businesses need right now,” Google’s vice president for regulatory affairs, Lee-Anne Mulholland, wrote in a blog post on Sunday.

And the latest case could have ramifications that go well beyond Google, with Apple, Amazon and Meta all facing their own antitrust clashes with the Biden administration.

• Also in tech: On Monday, Apple is set to unveil the iPhone 16, the company’s attempt to catch up on A.I., and take it mainstream.

HERE’S WHAT’S HAPPENING

The presidential debate, central bank decisions and inflation data loom large this week. Vice President Kamala Harris goes up against Donald Trump on Tuesday in their first presidential debate, with the pair deadlocked in the polls. On Wednesday, inflation hawks will focus on the August Consumer Price Index, a key report ahead of the Fed meeting next week.

Boeing reaches a deal with unions to avert a production shutdown threat. The agreement would give unionized Boeing workers a 25 percent raise over the next four years, less than they had sought, and removes a pressing item for the new C.E.O., Kelly Ortberg, as the plane maker still faces a cash crunch as it seeks to turn itself around.

Norfolk Southern is investigating its C.E.O. over accusations of an inappropriate workplace relationship. The board of the railroad operator said on Sunday that it was examining if Alan Shaw violated the company’s code of ethics. Norfolk Southern has already been under pressure from the activist investor Ancora to fire Shaw over the company’s handling of the 2023 toxic derailment in East Palestine, Ohio, poor stock performance and strategy.

A clash with the Murdochs

The Murdoch family’s control over its media empire has long been the subject of intrigue, drama and, soon, legal strife. It’s also the latest target of the prominent shareholder activist Jeff Smith.

His hedge fund, Starboard Value, has submitted a nonbinding proposal that could end the Murdochs’ control, according to a letter to fellow shareholders first obtained by DealBook. The plan shines a light on the family’s power as it’s about to be subjected to courtroom scrutiny.

The context: The Murdochs own a 14 percent economic stake in News Corp, the parent company of The Wall Street Journal, but control 41 percent of the company’s vote through special super-voting shares. (Starboard owns 3.7 percent of nonvoting News Corp shares and 4.6 percent of the voting shares.)

The Murdochs’ shares, as well as similar controlling stock for Fox, are held in a family trust that Rupert Murdoch controls. Control will pass to his four eldest children after he dies, but three of them are fighting their father in court over a move to give his son Lachlan majority control of the trust when Rupert Murdoch dies.

Dual class shares should not be hereditary, Starboard argues. Such structures are often found in media companies; it’s how the Sulzberger family controls The New York Times Company, for example. But Smith argued that political disagreements among the Murdoch children could be paralyzing to the strategic direction” of News Corp.

More broadly, he writes, “we are not sure why their perspectives should carry greater weight than the views of other shareholders.”

(Reuters earlier reported on Starboard’s proposal.)

Activists have sought to shake up News Corp before. In 2022, Irenic Capital Management pushed back against the Murdochs’ plan to merge News Corp and Fox. Rupert Murdoch later abandoned the effort.

Starboard’s proposal faces long odds. Because it’s nonbinding, the board has no obligation to listen. Still, there are examples of families giving up corporate control, including the beer and wine giant Constellation Brands and the equipment distributor MSC Industrial Supply.

A similar proposal at News Corp in 2015 was supported by 90 percent of non-Murdoch shareholders, equivalent to 49.5 percent of the vote. Majority support for this initiative proposal, Smith wrote, would “send a clear and direct message” to the board — and if the board doesn’t listen, he added, “we can then take further action.”

The Vista Outdoor fight is back on

The battle over the future of Vista Outdoor, which makes CamelBak water bottles and Remington-branded ammunition, had been quiet since the company postponed a shareholder vote on a proposed sale of its ammunition business in late July.

But a fight over the company’s future has burst back into the open, days before a new vote on the proposed deal.

MNC Capital announced a higher takeover bid — with a time limit. The investment firm said on Saturday that it would again raise its offer for all of Vista, this time to $43 a share, or $2.5 billion. MNC also criticized what it said had been weeks of radio silence from Vista after the company said it would review its strategic options, including a sale to the investment firm.

MNC said its new offer was good only until Monday, if Vista said it was ready to sign an agreement by Sept. 13. That’s the date of the latest shareholder vote on the sale of the ammo business to the Czechoslovak Group, known as CSG.

Vista shot back. The company said on Sunday that it had been negotiating in good faith and was surprised when MNC unveiled its so-called exploding offer around 10 p.m. Eastern on Friday and made it public the next morning.

The companies have battled behind the scenes for weeks, DealBook understands. The two sides had spoken regularly since early August, but MNC has argued that Vista didn’t do much to firm up a potential merger agreement, its main request, until two weeks ago.

And DealBook hears that Vista has privately raised questions about how quickly MNC could close a deal, noting that the CSG transaction could be finalized soon after an investor vote. (That said, shareholders had appeared likely to vote down the CSG deal several times already.)

There are still several unknowns:

• Has Vista found an alternative to both the CSG takeover of the ammo business and to MNC’s offer?

• Will Vista actually hold the shareholder vote on the CSG bid on Sept. 13, given previous opposition?

• When will MNC publicly disclose more about how its bid will be financed, including the name of its private equity partner that would take over the non-ammo business?

Inside the fall of Bob Chapek at Disney

Disney has been wracked by battles over succession before, but few compare with the clash between Bob Iger, the once and current C.E.O., and Bob Chapek, his handpicked successor who held the position for two years.

The Times’s Jim Stewart and Brooks Barnes tell the story of the extraordinary behind-the-scenes fight.

Among the revelations is that Chapek secretly met in 2022 with two Disney antagonists when he was C.E.O.: the activist shareholder Nelson Peltz; and Ike Perlmutter, a former Marvel executive who had a longstanding grudge against Iger.

From the article:

Mr. Perlmutter had sources in the company who convinced him that Mr. Iger was plotting a return. Mr. Perlmutter warned Mr. Chapek, fanning Mr. Chapek’s own anxieties about Mr. Iger’s intentions.

With Mr. Perlmutter’s encouragement, Mr. Chapek met with Mr. Peltz in July at Disneyland Paris and the two men forged a rapport. Soon after, Mr. Perlmutter called several board members, including Ms. Catz, lobbying them to add Mr. Peltz to the board. If not, he warned, Mr. Iger “would be back at Disney,” as Disney later put it in a proxy filing.

In a call to Horacio Gutierrez, the company’s new general counsel, Mr. Perlmutter told him: “We have to save Chapek. We can’t allow Iger to come back.”

Mr. Chapek told Ms. Arnold that he thought inviting Mr. Peltz made sense. It would spare Disney a costly and distracting proxy fight. But Ms. Arnold said the board would never offer Mr. Peltz a seat, partly because of his friendship with Mr. Perlmutter.

Chapek met again with Peltz and Perlmutter months later. After a Nov. 17 board meeting at which directors voted to rebuff Peltz, Disney’s chair, Susan Arnold, ordered Chapek not to contact the activist investor again.

Days later, citing a loss of trust (across various matters), the board fired Chapek and replaced him with Iger.

THE SPEED READ

Deals

• Atomico, the European venture capital firm, raised $1.24 billion for two new funds. (Bloomberg)

• Couche-Tard said it would renew talks to seek a “friendly” takeover of Japan’s Seven and I Holdings after the 7-Eleven convenience store operator rebuffed a $40 billion offer. (Bloomberg)

Elections, politics and policy

• Donald Trump’s embrace of crypto could create conflicts of interest. (WSJ)

• Mario Draghi called on the European Union to increase investment spending by €800 billion, or about $880 billion, annually to close the competitiveness gap with the U.S. and China. (FT)

Best of the rest

• The conservative activist Leonard Leo plans to spend $1 billion to target Corporate America after focusing on the government and the Supreme Court. (FT)

• “The plight of the girlboss” (Business Insider)

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