Google to reform compliance structure with $500 mn investment amid antitrust scrutiny

Google has agreed to commit $500 million over the next decade to drastically revamp its compliance framework, settling a significant shareholder lawsuit that accused the tech giant of antitrust violations, according to settlement papers reviewed by Reuters.

The preliminary settlement addresses so-called derivative litigation brought against top Alphabet officials, including CEO Sundar Pichai and co-founders Sergey Brin and Larry Page. These shareholders, led by two Michigan pension funds, alleged that Google's executives and directors breached their fiduciary duties by exposing the company to substantial antitrust liability in its dominant search, Ad Tech, Android, and app distribution businesses.

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The proposed changes, which require approval by U.S. District Judge Rita Lin in San Francisco, are designed to implement a "deeply rooted culture change" within the company's compliance functions, shareholder lawyers stated. Key reforms include the creation of a standalone board committee dedicated solely to overseeing risk and compliance – a responsibility previously handled by the Alphabet board's audit and compliance committee. Furthermore, Alphabet will establish a senior vice president-level committee to address regulatory and compliance issues, reporting directly to CEO Pichai, and a compliance committee composed of Google product team managers and internal compliance experts. These stringent new measures must remain in place for at least four years.

While Google has denied any wrongdoing in agreeing to the settlement, a company spokesperson stated, "Over the years, we have devoted substantial resources to building robust compliance processes. To avoid protracted litigation, we're happy to make these commitments."

Patrick Coughlin, a lawyer for the shareholders, told Reuters that this settlement represents one of the largest by a company to fund regulatory compliance committees. He added, "We didn't see the board getting the fulsome reports it should have gotten regarding antitrust risks. There are things it could have done, and should have done, earlier."

This compliance overhaul comes as Google faces increasing antitrust pressure. The settlement was disclosed on the same day U.S. District Judge Amit Mehta in Washington, who found Google violated federal antitrust law to maintain dominance in search last August, concluded a hearing to consider how to address the monopoly. Judge Mehta is expected to rule by August, with the U.S. Department of Justice having proposed remedies such as requiring Google to sell its Chrome browser and share search data with rivals. Shareholders' lawyers plan to seek up to $80 million in legal fees and expenses in addition to the $500 million.

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