Google, a subsidiary of Alphabet Inc., has agreed to invest $500m over the next decade to significantly revamp its compliance operations. This commitment comes as part of a preliminary settlement, filed on May 30, in a shareholder derivative lawsuit that accused the tech giant’s executives and directors of exposing the company to widespread antitrust liability.

The shareholder litigation, initiated in 2021 by two Michigan pension funds and other plaintiffs, alleged that Google’s “prolonged and ongoing monopolistic and anticompetitive business practices” across its core businesses – including search, advertising technology, Android, and app distribution – endangered the company’s future.

While Google has denied any wrongdoing, a company statement indicated it was “happy to make these commitments” to avoid protracted litigation. Reading between the lines this probably means that the half-billion-dollar overhaul should be viewed as a measure that was deemed advantageous to the company and its operational and compliance make-up going forward.

Compliance program costs

While the headline figure seems high at first glance, spread over a decade the cost to the business is reasonably modest given the fact that large corporations tend to spend hundreds of millions of dollars on compliance programs each year.

It is useful to contrast the figure with another figure being reported in connection with the settlement, which is the $80m in legal fees being sought by the plaintiffs’ lawyers on top of Google’s promised compliance program expenditure.

Nevertheless, the claim by the lawyers that the investment signals a major shift in how Google plans to manage regulatory risks is probably sound.

According to the lawyers, the settlement mandates a “comprehensive overhaul of Alphabet’s compliance function” that aims for a “deeply rooted culture change.”

In our view it is not the size of the funding, but its longevity – the fact that these reforms are set to remain in place for at least four years, with the funding committed for a full decade – which is the reason why the investment will almost certainly have a good chance of making an impact on the way that the search giant operates.

Key points

Much depends, as always, on the mandate of the compliance function and its ability to sway decision-making at the highest level given the antitrust focus. And here there are certainly some positive signs because key components of the compliance transformation include:

• Risk Compliance Committee (RCC): A new, standalone board-level committee will be established specifically to oversee regulatory compliance and antitrust risk. This responsibility was previously handled by the company’s audit and compliance committee, highlighting a significant elevation of antitrust oversight within the corporate governance structure. This new committee will report directly to CEO Sundar Pichai.
• Senior Vice President-Level Committee: A committee comprising senior vice presidents will be formed to address legal and compliance issues, also reporting to Sundar Pichai and new board-level RCC, ensuring top-tier engagement with regulatory matters.
• Executive-Level Committee: To embed compliance more deeply into daily operations, a compliance committee will be created, drawing members from Google’s various product teams and internal compliance experts, reporting to a V-P level compliance committee.
• Enhanced internal processes: The reforms will also focus on allowing employees to proactively flag potential legal risks before they escalate. Furthermore, Google has committed to preserving internal communications, a direct response to past criticisms in antitrust cases where judges noted the company’s use of auto-deleting chats.

The timing of the investment is not a surprise, as Google faces escalating antitrust scrutiny from regulators worldwide. Recent court rulings, such as the finding that Google holds an illegal monopoly in certain areas of its online advertising business, underscore the mounting pressure on the tech giant.

While shareholders will not receive direct monetary compensation from the settlement, the extensive governance reforms and the substantial financial commitment are expected to mitigate future risks and improve the company’s long-term stability.

Company governance

And the fact that the protracted and “challenging” negotiations with the company have actually led to a significant change in internal company governance and operational structures is as significant as anything else here. As the court filing rightly says, such reforms have “rarely achieved in shareholder derivative actions”.

This proactive (though admittedly legally compelled) investment probably reflects Google’s acknowledgement of the intense regulatory environment it continues to operate in. It also represents a significant concession by a company that is generally quite combative when it comes to competition law more generally.

Ultimately, the success or failure of this compliance overhaul can only be measured by its ability to foster a compliant culture within the organization and more effectively navigate the complex landscape of global antitrust law externally going forward.