Shares in Alphabet (GOOGL) slumped today as it agreed to stump up $100 million in cash to settle a decade-old advertising lawsuit.
Overcharging Advertisers
According to Reuters, a preliminary settlement of the class-action lawsuit which began in March 2011 was filed yesterday in San Jose, California, and is awaiting a judge’s approval.
The lawsuit related to claims that Google overcharged advertisers by failing to provide promised discounts and charged for clicks on ads outside the geographic areas the advertisers targeted.
Advertisers who took part in Google’s AdWords program, now known as Google Ads, accused the search engine operator of breaching its contract by manipulating its Smart Pricing formula to artificially reduce discounts.
Thousands of Legal Documents
The advertisers also said Google misled them by failing to limit ad distribution to locations they designated, violating California’s unfair competition law. The settlement covers advertisers who used AdWords between January 1, 2004, and December 13, 2012.
Google denied any wrongdoing despite agreeing to settle. “This case was about ad product features we changed over a decade ago, and we’re pleased it’s resolved,” spokesman Jose Castaneda told Reuters in a statement.
The case took so long to reach a conclusion partly because the parties involved produced reams of evidence. This included over 910,000 pages of documents and multiple terabytes of click data from Google.
Alphabet shares were down nearly 3% in early trading.
Is GOOGL a Good Stock to Buy Now?
On TipRanks, GOOGL has a Moderate Buy consensus based on 26 Buy and 10 Hold ratings. Its highest price target is $235. GOOGL stock’s consensus price target is $213.78 implying an 35.53% upside.
