Why Alphabet Stock Tripped and Fell on Thursday

Key Points

• The company's appeal in a long-running legal dispute was rejected by a federal court.

• Its core Google unit had been in a tussle with Epic over its Google Play store policies.

• 10 stocks we like better than Alphabet ›

Google parent Alphabet (NASDAQ: GOOG)(NASDAQ: GOOGL) might be a part of our online lives, but on the second-to-last trading day, it wasn't a hot choice for stock portfolios. Both share classes of the company slumped by more than 2% on the day in the latest development in a long-running video game saga. An index fund would have been a better bet, as the S&P 500 index dipped by only 0.4%.

Google takes it on the chin in court

That day, Google suffered a defeat, as a federal court rejected the company's appeal of a judge's order to revamp its Google Play online store policies.

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Image source: Getty Images.

With the ruling, Alphabet will have to remove barriers within the digital marketplace that block developers from setting up their own in-app marketplaces and billing systems. The original injunction for Alphabet to make the change was handed down last year. It was put on hold pending a decision on the company's appeal.

Alphabet, unsurprisingly, wasn't overjoyed with the ruling. It said that it would "significantly harm user safety" and quash innovation within its app ecosystem. The app store controversy was fanned by video game developer Epic Games, which originally sued Google in mid-2020.

The company argued that the way it operated the Google Play store was tantamount to an illegal monopoly, pointing to a mandatory 30% fee for monies generated from apps. Epic also took issue with Google's requirement that developers use its Google Play Billing services, among other complaints.

Time to let bygones be bygones

Although Alphabet likely felt obligated to at least attempt to reverse the original ruling, it probably didn't stand much of a chance. That tight grip on the app store, strongly reminiscent of similar requirements once also mandated by Apple, had come under fire from many critics. At least now Alphabet is putting the matter behind it.

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Eric Volkman has positions in Apple. The Motley Fool has positions in and recommends Alphabet and Apple. The Motley Fool has a disclosure policy.