That's one thing I thought of after I saw the announcement, but I doubt that's the primary reason. Probably the main reason is just that they want to avoid the service getting eaten up by people who don't even understand what the "quality" and "resolution" settings on their cameras or other camera-enabled devices mean. Even with Google's compression, I imagine it's not too hard to use steganography to fit the Constitution, or a chunk of the Bible, or most of 1984, or the Kama Sutra, or the technical plans for a planet-destroying battle station in an image.
If a service like Google, Amazon, Facebook, or Yahoo! resizes and recompresses the image data, that's one thing. If they start stripping iTXt chunks that contain copyright or attribution information, that could be a serious legal problem; likewise if they reduce quality so much that it obscures a watermark containing a copyright or trademark notice.