A lawsuit accusing Google of abusing its position as one of the biggest brokers, providers, and online auctioneers of advertisements put on websites and mobile applications could result in Google Ads losing its monopoly.
A significant increase in the legal issues the company has with its operations in the United States and elsewhere is the Justice Department’s request for the dissolution of Google’s business of brokering digital advertising across much of the internet.
As one of the biggest brokers, providers, and online auctioneers of advertisements put on websites and mobile applications, Google is accused of abusing its position in a lawsuit filed Tuesday, the Justice Department’s second against the Alphabet Inc. division after one filed in 2020. The filing indicates that there will be a drawn-out legal struggle with significant repercussions for the digital advertising sector.
The lawsuit, which was filed in federal court in Virginia, contends that Google abuses its position of monopoly strength in the ad-tech sector, harming online publishers and advertisers who attempt to utilize rival solutions. Eight states, including California and New York, joined the Justice Department’s lawsuit.
The case requests that the court annul Google’s “anticompetitive acquisitions,” such as its 2008 acquisition of DoubleClick, an ad-serving company, and demands the sale of its ad exchange.
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“For 15 years Google has pursued a course of anticompetitive conduct that has allowed it to halt the rise of rival technologies, manipulate auction mechanics, insulate itself from the competition, and forced advertisers and publishers to use its tools,” Attorney General Merrick Garland said at a press conference Tuesday. “Google has engaged in exclusionary conduct that has severely weakened if not destroyed the competition in the ad-tech industry.”
The lawsuit “attempts to pick winners and losers in the highly competitive advertising technology sector,” according to a Google representative.
“DOJ is doubling down on a flawed argument that would slow innovation, raise advertising fees, and make it harder for thousands of small businesses and publishers to grow,” the spokesman said.
The Justice Department lawsuit went further than some antitrust experts had anticipated in pushing for specific divestitures from Google’s ad-tech division. Alphabet’s stock decreased by around 2% during Tuesday’s trading.
The majority of the purchasing and selling of digital ads that supports online publishers is facilitated by the ad-tech platforms controlled by Google while being virtually invisible to internet users. A tool for publishers to give ad space, a product for advertisers to purchase those slots, and an exchange that automatically connects bidders with webpages as they are being loaded for specific viewers are all part of Google’s business.
The dominance of large tech companies like Google in online markets has drawn the ire of lawmakers and authorities on numerous continents. Investigators from the Justice Department are also looking into Apple Inc. The Federal Trade Commission has filed lawsuits against Microsoft Corp. to stop its proposed $75 billion acquisition of Activision Blizzard Inc. and Meta Platforms Inc.’s Facebook division over antitrust claims. Recently, President Biden asked senators from both parties to support measures aimed at controlling tech corporations. As part of its investigation into suspected anticompetitive behaviour by Google, Meta, and other businesses, the European Union has also opened cases.
An agreement to make Google search the default in Apple’s Safari web browser was one of the targets of the Justice Department’s 2020 lawsuit against Google. The case, which Google is defending, is anticipated to go to trial this year.
About 80% of Alphabet’s revenue comes from advertising. The current lawsuit filed by the Justice Department is directed at the division of that industry that handles the buying and selling of advertisements on other websites and mobile applications. This ad-brokering business generated $31.7 billion in revenue for Google in 2021, or roughly 12% of Alphabet’s overall income. About 70% of such revenue is given by Google to online publishers and developers.
The Justice Department references several of the same internal communications that were the subject of the Texas-led case in its complaint filed on Tuesday, including one in which a Google executive compared the company’s power over the ad-tech industry to the financial sector: “The analogy would be if Goldman or Citibank owned the NYSE,” referring to the New York Stock Exchange.
The case is also related to investigations launched in 2021 by the European Commission, the EU’s top antitrust enforcer, and the Competition and Markets Authority of the United Kingdom. In addition to looking at other aspects of Google’s ad-tech business, these investigations are looking into claims that the company favors its own ad-buying tools in the advertising auctions it conducts. For example, the EU is also investigating Google’s alleged exclusion of rivals from brokering ad buys on its video site YouTube..
According to Mr. Garland, the Justice Department brought its own complaint because Google’s purported monopolistic actions had a negative impact on the federal government. According to the complaint, federal agencies have spent more than $100 million on display ads since 2019. The case claims that due to Google’s anticompetitive conduct, the government was forced to pay inflated fees and suffered from manipulated advertising pricing.
Although there are similarities with earlier claims against Google, the Justice Department’s complaint is based on its own investigation that produced “meticulous detail” on Google’s ad-tech business, according to Jonathan Kanter, the assistant attorney general for antitrust.
“We detail many facts, many episodes that in the individual and in the aggregate have maintained numerous monopolies,” Mr. Kanter said.
Google has made an effort to resolve the complaints levelled against its ad-tech division. The corporation last year discussed with the EU an option to permit rivals to broker the sale of ads directly on the video service in addition to offering to split off portions of its ad-tech business to avoid the Justice Department complaint.
In order to end a U.K. antitrust inquiry into the plan, the company agreed to grant the regulators there an effective veto over certain aspects of its plans to remove a feature known as third-party cookies from its Chrome browser.
Google agreed to pay a fine of 220 million euros ($239 million) in France, increase data access for other ad-tech companies, and refrain from using its data in ways that competitors couldn’t reproduce to settle a similar antitrust investigation in the country.