U.S. Accuses Google of Abusing Monopoly in Ad Technology

The Justice Department’s antitrust lawsuit, which a group of states joined, was the fifth by U.S. officials against the company since 2020.

· Eight states sued Google on Tuesday (24.01.2023), accusing it of illegally abusing a monopoly over the technology that powers online advertising.

· Google had “corrupted legitimate competition in the ad tech industry by engaging in a systematic campaign to seize control of the wide swath of high-tech tools used by publishers, advertisers and brokers.

· Software for buying and selling ads, a marketplace to complete the transactions and a service for showcasing the ads across the internet.

· Regulators have passed new laws to limit social media’s harms and some practices such as data collection.

· The agency has also challenged Microsoft’s $69 billion purchase of the video game publisher Activision Blizzard, a notable action because the two companies are not primarily seen as direct competitors.

· Advertisers paid more for space on the internet and publishers made less money, as Google took its cut, they said.

· The analogy would be if Goldman or Citibank owned the” New York Stock Exchange.

· Google’s search engine has long been its profit center, but its ad tech division has helped cement its place as a one-stop shop for advertisers.

· Google has added to its online advertising tools for years. Its $3.1 billion purchase in 2007 of DoubleClick, a maker of ad tools, amplified the reach of its already powerful digital advertising machine.

· By 2021, the company’s advertising technology division generated $31.7 billion in revenue, making it the second-largest business unit after the flagship search engine.

The Justice Department and a group of eight states sued Google on Tuesday (24.01.2023), accusing it of illegally abusing a monopoly over the technology that powers online advertising, in the agency’s first antitrust lawsuit against a tech giant under President Biden and an escalation in legal pressure on one of the world’s biggest internet companies.

The lawsuit said Google had “corrupted legitimate competition in the ad tech industry by engaging in a systematic campaign to seize control of the wide swath of high-tech tools used by publishers, advertisers and brokers to facilitate digital advertising.”

The lawsuit asked U.S. District Court for the Eastern District of Virginia to force Google to sell much of its suite of ad technology products, which include software for buying and selling ads, a marketplace to complete the transactions and a service for showcasing the ads across the internet. The lawsuit also asked the court to stop the company from engaging in allegedly anticompetitive practices.

It is the fifth antitrust lawsuit filed by U.S. officials against Google since 2020, as lawmakers and regulators around the world try to rein in the power that big tech companies exert over information and commerce online. In Europe, Amazon, Google, Apple and others have faced antitrust investigations and charges, while regulators have passed new laws to limit social media’s harms and some practices such as data collection.

In the United States, Google has faced particular scrutiny. In 2020, a group of states led by Texas filed an antitrust lawsuit against it involving advertising technology, while the Justice Department and another group of states separately sued Google over claims that it abused its dominance over online search. In 2021, some states also sued over the company’s app store practices.

The new lawsuit “adds another important complication to Google’s efforts to deal with regulators worldwide,” said William Kovacic, a former chairman of the Federal Trade Commission. “There’s a chance one or more of these challenges is going to make its way through and hit the target.”

Peter Schottenfels, a Google spokesman, said the lawsuit “attempts to pick winners and losers in the highly competitive advertising technology sector.” It echoes the “unfounded” lawsuit led by Texas in 2020, he said, adding that the Justice Department’s latest suit makes a flawed argument that would slow innovation and harm publishers.

Attorney General Merrick B. Garland said monopolies “threaten the free and fair markets upon which our economy is based.” He added, “We will aggressively protect consumers, safeguard competition and work to ensure economic fairness and opportunity for all.”

The Biden administration is trying to use uncommon legal theories to clip the wings of some of America’s largest businesses. The F.T.C. recently asked a judge to block Meta from buying a virtual-reality start-up, a rare case that argues a deal could harm potential competition in a nascent market. The agency has also challenged Microsoft’s $69 billion purchase of the video game publisher Activision Blizzard, a notable action because the two companies are not primarily seen as direct competitors.

These efforts are expected to meet fierce resistance in federal courts. Judges have for decades subscribed to a view that antitrust violations should mostly be determined by whether they increase prices for consumers. But Jonathan Kanter, the chief of the Justice Department’s antitrust division, and Lina Khan, the F.T.C. chair, have said they are willing to lose cases that allow them to stretch the boundaries of the law and that put corporate America on notice.

The lawsuit on Tuesday describes a campaign by Google to monopolize advertising technology and then abuse that dominance, to the detriment of publishers, advertisers and ultimately consumers.

The Justice Department and the states, which include New York and California, said Google had built its monopoly by buying up crucial tools that delivered ads to publishers. As a result, advertisers paid more for space on the internet and publishers made less money, as Google took its cut, they said.

“Each time a threat has emerged, Google has used its market power in one or more of these ad tech tools to quash the threat,” the lawsuit said. “The result: Google’s plan for durable, industrywide dominance has succeeded.”

The Justice Department described internal Google documents and other evidence that it believes could help prove its case. In the lawsuit, the agency said one Google advertising executive had questioned the company’s market power, asking if there was “a deeper issue with us owning the platform, the exchange and a huge network” and adding that “the analogy would be if Goldman or Citibank owned the” New York Stock Exchange.

The lawsuit echoes claims made in the 2020 lawsuit backed by Texas and 14 other states and territories over Google’s ad technology. That lawsuit has had a mixed reception in court. In September, a federal judge in New York ruled that some of the case could go forward, but dismissed a claim involving a deal between Google and Facebook that the states said was anticompetitive.

Google’s search engine has long been its profit center, but its ad tech division has helped cement its place as a one-stop shop for advertisers. The two businesses together have given the company a powerful advantage in setting the price of online ads. Because Google’s various ad tools and platforms are closely integrated, a forced divestiture could be a painful and difficult process for the company.

Alphabet, Google’s parent company, is scheduled to report financial results for the fourth quarter on Feb. 2, amid a downturn in the online advertising market.

Google has added to its online advertising tools for years. Its $3.1 billion purchase in 2007 of DoubleClick, a maker of ad tools, amplified the reach of its already powerful digital advertising machine. DoubleClick gave Google a crucial role on the internet, providing a marketplace for publishers and letting Google host more ads on sites across the web.

At the time, Google had $16.6 billion in annual revenue, primarily from its search engine business. By 2021, the company’s advertising technology division generated $31.7 billion in revenue, making it the second-largest business unit after the flagship search engine. Through the first three quarters of 2022, the unit posted $24.3 billion in sales.

Google has long faced accusations from online publishers that its control over the digital ads ecosystem unfairly sapped profits from the sites where the ads are displayed.

One group representing publishers, including The New York Times Company, has pushed Congress to allow the sites to negotiate the terms of ad deals collectively with Google and other online platforms. Normally, that kind of coordination would be illegal under antitrust laws. The publishers’ efforts have been unsuccessful so far.

The Justice Department said that besides harming publishers and advertisers, Google’s tight control of the ad tech market hurt internet users, arguing that publishers have fewer resources to create content for visitors of their websites.

On Friday, Google announced that it would lay off 12,000 employees, or 6 percent of its work force, in response to a slowdown in the digital advertising market. The company said the cuts would allow it to prioritize projects involving artificial intelligence, an area that has picked up steam in Silicon Valley in recent months.