DOJ sues Google over its dominance in online advertising market



CNN

The Justice Department and eight states sued Google on Tuesday, accusing the company of harming competition with its dominance of the online advertising market and calling for it to be broken up.

The move marks the Biden administration’s first successful antitrust case against Big Tech. The eight states that have joined the lawsuit include California, Colorado, Connecticut, New Jersey, New York, Rhode Island, Tennessee and Virginia.

The new complaint sharply escalates the risks for Google coming from Washington, where lawmakers and regulators have often raised concerns about the tech giant’s power but have so far failed to pass new legislation or regulations that could affect the company or its peers.

Google’s critics have argued for years that the company’s vast role in the digital ecosystem, which allows advertisers to place ads and publishers to offer digital ad space, represents a conflict of interest that Google has abused in an anti-competitive manner.

In Tuesday’s complaint, a copy of which was seen by CNN, the Justice Department alleged that Google actively and unlawfully maintained that dominance by engaging in a campaign to impede competition. Google gobbled up rivals through anti-competitive mergers, the US government said, and bullied publishers and advertisers into using the company’s own ad technology products.

For 15 years, Google’s alleged anti-competitive behavior has led to lower ad revenue for websites and publishers, as well as higher advertising costs for marketers, Attorney General Merrick Garland said during a press conference Tuesday. Even the US government has been harmed, according to the complaint, which names the US military as one of several government advertisers using Google’s tools. Since 2019, the US government has spent $100 million buying online ads, the complaint said.

As part of the lawsuit, the US government called for Google to be broken up and for the court to order the company to spin off at least its online ad exchange and its publisher ad server, if not more.

Google, the US government alleges, “has harmed legitimate competition in the ad technology industry by engaging in a systematic campaign to gain control of a broad swath of cutting-edge tools used by publishers, advertisers and brokers to facilitate digital advertising. Google has integrated itself into all aspects of the digital advertising market and has used anti-competitive, exclusionary and illegal means to eliminate or significantly reduce any threat to its dominance of digital advertising technologies.”

The lawsuit was filed in the U.S. District Court for the Eastern District of Virginia.

Tuesday’s lawsuit marks the federal government’s second antitrust complaint against Google since 2020, when the Trump administration sued Google for allegedly harming Google in search and search advertising. That case is still ongoing. Google has also been the target of antitrust lawsuits from government and private entities.

Google said in a statement that the DOJ suit “attempts to pick winners and losers in the highly competitive ad tech sector.”

“The 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,” a Google spokesman said, adding that a federal judge last year rejected claims that Google had settled with Facebook in a separate antitrust lawsuit by the state of Texas. But that judge also ruled that several monopolization claims in the Texas case could move forward.

Asked for a response to Google’s announcement, Garland said Tuesday: “We’re not picking winners or losers. We pick out those who violate antitrust laws. Those are the people we’re suing.”

The lawsuit is a frontal attack on Google’s massive, primary advertising business. According to its annual report, Google generated $209 billion in advertising revenue in 2021, accounting for more than 80% of its total revenue. By comparison, the next biggest giant in online advertising, Facebook-parent Meta, earned $115 billion in 2021. (Tuesday’s suit targets the subset of Google’s ad revenue represented by display advertising, which is about $32 billion for the company.)

Third-party estimates suggest that Google and Facebook accounted for the majority of digital ad revenue in the US, peaking around 2017, with Google taking about a third of the market. But since then, others, including Amazon, have begun to intervene in the business.

The US complaint echoes concerns raised by similar antitrust investigations in the United Kingdom and the European Union.

Google controls not only the platform publishers use to sell online ad inventory, the Justice Department said Tuesday, but also the advertising tools merchants use to claim that inventory and the exchange that facilitates those transactions.

“Google’s pervasive power over the entire ad tech industry has been challenged by its own digital advertising executives,” the complaint states, “at least one of whom aptly asked:[I]Is there a deeper problem with owning a platform, an exchange, and a huge network? The analogy would be if Goldman or Citibank owned the NYSE.”

Tuesday’s complaint marks the opening salvo against Big Tech by Justice Department antitrust chief Jonathan Kanter. Kanter has spent months laying the groundwork for a broader offensive against the tech industry’s most dominant companies, echoing commitments by President Joe Biden and others in the US government to hold powerful companies accountable. Justice Department antitrust officials under Kanter pushed for more cases to go to trial as well as prosecutions in cases involving unconventional legal theories.

Kanter told reporters on Tuesday that Google had abused “long-standing monopolies in digital advertising technology” to gain an advantage.

“Google’s own documents estimate that it keeps at least 30 cents of every advertising dollar that flows through Google’s advertising tools,” Kanter said, adding that in some situations the number could be much higher.

In 2020, House lawmakers released a 450-page report finding that Google, along with Amazon, Apple and Facebook, have “monopoly power” in key business segments. The report was the result of a 16-month investigation in which congressional staff reviewed company documents and interviewed numerous customers and technology industry rivals. Among other things, he concluded that Google is uniquely positioned to benefit from its prominent role in the online advertising industry.

“With a significant share of the ad exchange and ad intermediary market, and as a leading supplier of advertising space, Google simultaneously acts on behalf of publishers and advertisers while trading for itself,” the report said.

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