Break Up Google Now, Says US Govt In Ad Monopoly Lawsuit

The US Justice Department and eight states sued Alphabet's Google subsidiary on Tuesday claiming the web giant has unfairly monopolized the buying and selling of digital advertising.

The complaint [PDF], filed in a Virginia federal court, calls for breaking up Google, the kind of remedy sought in 1974 and won in 1982 when the US government challenged the AT&T telecom monopoly.

"Today, the Department of Justice, joined by eight states, filed a civil antitrust lawsuit in the United States District Court for the Eastern District of Virginia against Google," said Attorney General Merrick Garland at a press conference. One of those states is Google's home state of California.

"We alleged that Google has used anti-competitive, exclusionary and unlawful conduct to eliminate or severely diminish any threat to its dominance over digital advertising technologies."

The lawsuit focuses on the way Google coordinates the buying and selling of online ads that get placed on websites through its auction process. It accuses the super-corp of acquiring competitors, forcing publishers and advertisers to use its tools, distorting auction competition, and manipulating auction outcomes.

Google has used anti-competitive, exclusionary and unlawful conduct to eliminate or severely diminish any threat to its dominance

"As detailed in our complaint, we alleged that Google's anti-competitive conduct extends to three significant elements of the digital ad buying process," said Garland.

"First, Google controls that technology used by nearly every major website publisher to offer advertising space for sale. Second, Google controls the leading tool used by advertisers to buy that advertising space. And third, Google controls the largest ad exchange that matches publishers and advertisers together each time that ad space is sold."

The complaint cites Google's own documents to show that the corporation captures 35 cents of every ad dollar that passes through its ad tech tools. It describes Google's previously disclosed efforts to kill header bidding, an alternative ad auction mechanism that by Google's own estimate would raise publisher revenues by 30 to 40 percent.

The government seeks at a minimum to force Google to sell off its Ad Manager suite, including both Google’s publisher ad server known as DFP (DoubleClick for Publishers), and its ad exchange, AdX, alongside any other structural relief deemed necessary to restore competition. This would undo the acquisitions of DoubleClick and of AdMeld.

Garland said the US government, as an advertiser, has been harmed by Google's conduct.

"Monopolies threaten the free and fair markets upon which our economy is based," said Garland. "They stifle innovation. They hurt producers and workers, and they increase costs for consumers. Today's complaint is only the latest example of the department's work to challenge antitrust violations that undermine competition and harm the American people."

The Biden administration in a July 9, 2021 Executive Order committed to stronger antitrust enforcement but has met with mixed results – the feds prevented Penguin Random House from acquiring rival publisher Simon & Schuster, but failed to stop US Sugar's purchase of competitor Imperial Sugar or UnitedHealth Group merger with Change HealthCare.

The Federal Trade Commission's attempts to prevent Microsoft's takeover of Activision and to keep Meta from buying VR firm Within Unlimited, remain ongoing.

The Justice Department's latest complaint against Google resembles a similar case from the Trump administration. On October 20, 2020, the Justice Department and eleven states sued Google for maintaining an illegal monopoly in the search advertising business. That case, the Justice Department says, is distinct from the new complaint covering Google's digital advertising technology business – the infrastructure of ad auctions. The prior case is scheduled for trial in September 2023.

An antitrust claim against Google filed December 16, 2020, [PDF] by the Attorney General of Texas and ten other states has been mostly dismissed. A competition lawsuit filed December 17, 2020, by a coalition of 38 attorneys general and helmed by Colorado Attorney General Phil Weiser remains ongoing. About 19 complaints against Google related to digital advertising technology have been combined into multidistrict litigation [PDF].

Efforts to challenge Google's search advertising business practices go back at least to 2006 when vertical search firm Foundem found itself penalized by a Google search algorithm change. After years of complaints from small advertising and ecommerce firms, the European Commission began preparing an informal inquiry in 2009 and the US Federal Trade Commission began investigating Google by April 2011.

During this period, Google made acquisitions like YouTube (2006), DoubleClick (2007), AdMob (2009), and ITA Software (2010) without much resistance from regulators. And company spokespeople keep saying, "Competition is only a click away."

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Google continues to maintain that it has done nothing wrong.

"Today’s lawsuit from the DOJ attempts to pick winners and losers in the highly competitive advertising technology sector," a Google spokesperson said in an email. "It largely duplicates an unfounded lawsuit by the Texas Attorney General, much of which was recently dismissed by a federal court. 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 internet titan published a longer critique of the lawsuit on its public policy blog.

Adam Kovacevich, CEO of tech lobbying group Chamber of Progress and former head of Google's US policy strategy and external affairs team, suggested that Google's declining market share and recent layoffs make it deserving of government assistance rather than prosecution.

"Google’s online ad market share is now at an all time low, and it just laid off 12,000 employees in the midst of a declining advertising market – so this DOJ case seems pretty disconnected from economic reality,” he said. “As the tech sector and advertising industry shed jobs, the Biden Administration should be looking for ways to support these sectors rather than undermine what’s left." ®