DOJ Files Second Antitrust Lawsuit Against Google – Seeks to Break Up Its Ad Business

Tuesday saw the second antitrust lawsuit filed by the U.S. Justice Department against Google It has been just over two years. It is the latest evidence that the U.S. government does not plan to stop pursuing tech companies in court cases, despite the fact that there has been a significant increase in the number of such cases. mixed record in court antitrust cases

Google shares dropped 1.3% Tuesday afternoon.

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This lawsuit is focused on Google’s online advertising business and seeks Google’s divestiture of parts of it, is the first complaint against the company brought under the Biden administration. The department’s earlier lawsuitIn a complaint filed by the Trump administration on October 2020, Google was accused of using its alleged Monopoly Power to reduce competition in internet search via exclusionary agreements. The case is expected to go to trial in September.

Google’s advertising business earned $54.5 billion from Search, YouTube and Google Network ads in the quarter ending Sept. 30, 2009.

Google is also facing three antitrust lawsuits brought by large groups of state attorneys general. focused on its advertising business led by Texas Attorney General Ken Paxton.

California, Colorado (New Jersey), Connecticut, New Jersey and New York, Rhode Island. Tennessee, Virginia, and California joined the DOJ in the latest lawsuit.

Google’s advertising business has drawn critics because the platform operates on multiple sides of the market — buying, selling and an ad exchange — giving it unique insight into the process and potential leverage. While Google denies that it controls the online advertising market, the company points to its market share with competitors. Meta‘s Facebook.

The Justice Department and the States argue in their lawsuit that Google tried to control all aspects of the market. “it could become ‘the be-all, and end-all location for all ad serving.'”

“Google would no longer have to compete on the merits; it could simply set the rules of the game to exclude rivals,” They claim.

The complaint claims that even one of Google’s advertising executives had doubted the wisdom of its broad ownership of the space.

“[I]s there a deeper issue with us owning the platform, the exchange, and a huge network?” According to the report, the executive was asked. “The analogy would be if Goldman or Citibank owned the NYSE.”

They claim that Google’s practice is causing them harm. “website creators earn less, and advertisers pay more, than they would in a market where unfettered competitive pressure could discipline prices and lead to more innovative ad tech tools that would ultimately result in higher quality and lower cost transactions for market participants.”

They concluded that more publishers have to look at subscriptions as a funding model to their operations.

According to the complaint, Google also tried to acquire other companies to expand its influence in the advertising market. “set the stage for Google’s later exclusionary conduct across the ad tech industry.” These acquisitions include a 2008 purchase by DoubleClick Publisher Ad Server and a “nascent ad exchange” This would be Google’s AdX. Google’s AdX was created as a way for publishers to be required to use all of its tools, and not just one or two.

“In effect, Google was robbing from Peter (the advertisers) to pay Paul (the publishers), all the while collecting a hefty transaction fee for its own privileged position in the middle,” The enforcers claim. “Rather than helping to fund website publishing, Google was siphoning off advertising dollars for itself through the imposition of supra-competitive fees on its platforms. A rival publisher ad server could not compete with Google’s inflated ad prices, especially without access to Google’s captive advertiser demand from Google Ads.”

Google identified potential threats to its dominance and continued to do so, the complaint alleges. For example, when yield management tools were made to assist publishers in finding better prices for inventory in real-time outside of Google’s environment.

“So, in response, Google employed a familiar tactic: acquire, then extinguish, any competitive threat,” They referred to Google’s 2011 purchase of yield manager AdMeld. They claim that Google altered its AdX contracts following the deal to prohibit publishers from using other platforms, thereby limiting its ability to offer its own exchange to compete against others.

Google later discovered a second workaround, called “header bidding,” Publishers could add code on their websites to allow non-Google ad exchanges to bid for inventory prior to Google’s preferences were activated. This allowed a significant number of ad exchange rivals to return to the market. According to Google executives, the practice was described as “anonymous”. “existential threat.”

Google created its own advertising “Open Bidding” Alternatives to the tool, which is what the complaint calls a “Trojan Horse.” Publishers and ad-exchanges that took part in the program were required to provide Google visibility into their auctions. This included rival bids. Google’s ad-exchange was able to retain this information. “a guaranteed seat in every auction, regardless of whether Google’s ad exchange offers the best match between advertisers and publishers,” The complaint claims.

Google was also concerned about the Facebook ad competition. AmazonThe DOJ and the states claim that it was. In response, Facebook agreed to provide it. “preferential Open Bidding auction terms … in exchange for spend and pricing commitments designed to push more of Facebook’s captive advertiser spend onto Google’s platforms.” The complaint claims that Google tried to reach a similar agreement with Amazon, but was unsuccessful.

“Today’s lawsuit from the DOJ attempts to pick winners and losers in the highly competitive advertising technology sector,” Google spokesperson said In a statement “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.”

Jonathan Kanter, the progressive chief of DOJ’s antitrust section, was cleared recently to work on Google related matters. The Wall Street Journal reported This was earlier in the month. Bloomberg Kanter had been reported previously that Kanter was not allowed to work on company issues while the department reviewed Google’s request for review of his reasons for recusal. Kanter was a representative of some of Google’s competitors and critics before he joined the government. Yelp News Corp.

In a statement, a Google spokesperson stated that Kanter’s previous work and statements were not included in the Google statement. “raise serious concerns about his ability to be impartial.”

Google isn’t alone in being scrutinized by the federal government. The Federal Trade Commission Meta It has also been the subject of antitrust suits. Microsoft’s Proposed acquisition Activision.

Google and other tech companies are also under increasing scrutiny from overseas, especially in Europe where Google has been involved in multiple cases of competition. new regulations Major changes could be made to the tech business model.

Google parent Alphabet is expected to report earnings Feb. 2.

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