Justice department alleges Google tried to ‘eliminate’ ad market rivals in lawsuit

Justice department alleges Google tried to ‘eliminate’ ad market rivals in lawsuit

The DoJ and eight states have filed a complaint against the tech company for violating antitrust laws

As a result of Google’s dominance, attorney general Garland said: ‘website creators earn less and advertisers pay more’.

The US justice department and eight states filed a lawsuit against Alphabet’s Google on Tuesday over allegations that the company abused its dominance of the digital advertising business, according to a court document.

“Google has used anticompetitive, exclusionary, and unlawful means to eliminate or severely diminish any threat to its dominance over digital advertising technologies,” the government said in its antitrust complaint.

The government alleges that Google’s plan to assert dominance has been to “neutralize or eliminate” rivals through acquisitions and to force advertisers to use its products by making it difficult to use competitors’ products. It’s part of a new, if slow and halting, push by the US to rein in big tech companies that have enjoyed largely unbridled growth in the past decade and a half.

The antitrust suit was filed in federal court in Alexandria, Virginia. Attorney general Merrick Garland said in a press conference on Tuesday that “for 15 years, Google has pursued a course of anti-competitive conduct” that has halted the rise of rival technologies and manipulated the mechanics of online ad auctions to force advertisers and publishers to use its tools.

In so doing, he added, “Google has engaged in exclusionary conduct” that has “severely weakened”, if not destroyed, competition in the ad tech industry.

“First, Google controls the 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,” Garland said.

As a result, he added, “website creators earn less and advertisers pay more.” And this means fewer publishers can offer their content without subscriptions, paywalls and other fees to make up for revenue.

The justice department asked the court to compel Google to divest its Google Ad manager suite, including its ad exchange AdX.

The department’s suit accuses Google of unlawfully monopolizing the way ads are served online by excluding competitors. This includes its 2008 acquisition of DoubleClick, a dominant ad server, and subsequent rollout of technology that locks in the split-second bidding process for ads that get served on Web pages.

Google’s ad manager lets large publishers who have significant direct sales manage their advertisements. The ad exchange, meanwhile, is a real-time marketplace to buy and sell online display ads.

Digital ads currently account for about 80% of Google’s revenue, and by and large support its other, less lucrative endeavors. But the company, along with Facebook’s parent company Meta, has seen its market share decline in recent years as smaller rivals grab bigger portions of the online advertising market. On top of that, the overall online ad environment market is cooling off as advertisers clamp down on spending and brace for a potential recession.

Alphabet Inc., Google’s parent company, said in a statement that the suit “doubles 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 lawsuit is the second federal antitrust complaint filed against Google, alleging violations of antitrust law in how the company acquires or maintains its dominance. The justice department lawsuit filed against Google in 2020 focuses on its monopoly in search and is scheduled to go to trial in September.

Eight states joined the department in the lawsuit filed on Tuesday, including Google’s home state of California. The states taking part in the suit include California, Virginia, Connecticut, Colorado, New Jersey, New York, Rhode Island and Tennessee.

Dina Srinivasan, a Yale University fellow and adtech expert, said the lawsuit is “huge” because it aligns the entire nation – state and federal governments – in a bipartisan legal offensive against Google.

Tuesday’s lawsuit comes as the US government is increasingly looking to rein in big tech’s dominance, although such legal action can take years to complete and Congress has not passed any recent legislation seeking to curb the influence of the tech industry’s largest players.

The European Union has been more active. It launched an antitrust investigation into Google’s digital ad dominance in 2021. British and European regulators are also looking into whether an agreement for online display advertising services between Google and Meta breached rules on fair competition.

The current online ad market, Srinivasan said, “is broken and totally inefficient”. The fact that intermediaries are getting 30-50% of the take on each ad trade is “an insane inefficiency to have baked into the US economy”. She called it “a massive tax on the free internet and consumers at large. It directly affects the viability of a free press” as well.

Google shares were down 1.3% on the news.

Google held nearly 29% of the US digital advertising market – which includes all the ads people see on computers, phones, tablets and other internet-connected devices – in 2022, according to research firm Insider Intelligence. Facebook parent company Meta is second, commanding nearly 20% of the market. Amazon is a distant, but growing, third at more than 11%.

Insider Intelligence estimates that both Google and Meta’s share of the ad market will decline, while rivals such as Amazon and TikTok are expected to see gains.