DOJ Files Second Antitrust Complaint Against Google, Seeks to Dismantle Ad Business


The US Department of Justice filed its second antitrust complaint on Tuesday against Google in just over two years. It’s the latest sign that the US government isn’t backing down from lawsuits against tech companies, even in light of a mixed record in the courts in antitrust lawsuits.

Google shares were down 1.3% on Tuesday afternoon.

This trial, which concerns from google online advertising company and is seeking to have Google divest parts of the business, is the first against the company filed under the Biden administration. The department’s earlier lawsuit, filed in October 2020 under the Trump administration, accused Google of using its alleged monopoly power to cut off competition for Internet search through exclusion agreements. This case is expected to go to trial in September.

Google’s advertising business generated $54.5 billion in the quarter ended Sept. 30 from search, YouTube, Google Network ads and other advertising.

Google also faces three other antitrust lawsuits from major state attorney general groups, including one focused on its advertising business led by Texas Attorney General Ken Paxton.

The states of California, Colorado, Connecticut, New Jersey, New York, Rhode Island, Tennessee and Virginia joined the DOJ in the latest lawsuit.

Google’s advertising business has drawn criticism because the platform operates on multiple sides of the market – buying, selling and exchanging ads – giving it unique insight into the process and potential leverage. The company has long denied dominating the online advertising market, pointing to the market share of competitors including Metais Facebook.

In their lawsuit, the Justice Department and the states argue that Google sought to control all aspects of the marketplace, realizing “it could become ‘the ultimate, ultimate location for all ad serving’.”

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

According to the complaint, even one of Google’s own advertising executives questioned the wisdom of the company’s broad ownership of the space.

“[I]Is there a deeper issue with the fact that we own the platform, the exchange and a huge network?” the exec reportedly asked. “The analogy would be if Goldman or Citibank owned the NYSE. “

The harm of Google’s practices, they say, is that “website builders earn less and advertisers pay more than they would in a market where unfettered competitive pressure could discipline prices and lead to more innovative advertising technology that would ultimately result in higher quality and lower cost transactions for market participants.”

As a result, they added, more publishers are being forced to turn to alternative models like subscriptions to fund their operations.

Another part of Google’s strategy, the complaint says, was to acquire other companies to increase its power in the advertising market and “set the stage for Google’s subsequent exclusionary conduct in the tech industry.” advertisers”. These acquisitions included a 2008 purchase of publisher DoubleClick’s ad server and a “nascent ad exchange” that would become Google’s AdX. This has allowed Google to require publishers, in some cases, to use all of its tools to access any, rather than working with competing tools for parts of the online ad buying process.

“In effect, Google was robbing Peter (the advertisers) to pay Paul (the publishers), while collecting high transaction fees for its own privileged position in the middle,” the enforcers allege. “Rather than help fund website publishing, Google was diverting advertising money to itself by imposing supra-competitive fees on its platforms. A rival publisher ad server couldn’t compete with Google’s inflated ad prices, especially without access to Google’s captive advertiser demand for Google Ads.”

Google continued to identify potential threats to its dominance, the complaint says, such as when yield management tools became available to help publishers find better prices for their real-time inventory outside of the Google ecosystem. Google.

“So in response, Google used a familiar tactic: acquiring, then extinguishing, any competitive threat,” the plaintiffs wrote, pointing to Google’s 2011 acquisition of yield manager AdMeld. As a result of the deal, they claim, Google changed its AdX contracts to prohibit publishers from using other platforms, forcing its own exchange to compete against others in real time.

Google later became aware of another circumvention attempt called “header bidding”, where publishers could add code to their own websites to allow non-Google ad exchanges to bid on the ad exchange. inventory before Google’s ad exchange preferences are triggered, allowing ad exchange rivals to re-enter the market. in a significative way. Google executives reportedly described the practice as an “existential threat.”

Google marketed its own “Open Bidding” tool as an alternative, which the complaint called a “Trojan horse”. Publishers and ad exchanges that participated in the program were required to give Google visibility into their auctions, including competing exchange offers. This allowed Google’s ad exchange to retain “a guaranteed place in each auction, whether or not Google’s ad exchange offers the best match between advertisers and publishers,” the complaint alleges.

Google also feared advertising competition from Facebook and Amazon, the DOJ and the states allege, and in response, it agreed with Facebook to give it “preferential open auction terms…in exchange for spending and pricing commitments designed to further push the spending of Facebook’s captive advertisers on Google’s platforms”. The complaint alleges that Google sought a similar deal with Amazon but was not as successful. Facebook and Amazon had no comment.

“Today’s lawsuit by the DOJ attempts to pick winners and losers in the highly competitive ad tech industry,” a Google spokesperson said in a statement. “This largely replicates a baseless lawsuit by the Texas Attorney General, much of which was recently thrown out of federal court. The DOJ is doubling down on a flawed argument that would slow innovation, increase advertising costs and make the task more difficult for thousands of small businesses and publishers to grow.”

The progressive head of the DOJ’s antitrust division, Jonathan Kanter, had recently been cleared to work on issues related to Google, The Wall Street Journal reported earlier this month. Bloomberg previously reported that Kanter was not authorized to work on issues involving the company while the department assessed Google’s request to review his grounds for recusal. Prior to his arrival in government, Kanter represented some of Google’s rivals and critics, including Yelp and press company.

A Google spokesperson said in a statement last year that Kanter’s previous work and statements “raise serious concerns about his ability to be impartial.”

Google isn’t the only tech giant to come under federal scrutiny. To the Federal Trade Commission, Meta is also the subject of two antitrust lawsuits, as is Microsoft project to acquire Activision.

Google and other tech companies have also come under increasing scrutiny from overseas, particularly in Europe, where Google has also been fighting multiple competition cases and new regulations threaten major changes. in technology business models.

Alphabet, Google’s parent company, is expected to report earnings on February 2.

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WATCH: Google faces fast and furious pace of lawsuits as antitrust scrutiny intensifies



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