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The DOJ is suing Google over its dominance of the 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 blockbuster antitrust case against a Big Tech company. The eight states joining the suit include California, Colorado, Connecticut, New Jersey, New York, Rhode Island, Tennessee and Virginia.

The new complaint significantly escalates the risks for Google emanating from Washington, where lawmakers and regulators have often expressed concern about the tech giant’s power but have so far failed to enact new legislation or regulations that could rein in the company or its peers.

For years, Google’s critics have argued that the company’s extensive role in the digital ecosystem, enabling advertisers to place ads and publishers to offer digital ad space, represents a conflict of interest that Google has exploited in an anticompetitive way.

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

For 15 years, Google’s alleged anticompetitive behavior led to lower ad revenue for websites and publishers, as well as higher advertising costs for marketers, Attorney General Merrick Garland said during a news conference Tuesday. Even the U.S. government was harmed, according to the complaint, which named the U.S. Army 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 ad server to publishers, if not more.

Google, the US government alleged, “has corrupted legitimate competition in the ad technology industry by engaging in a systematic campaign to seize control of the wide range of high-tech tools used by publishers, advertisers and brokers to facilitate digital advertising. After have entrenched themselves in every aspect of the digital advertising marketplace, Google has used anticompetitive, exclusionary, and illegal means to eliminate or seriously diminish any threat to its dominance of digital advertising technologies.”

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

Tuesday’s case marks the federal government’s second antitrust complaint against Google since 2020, when the Trump administration sued over Google’s alleged anticompetitive harms in search and search advertising. That case is still ongoing. Google has also been the target of antitrust cases from government and private players.

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

“The DOJ is doubling down on a flawed argument that would stifle 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 struck down a claim that Google cooperated with Facebook in a separate antitrust case led by the state of Texas. However, that judge also ruled that a number of monopolization claims in the Texas case could move forward.

Asked to respond to Google’s statement, Garland said Tuesday: “We don’t pick winners or losers. We pick those who violate antitrust laws. Those are the ones we sue.”

The lawsuit is a frontal attack on Google’s massive, primary advertising business. Google generated $209 billion in ad revenue in 2021, according to its annual report, a figure that represents more than 80% of its total revenue. By comparison, the second largest online advertising giant, Facebook parent company Meta, generated $115 billion in 2021. (Tuesday’s suit targets a subset of Google’s ad revenue represented by display advertising, a roughly $32 billion business for the company.)

Third-party estimates suggest that Google and Facebook accounted for the majority of US digital ad revenue, peaking around 2017, when Google took about a third of the market. Since then, however, others, including Amazon, have begun to tap into that business.

The US complaint echoes concerns that have prompted similar antitrust investigations in the UK and the EU.

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

“Google’s pervasive power over the entire ad tech industry has been questioned by its own digital advertising executives,” the complaint said, “at least one of whom aptly asked the question: ‘(i)s there a deeper problem with us owning the platform, the exchange and a giant network? The analogy would be if Goldman or Citibank owned the NYSE.'”

Tuesday’s complaint marks an opening salvo against Big Tech by the DOJ’s antitrust chief, Jonathan Kanter. Kanter has spent months laying the groundwork for a broader offensive against the tech industry’s most dominant companies, mirroring pledges by President Joe Biden and others in the US government to hold powerful companies accountable. Under Kanter, Justice Department antitrust officials have pushed to bring more cases to court as well as to prosecute cases involving unconventional legal theories.

On Tuesday, Kanter told reporters that Google was abusing “long-standing monopolies in digital advertising technologies” to give itself an advantage.

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

In 2020, parliament lawmakers released a 450-page report that found 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 the tech industry’s many customers and rivals. It concluded, among other things, that Google was uniquely positioned to take advantage of its powerful role in the online advertising industry.

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

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