US accuses Google of abusing ad tech monopoly

The Justice Department and a group of eight states sued Google on Tuesday, accusing it of unlawfully abusing a monopoly on the technology that powers online advertising, in the agency’s first antitrust lawsuit against a tech giant under President Biden and an escalation of legal pressure on one of the world’s largest internet companies.

The lawsuit said Google had “corrupted legitimate competition in the ad-tech industry by engaging in a systematic campaign to take control of the wide range of high-tech tools used by publishers, advertisers and brokers to facilitate digital advertising”. The lawsuit asked the U.S. District Court for the Eastern District of Virginia to compel Google to sell its suite of ad-tech products and restrain the company from engaging in allegedly anti-competitive practices.

It was the fifth antitrust lawsuit brought by U.S. officials against Google since 2020, as lawmakers and regulators around the world try to limit the power big tech companies wield over online information and commerce. In Europe, Amazon, Google, Apple and others have faced antitrust investigations and charges, while regulators have passed new laws to limit social media harms and certain practices such as collecting data.

In the United States, Meta, the parent company of Facebook and Instagram, was sued in 2020 over allegations that it illegally crushed fledgling rivals. Google has come under particular scrutiny. In 2020, a group of states led by Texas filed an antitrust lawsuit against it over ad tech, while the Justice Department and another group of states separately sued Google for abusing its dominance. on online research. In 2021, some states also continued Google’s App Store practices.

The new lawsuit “adds another significant complication to Google’s efforts to deal with regulators around the world,” said William Kovacic, former chairman of the Federal Trade Commission. “There is a chance that one or more of these challenges will succeed and hit the target.”

Peter Schottenfels, a spokesperson for Google, said the lawsuit “attempts to pick winners and losers in the highly competitive ad tech industry.” The lawsuit echoes Texas’ 2020 “unfounded” lawsuit, he said, adding that the Justice Department’s latest lawsuit made a flawed argument that would slow innovation and hurt publishers.

The Justice Department did not immediately respond to a request for comment.

The Biden administration is trying to use uncommon legal theories to clip the wings of some of America’s biggest corporations. The FTC has asked a judge to stop Meta from buying a virtual reality startup, a rare case that argues a deal could hurt potential competition in a nascent market. The agency also took issue with Microsoft’s $69 billion purchase of video game maker Activision Blizzard, a notable move because the two companies aren’t primarily seen as direct competitors.

The administration’s efforts are expected to meet fierce resistance in federal courts. Judges have for decades subscribed to the idea that antitrust violations should primarily be determined by whether or not prices are raised for consumers. But Jonathan Kanter, the head of the Justice Department’s antitrust division, and Lina Khan, the chairwoman of the FTC, said they’re willing to lose cases that allow them to push the boundaries of the law and that put warning American companies.

Tuesday’s lawsuit describes a campaign by Google to monopolize advertising technology and then abuse that dominance, to the detriment of publishers, advertisers and, ultimately, consumers. The Justice Department and states including New York and California said Google built its monopoly by buying up crucial tools that serve ads to publishers. As a result, advertisers paid more for space on the internet and publishers earned less money as Google took its cut, they said.

“Each time a threat emerged, Google used its market power in one or more of these ad technology tools to negate the threat,” the lawsuit said. “The result: Google’s plan for enduring industry-wide dominance has succeeded.”

The new lawsuit echoes claims made in the 2020 lawsuit backed by Texas and 14 other states and territories regarding Google’s advertising technology. This trial had a mixed reception in the courts. In September, a federal judge in New York ruled part of the case could go ahead, but dismissed a complaint about a deal between Google and Facebook that the states said was anti-competitive.

Google’s search engine has long been its profit center, but the company’s ad technology division has helped cement its place as a one-stop shop for advertisers. Both companies have given Google a powerful advantage in pricing online advertisements. Since Google’s various advertising tools and platforms are tightly integrated, a forced divestiture could be a painful and difficult process for the company.

Alphabet, Google’s parent company, is expected to release its fourth-quarter financial results on Feb. 2 amid a slowing online advertising market.

Google has added to its online advertising tools for years. Its $3.1 billion purchase in 2007 of DoubleClick, a maker of advertising tools, amplified the reach of its already powerful digital advertising machine. DoubleClick gave Google a crucial role on the Internet, providing a marketplace for publishers and allowing Google to host more ads on websites across the web.

At the time, Google had $16.6 billion in annual revenue, mostly from its search engine business. In 2021, the company’s ad tech division generated $31.7 billion in revenue, making it the second-largest business unit after the flagship search engine. In the first three quarters of 2022, the unit posted revenue of $24.3 billion.

Google has long faced accusations from online publishers that its control over the digital ad ecosystem has unfairly undermined the profits of the sites on which the ads are displayed.

A group representing publishers, including The New York Times Company, has pushed Congress to allow sites to collectively negotiate the terms of advertising agreements with Google and other online platforms. Normally, this type of coordination would be illegal under antitrust laws. Efforts by publishers have so far been in vain.

The Department of Justice said that in addition to hurting publishers and advertisers, Google’s tight control over the ad-tech market was also hurting internet users, arguing that publishers had fewer resources to create content for visitors to their websites.

On Friday, Google said it would lay off 12,000 employees, or 6% of its workforce, in response to a slowdown in the digital advertising market. The company said the cuts would allow it to prioritize projects involving artificial intelligence, a field that has gained momentum in Silicon Valley in recent months.