Google’s Ad Empire Under Fire: Landmark Antitrust Trial Begins

Over the next one month or so the US District Court for the Eastern District of Virginia will witness arguments and counter-arguments in a keenly watched anti-trust case filed against Google by the US Department of Justice (DOJ) and a coalition of states over the former’s alleged monopoly in the digital advertising industry.

Trial for the high-profile anti-trust case began yesterday (September 9).

A gaggle of witnesses is going to testify. For instance, Tim Wolfe, SVP of revenue operations at Gannett, is one of them. Gannett, the largest publisher in the US, including USA TODAY and over 200 local publications, has a pending federal lawsuit against Google for “monopolization of advertising technology markets and deceptive commercial practices”.

It’s worth noting that Google has filed a motion to exclude certain testimony from witnesses like Tim Wolfe, who are not economists or antitrust experts. However, the court has denied this motion, allowing Wolfe and other witnesses to testify.

It was last year that the Department of Justice, along with the Attorneys General of California, Colorado, Connecticut, New Jersey, New York, Rhode Island, Tennessee, and Virginia, filed a civil anti-trust lawsuit against Google, accusing the company of monopolizing several ad-tech products in violation of Sections 1 and 2 of the Sherman Act.

The DoJ has a long history of enforcing the Sherman Act to promote open markets, and in this case, is seeking both equitable remedies and triple damages due to Google’s anti-competitive practices. Notably, this is the first time in nearly five decades that the DoJ has pursued damages for a civil antitrust violation related to monopolization.

According to the DoJ complaint, Google has engaged in a 15-year pattern of anti-competitive and exclusionary conduct, including:

Acquiring rival companies in the ad tech industry
Leveraging its market dominance to coerce publishers and advertisers into using its products
Blocking the use of competing solutions

These alleged actions have reportedly enabled Google to consolidate its control over:

Tools used by website publishers and online advertisers
The digital advertising exchange that facilitates ad auctions

This consolidation of power has allegedly harmed competition and innovation in the ad tech industry.

The DoJ contends that Google has achieved unparalleled dominance in the ad-tech industry through a deliberate series of strategic acquisitions. A pivotal moment came in 2007 when Google acquired DoubleClick for $3.1 billion, thereby gaining control of a vital online marketplace, where publishers sell ad space. According to the DoJ, DoubleClick now commands over 50% of the market share for open-web display transactions. Furthermore, Google’s subsequent acquisitions of Invite Media and AdMeld enabled the company to exert control over both the supply and demand sides of online advertising, as well as the crucial exchange where buyers and sellers interact.

The DOJ believes that Google’s anti-competitive behaviour has stifled alternative technologies, preventing their adoption by publishers, advertisers, and competitors.

While this antitrust case affects the US, as it is based on violations of the Sherman Act, the implications could extend globally. As a major player in the ad-tech market, any legal action against Google could potentially impact its operations, business practices, and partnerships worldwide. The outcome of the case may also encourage other countries to scrutinize Google’s practices more closely or pursue similar antitrust actions, influencing global regulatory landscapes and digital markets.

Tightening the noose?

Last month, in a separate case, the US District Court of Columbia Judge Amit P Mehta accused Google of dominating the search engine market.

Just three days before to the start of the US trial, on September 6, the Competition and Markets Authority (CMA) in the UK provisionally found that Google is using “anti-competitive practices in open-display ad tech, which it believes could be harming thousands of UK publishers and advertisers.”

The CMA provisionally found that, when placing digital ads on websites, the vast majority of publishers and advertisers use Google’s ad tech services in order to bid for and sell advertising space. The authority is concerned that “Google is actively using its dominance in this sector to preference its own services. Google disadvantages competitors and prevents them from competing on a level playing field to provide publishers and advertisers with a better, more competitive service that supports growth in their business.”

Yelp, a platform for online reviews, also filed a separate antitrust lawsuit against Google in the US, alleging that it maintains a monopoly in local search services, harming its business.

Google’s arguments

Google has already given a fair idea as to how it is going to defend its case in this case. In a blog post, Lee-Anne Mulholland, Vice President, Regulatory Affairs at Google, argues that their ad tech tools are chosen by buyers and sellers because they are simple, affordable, and effective.

Mulholland argues that the ad tech market is highly competitive, with numerous players like Comcast, Disney, Walmart, Target, Criteo, and others, not just Google. Google points out that their products work alongside competitors’ tools, giving businesses flexibility in choosing different ad platforms. The tech giant further claims that their fees are lower than industry averages, benefiting publishers and advertisers. Mulholland warns that the DOJ’s case could harm small businesses by raising costs and reducing the quality of ads. Google aims to prove that the current ad tech landscape is functioning well and that the DOJ’s actions could lead to higher costs and inefficiencies, negatively impacting the economy and small businesses.

“The DOJ’s narrow view of the ad tech market doesn’t reflect reality. We are one of hundreds of companies who actively compete to enable the placement of ads across the internet. Media companies like Comcast and Disney, retailers like Walmart and Target, and specialized ad tech companies like Criteo, Index Exchange and the Trade Desk all invest in building their online ads services. In the last few months alone, Paypal, Costco and United Airlines introduced new ad tech services,” Mulholland writes.

Google counters DoJ’s core criticism in the complaint about its monopoly.

“We aren’t the only option... After its recent acquisition of Xandr, Microsoft also offers customers a vertically integrated suite of ad tech products, and Amazon and Meta have similar offerings. It is a fiercely competitive industry — and new technologies are making it more dynamic each day,” Mulholland says.

Possible outcomes of the trial include:

Breakup of Google: The US government may consider breaking up Google if the trial rules against the company.
Concessions from Google: Google may be forced to make concessions or agree to a deal with antitrust authorities.
Industry impact: A ruling against Google could lead to a more open ad tech ecosystem, benefiting independent ad tech companies.
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