Google is back in the courtroom this week as its parent company Alphabet faces allegations from the federal Department of Justice (DOJ) that its power in the ad tech industry is monopolistic.
This comes just weeks after a federal judge ruled that the company has illegally maintained a monopoly over the search engine industry through anti-competitive business practices, particularly its exclusive contracts with web browsers and device manufacturers that allow it to serve as users’ default search engine.
This ruling reportedly marked the DOJ’s first legal victory against a monopoly power in more than twenty years.
The case currently before the court focuses on its advertising technologies behind its $200 billion digital ad business.
Referred to as “ad tech,” these technologies are used to “almost instantly match that website publisher with an advertiser looking to promote its products or services to the website’s individual user,” which “typically involves the use of an automated advertising exchange that runs a high-speed auction designed to identify the best match between a publisher selling internet ad space and the advertisers looking to buy it.”
Filed in January of 2023, the DOJ’s lawsuit alleges that the “ad tech space is broken,” however, “for reasons that were neither accidental nor inevitable” because Google has allegedly “corrupted legitimate competition in the ad tech industry by engaging in a systematic campaign to seize control of the wide swath of high-tech tools used by publishers, advertisers, and brokers, to facilitate digital advertising.”
According to the DOJ, Google has “neutralize[d] or eliminate[d]” its competition through a series of acquisitions and used its dominance to “force more publishers and advertisers to use its products while disrupting their ability to use competing products effectively.”
The complaint goes on to allege that because Google now essentially controls all major aspects of the ad tech industry, it can “dictate how digital advertising is sold, and the very terms on which its rivals can compete.”
Consequently, “website creators earn less, and advertisers pay more, than they would in a market where unfettered competitive pressure could discipline prices and lead to more innovative ad tech tools that would ultimately result in higher quality and lower cost transactions for market participants.”
“And this conduct hurts all of us because, as publishers make less money from advertisements, fewer publishers are able to offer internet content without subscriptions, paywalls, or alternative forms of monetization,” the DOJ wrote in their complaint.
As a result of this lawsuit, the government is hoping to have the courts “halt Google’s anticompetitive scheme, unwind Google’s monopolistic grip on the market, and restore competition to digital advertising.”
In practice, this would mean “at minimum” Google’s divestiture of the Google Ad Manager suite (GAM), including Google’s publisher ad server (DFP) and Google’s ad exchange (AdX).
Additionally, the DOJ would like to see the courts “enjoin Google from continuing to engage in the anticompetitive practices described herein and from engaging in any other practices with the same purpose and effect as the challenged practices,” among other things.
Click Here to Read the DOJ’s Full Complaint
In a statement released by Google Sunday, the company says that they “will show that ad buyers and sellers have many options, and when they choose Google they do so because [their] ad tech is simple, affordable, and effective.”
“By picking winners and losers in a highly competitive industry, the DOJ risks making it more expensive for small businesses to grow and for websites and apps to make money,” Google said.
“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,” wrote the company. “Even when it comes to offering a vertically integrated ‘full stack’ of products that help ad buyers and sellers — a core criticism in the DOJ’s complaint — we aren’t the only option.”
“Google’s ad tech products are built to work with those of our competitors, and businesses often mix and match ad tech providers, regularly using different platforms simultaneously,” they continued.
“We compete in a flourishing market by offering ad tech that works and gives advertisers a good return on their investment,” Google contends. “You wouldn’t know it from reading the DOJ’s complaint, but Google’s ad tech fees are actually lower than reported industry averages — hardly a sign of monopoly abuse.”
“The ability to buy online ads cheaply and simply has opened up advertising to even the smallest retailers,” they say. “Our products are particularly popular with small businesses who don’t have the time and resources to employ advertising experts, and like using our simple and effective tools.”
“With the cost of ads going down and the number of ads sold going up, the market is working. The DOJ’s case risks inefficiencies and higher prices — the last thing that America’s economy or our small businesses need right now,” Google concludes. “We will make sure their voices are heard at trial and we look forward to making our case.”
