Google sued by DOJ over allegedly monopolizing digital advertising tech

Picture Credit: Mitchell Lu

The US Department of Justice has hit Alphabet-owned Google with a lawsuit over allegedly monopolizing digital advertising technologies.

The DOJ, along with the Attorneys General of California, Colorado, Connecticut, New Jersey, New York, Rhode Island, Tennessee, and Virginia, filed a civil antitrust suit against Google in the US District Court for the Eastern District of Virginia, according to a DOJ release on Tuesday (January 24).

Google is being accused of subverting competition in internet advertising technologies through serial acquisitions and anticompetitive auction manipulation.

“Over the past 15 years, Google has engaged in a course of anticompetitive and exclusionary conduct that consisted of neutralizing or eliminating ad tech competitors through acquisitions,” the DOJ claims.

Google is taking advantage of its dominance across digital advertising markets to force more publishers and advertisers to use its products and prevent them from using competing products.

In the third quarter of 2022, Google’s advertising revenue rose to $54.48 billion from $53.13 billion in 2021 despite the slowdown in global ad spending. However, its affiliate YouTube, posted a 1.9% YOY drop in ad revenue to $7.07 billion, which Philipp Schindler, Alphabet’s SVP and Chief Business Officer, attributed to “the shift in user behavior.”

The DOJ claims that Google now controls  the digital tool that nearly every major website publisher uses to sell ads on their websites, and controls the dominant advertiser tool that large and small advertisers use to buy ad inventory. It also controls the largest advertising exchange, a technology that runs real-time auctions to match buyers and sellers of online advertising.

“Today’s complaint alleges that Google has used anticompetitive, exclusionary, and unlawful conduct to eliminate or severely diminish any threat to its dominance over digital advertising technologies,” says Attorney General Merrick Garland.

“No matter the industry and no matter the company, the Justice Department will vigorously enforce our antitrust laws to protect consumers, safeguard competition, and ensure economic fairness and opportunity for all.”

The lawsuit alleges that on average, Google pockets more than 30% of the advertising income that flows through its digital ad technology products.

Among the allegations made against Google include acquiring competitors to obtain control over key digital advertising tools.

In 2007, Google bought internet advertising company DoubleClick for $3.1 billion, turning it into an “ad powerhouse,” according to The New York Times.

The deal was approved in a 4-to-1 vote by the Federal Trade Commission.

But in 2020, the DOJ filed antitrust charges against Google for “unlawfully maintaining monopolies through anticompetitive and exclusionary practices in the search and search advertising markets”.

“Google is the monopoly gatekeeper to the internet for billions of users and countless advertisers worldwide,” the DOJ said at the time.

That lawsuit is scheduled for trial in September 2023.

The latest litigation, which also targets Google’s advertising dominance, centers on digital ad technologies, collectively referred to as the “ad tech stack,” that website publishers depend on to sell ads. Advertisers also rely on ad tech stack to buy ads and reach potential customers.

“The complaint filed today alleges a pervasive and systemic pattern of misconduct through which Google sought to consolidate market power and stave off free-market competition,” says Deputy Attorney General Lisa Monaco.

“In pursuit of outsized profits, Google has caused great harm to online publishers and advertisers and American consumers. This lawsuit marks an important milestone in the Department’s efforts to hold big technology companies accountable for violations of the antitrust laws,” Monaco says.

Google is also accused of forcing the adoption of its tools by locking in website publishers to its newly-acquired tools, distorting auction competition by limiting real-time bidding on publisher inventory to its ad exchange, and manipulating auction mechanics across several of its products to insulate Google from competition and deprive rivals of scale.

Associate Attorney General Vanita Gupta, said: “The Department’s landmark action against Google underscores our commitment to fighting the abuse of market power. We allege that Google has captured publishers’ revenue for its own profits and punished publishers who sought out alternatives. Those actions have weakened the free and open internet and increased advertising costs for businesses and for the United States government, including for our military.”

Assistant Attorney General Jonathan Kanter of the Justice Department’s Antitrust Division, added: “Today’s lawsuit seeks to hold Google to account for its longstanding monopolies in digital advertising technologies that content creators use to sell ads and advertisers use to buy ads on the open internet.”

“Our complaint sets forth detailed allegations explaining how Google engaged in 15 years of sustained conduct that had — and continues to have — the effect of driving out rivals, diminishing competition, inflating advertising costs, reducing revenues for news publishers and content creators, snuffing out innovation, and harming the exchange of information and ideas in the public sphere.”

The latest legal action comes as Google parent Alphabet became one of the latest US-based tech giants to carry out job cuts amid the global economic slowdown.

Reuters reported, citing a staff memo sent by Alphabet CEO Sundar Pichai on Friday (January 20), that Alphabet is slashing 12,000 roles, or roughly 6% of its workforce globally.

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