Google is heading for the next showdown in a concerted international antitrust campaign to break the tech giant’s decades-long dominance of the digital advertising market, this time with the future of its $20bn ad tech business at stake.
Fresh from its antitrust victory against Google over online search, the US Department of Justice will once again face its parent company Alphabet in court next week over allegations it exerts monopolistic control of digital advertising.
The lawsuit dates to January 2023, when DoJ antitrust head Jonathan Kanter and a group of US states accused Google of using “anti-competitive, exclusionary, and unlawful means to eliminate or severely diminish any threat to its dominance” as a major intermediary in ad tech — the automated marketplace that buys, sells and places video and picture adverts online.
The case highlights potential conflicts of interest arising from Google’s ownership of companies that operate on all sides of the market. This includes the tech used by website publishers such as newspapers to sell ad space, the biggest exchange on which that space is bid for by businesses looking to promote their products, and the software that advertisers use to access the market.
The US case, which starts Monday in Alexandria, Virginia, has taken on far greater significance after Alphabet lost two similar lawsuits in the past nine months, raising the possibility of big court-imposed changes to Google’s business that could reshape or even split the near-$2tn Big Tech company apart.
In August, a US judge in the first DoJ antitrust suit branded Google a “monopolist” that paid billions to Apple and other companies to guarantee its place as the default search engine and thereby stifle competition in online queries.
In December last year, a San Francisco jury ruled that the company shut out rivals from its Android app Play Store to generate billions of dollars of profits by charging excessive fees.
Combined, the trio of US cases add up to one of the biggest challenges that Google has faced in its 26-year history, at a time when artificial intelligence-powered chatbots also have the potential to upend the way users search for information online.
Chief executive Sundar Pichai must find a way to navigate these potentially existential threats and keep the company together.
“Like all empires, time remains undefeated and the barbarians are at Google’s gate. Facing a three-front legal battle . . . it’s hard to envision Google escaping unscathed,” said Bernstein analyst Mark Shmulik.
However, “investors have mostly shrugged off the regulatory headlines as more noise in a noisy world, he added. “It’s hard to blame [them].”
The judge’s ruling on remedies in the Google Play Store lawsuit, brought by Epic Games, is expected in weeks.
The government’s search case will take longer: the judge in that case said he hopes to render a decision by August 2025.
The potential remedies in that case, which are yet to be determined, range from banning incentive payments to partners and requiring Google to share user data with rivals to forcing it to spin off units or even break the company up entirely.
Barak Richman, professor at George Washington University’s law school, called the US government’s ad tech lawsuit a “fascinating case that is harder and perhaps more important than the Google search case.”
“It illustrates the policy tension of what happens when a company creates a new market, which is presumptively good, and then hardwires the market for self-advancement, which is presumptively bad,” he said.
At the core of the ad tech case is the accusation that Google has dominated the sector for 16 years, buying any potential competitors, incentivising publishers to adopt its tools and manipulating ad auctions to its own benefit.
In 2008 Google bought DoubleClick, a publisher ad server, and ADX, a nascent ad exchange, which created an ecosystem that locked in publishers, the DoJ said.
“In effect, Google positioned itself to function simultaneously as buyer, seller, and auctioneer of digital display advertising.”
The 2023 complaint quoted a Google product manager who wrote: “Our goal should be all or nothing — use ADX as your [exchange] or don’t get access to our [advertising] demand.”
Another document filed last month quoted Google employees as saying: “The analogy would be if Goldman or Citibank owned the NYSE [New York Stock Exchange] . . . “[O]ne other very very important reason to keep adx out of the buy side team is that would be a HUGE conflict perception in the market.”
The DoJ has demanded that the company divest Google Ad Manager suite to dismantle the monopoly.
Google denies the allegations and has repeatedly tried to get the case dismissed, describing the ad tech sector as highly competitive and pointing out that large competitors such as Amazon, Meta, Microsoft and Adobe own rival platforms on all sides of the market.
Alphabet’s lawyers, led by president of global affairs Kent Walker, have also argued that the government has gerrymandered its definition of the digital ad market to ensure that it exceeded the threshold of 70 per cent of spending required to class it as a monopoly.
The lawyers added that focusing only on open web display advertising such as static banners — and excluding ads within apps — is a dated view of the market and does not reflect modern advertising that is increasingly app-based.
Nevertheless, after the recent succession of trial losses, executives at Google seem more worried about the outcome than any previous case, according to a person involved in the tech giant’s preparation.
Google even attempted to pre-empt the government’s claim for monetary damages by sending, unprompted, a cheque for the full, unspecified amount being sought — but it was rejected.
The defeats have also encouraged competitors to challenge Alphabet. Yelp, the online listings and review service, has sued the company alleging that it uses its search engine to prioritise its own results. It has called for monetary damages and wants to see Google spin off businesses that have benefited from its monopoly.
Bernstein’s Shmulik said that a class-action lawsuit could spring from the ad tech ruling, with advertisers claiming Google overcharged them for years: “It’s plausible to see a lawsuit seeking more than $100bn in damages.”
Alphabet is also under attack abroad. On Friday, the UK Competition and Markets Authority found that Google is “using its market power to hinder competition” in ad tech by rigging auctions and giving its own platforms preferential treatment. The company said the UK case “rests on flawed interpretations” of the sector.
The EU’s antitrust regulator is investigating the ad tech business. “Only the mandatory divestment by Google of part of its services would address” its concerns, the European Commission said when it brought the case in June.
Not every seismic antitrust loss ends badly, Bernstein’s Shmulik noted, as Microsoft proved after it was ordered to break up following defeat in a landmark DoJ case in 2000 over its dominant Windows platform.
It appealed, the decision was overturned and it was able to settle with the new, more business-friendly administration of George W Bush.
“There’s a 25 year track record since Microsoft’s guilty verdict of regulations having almost no effect on the monopolistic positions for Big Tech,” he said.
While Joe Biden’s Democratic administration has ramped up antitrust action — led by the DoJ’s Kanter and Federal Trade Commission chair Lina Khan — there is little indication that the Republicans and Donald Trump would go any easier on Big Tech if they win the election in November.
In an interview with the Financial Times last week, vice-presidential nominee JD Vance said “Google ought to be broken up . . . I think it’s way too big, way too powerful.”
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