The Justice Department files a second antitrust suit against Google, seeking to break up its advertising business

The Justice Department files a second antitrust suit against Google, seeking to break up its advertising business

On Tuesday, the US Department of Justice filed its second antitrust lawsuit The Google In just over two years. It’s the latest sign that the US government isn’t backing down from cases against tech companies even given the court’s mixed record in antitrust cases.

Google shares fell 1.3% on Tuesday afternoon.

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This lawsuit you focus on The Google The online business and seeks to have Google divest parts of its business, the first against the company filed under the Biden administration. The department’s previous lawsuit, filed in October 2020 under the Trump administration, accused Google of using its alleged monopoly power to cut out competition for Internet search through exclusionary agreements. The case is expected to go to trial in September.

Google’s advertising business generated $54.5 billion in the quarter ended September 30th from search, YouTube, Google Network ads, and other advertising.

Google also faces three other antitrust lawsuits from large groups of state attorneys general, including one focused on its advertising business led by Texas Attorney General Ken Paxton.

California, Colorado, Connecticut, New Jersey, New York, Rhode Island, Tennessee and Virginia have joined the DOJ in the latest lawsuit.

Google’s advertising business has drawn critics because the platform operates on multiple aspects of the market — buying, selling, ad exchange — giving it a unique view of the process and potential leverage. The company has long denied dominance in the online advertising market, citing market share from competitors including metaFB.

In the lawsuit, the Department of Justice and the states argue that Google sought to control all aspects of the market, realizing that it “could become the perfect and definitive home for all advertising services.”

“Google will no longer have to compete on merit; it can simply set the rules of the game to exclude competitors,” they claimed.

According to the complaint, even one Google advertising executive questioned the wisdom of the company’s broad ownership in the space.

“[I]Is there a deeper problem with our ownership of the platform, the exchange, and a huge network? the executive allegedly asked. The analogy would be if Goldman or Citibank owned the New York Stock Exchange. “

They claim that the harm caused by Google’s practices is that “website builders earn less and advertisers pay more than they pay in a marketplace where unrestrained competitive pressure can fine-tune prices and lead to more innovative advertising technology tools that ultimately lead to higher quality and lower-cost transactions for participants.” In the market “.

As a result, they added, more publishers are being forced to turn to alternative models such as subscriptions to fund their operations.

The complaint alleges that another part of Google’s strategy is to acquire other companies to grow its power in the advertising market and “pave the way for Google’s subsequent exceptional behavior across the advertising technology industry.” These acquisitions included the purchase of publisher DoubleClick’s ad server in 2008 and an “emerging ad exchange” that became Google’s AdX. This allowed Google to require publishers in some cases to use all of its tools to reach any one, rather than working with competing tools for parts of the online ad buying process.

“In reality, Google was stealing from Peter (advertisers) to pay Paul (publishers), while collecting huge transaction fees for its premium positioning in the middle, the enforcers claim.” Instead of helping to fund website publishing, Google was withdrawing It makes advertising money for itself by charging hyper-competitive fees on its platforms. And a competing publisher’s ad server can’t compete with Google’s inflated ad rates, especially without access to Google’s captive advertiser order from Google Ads.”

Google continued to identify potential threats to its dominance, the complaint alleges, such as when yield management tools became available to help publishers find better prices for their stock in real time outside of Google’s ecosystem.

“Therefore, in response, Google used a familiar tactic: acquire any competitive threat, then suppress it,” the complainants wrote, referring to Google’s 2011 acquisition of AdMeld. After the deal, they alleged that Google changed its AdX contracts to prevent publishers from using other platforms to force its exchange to compete with others in real time.

Later, Google became aware of trying another workaround called “header bidding”, where publishers could add code to their websites to allow non-Google ad exchanges to bid on inventory before Google’s ad exchange preferences were triggered, allowing competitors to exchange Ads are back in the market in a big way. Google executives have allegedly called the practice an “existential threat”.

Google has marketed its own “Open Bidding” tool as an alternative, which the complaint called a “Trojan”. Publishers and ad exchanges that participated in the program had to give Google visibility into their auctions, including competing exchange bids. The complaint alleges that this allowed Google’s ad exchange to retain “a guaranteed seat in every auction, regardless of whether Google’s ad exchange offered the best match between advertisers and publishers.”

Google also fears advertising competition from Facebook and AmazonThe Department of Justice and the states alleged that, in response, it had agreed with Facebook to give it “preferential open auction terms … in exchange for spending and pricing commitments designed to drive more of Facebook’s captive advertiser spending onto Google’s platforms.” The complaint alleges that Google sought a similar arrangement with Amazon but was not successful.

“The lawsuit filed today by the Department of Justice attempts to pick winners and losers in the fiercely competitive advertising technology sector,” a Google spokesperson said in a statement. It largely duplicates a baseless lawsuit by the Texas Attorney General, many of which have recently been dismissed by a federal court. The DOJ doubles down on a flawed argument that will slow innovation, raise advertising fees, and make it more difficult for thousands of small businesses and publishers. “.

The Wall Street Journal reported earlier this month that the progressive head of the Justice Department’s antitrust division, Jonathan Kanter, was recently authorized to work on matters relating to Google. Bloomberg had previously reported that Kanter was not allowed to work on cases involving the company while the department evaluated Google’s request to review its denial reasons. Prior to taking office in government, Kanter represented some of Google’s opponents and critics, including howling And News Corp.

A Google spokesperson said in a statement released last year that Kanter’s past work and statements “raise serious concerns about his potential for bias.”

Google isn’t the only tech giant that has seen scrutiny from the federal government. at the Federal Trade Commission, meta He is also the subject of two antitrust cases, as is Microsoft The proposed acquisition of Activision.

Google and other tech companies have also faced increasing scrutiny from abroad, particularly in Europe, where Google has also grappled with multiple competition cases and new regulations threaten to make significant changes to tech business models.

Google’s Alphabet is scheduled to report earnings on February 2nd.

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