Following Google’s recognition as a monopolist in online search, the company is facing a new lawsuit. The US Department of Justice (DOJ) and Google are preparing for a new round of confrontation. This time the subject of dispute will be the online advertising market. As TheVerge reports, the DOJ accuses Google of monopolizing the ad tech market and using its dominant position to stifle competition.
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The lawsuit follows the DOJ’s recent victory in an online search monopolization case in which a federal judge in Washington found Google guilty. The new case will be heard by a different judge in Virginia (US state). “It’s like a double whammy,” said Rebecca Haw Allensworth, a professor of antitrust law at Vanderbilt Law School. “Google is likely still licking its wounds from its previous defeat, and losing this case would be a serious blow to the company.”
The DOJ alleges that Google illegally monopolizes the market for advertising tools by controlling both demand (from advertisers) and supply (from site owners), as well as the exchanges that link them together. According to the government, Google has waged a 15-year “campaign to condition, control and tax digital advertising transactions,” illegally tying up its tools and preventing fair competition.
The lawsuit alleges that Google used its dominant position in the search market to create demand from advertisers. Then, by purchasing DoubleClick, a website advertising platform, in 2009, the company gained access to a huge base of publishers willing to connect their sites with advertisers through the DoubleClick ad network. Having gained control of all aspects of the market, Google, according to the DOJ, began to take actions to strengthen its monopoly, including manipulating advertising auctions and imposing unequal conditions for access to its tools.
Google, in turn, says the government is trying to punish the company for creating valuable tools that improve the efficiency of publishers and advertisers. Google argues that the government’s position does not reflect the reality of the market and ignores the intense competition the company faces as well as the innovations that make its tools attractive to users.
Interestingly, the case will be heard by a judge without a jury. A jury trial was initially planned, but Google paid the government $2.3 million, which the company said represented the “maximum amount of damages” claimed by the government. This was done to avoid a jury trial, which, as Google’s recent experience in its lost case against Epic Games showed, can be unpredictable.
One of the key questions in the case will be whether the government will try to force Google to cooperate with competitors. Allensworth said the DOJ will try to avoid framing the issue in this manner, and will instead seek to highlight the illegal manipulations Google has engaged in and the short-term sacrifices it has made to bolster its dominance.
The short-term victim reference is a case known as Aspen Skiing, which the government will try to rely on in its new lawsuit. Google once bought three of the four mountains in Aspen, Colorado, USA, and then ended the pass system that gave skiers access to all four mountains. The Supreme Court later ruled that the company had sacrificed short-term profits to simply hurt a competitor and increase its dominance.
Another “unfair practice” TheVerge points out is how Google responded to a strategy known as header bidding. With header bidding, publishers have discovered that they can submit their ad requests to other ad exchanges before contacting Google to maximize bids on their ad slots. According to the Justice Department, Google perceived this as an “existential threat” and created an Open Bidding feature in Google Ad Manager, which, in addition to reporting and billing, required publishers and ad exchanges to provide information about the rates of competing exchanges. The DOJ argues that the Open Bidding feature actually helped charge more commissions and “disengaged competing ad exchanges from their own publisher clients.”
For advertisers and site publishers who rely on Google tools, a ruling against the company could lead to dramatic changes in their online business. According to Evelyn Mitchell-Wolf, a senior analyst at Emarketer who covers the US digital advertising market, splitting up Google’s advertising business could cause a lot of problems, as market participants will have to urgently look for alternative solutions. However, the government hopes that in the long term such actions will revive competition in the industry. At the same time, some advertisers and publishers, according to Mitchell-Wolf, will be able to breathe a sigh of relief, having the opportunity to reduce their dependence on Google.