February 7, 2023

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The Justice Department is suing Google over the dominance of digital advertising

The Justice Department and eight states filed an antitrust lawsuit against Google on Tuesday, seeking to shatter its alleged monopoly over the entire online advertising ecosystem as a harmful burden to advertisers, consumers and even the US government.

The government alleged complaint that Google is looking to “neuter or eliminate” competitors in the online advertising market through acquisitions and force advertisers to use its products by making it difficult to use competitors’ offerings. It is part of a new push, if slow and stalled, by the United States to rein in the big tech companies that have enjoyed largely unbridled growth in the past decade and a half.

“Monopolies threaten the free and fair markets that underpin our economy. They stifle innovation, harm producers and workers, and drive up costs for consumers,” Attorney General Merrick Garland said at a news conference Tuesday.

For 15 years, Garland said, Google has pursued a “path of anti-competitive behavior” that has halted the rise of competing technologies and manipulated the mechanisms of online ad auctions to force advertisers and publishers to use its tools. In doing so, he added, “Google has engaged in exclusionary behavior” that has “severely weakened,” if not destroyed, competition in the ad technology industry.

The lawsuit, the government’s latest legal action against Google, accuses the company of illegally monopolizing the way ads are served online by excluding competitors. Google Ads Manager allows large publishers with direct sales to manage their ads. At the same time, ad exchange is a real-time marketplace for buying and selling display ads online.

Garland said Google controls the technology most major website publishers use to offer ad space for sale, as well as the largest ad exchange that matches publishers and advertisers together when selling ad space. The result, he added, is that “website builders earn less and advertisers pay more”.

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The lawsuit, filed in federal court in Alexandria, Virginia, demands that Google divest itself of business activities related to control of the technical tools that manage the buying, selling, and auction of digital advertising on the Display Network, and stay with search — its core business — and other products and services including YouTube and Gmail and cloud services.

Alphabet Inc, Google’s parent company, said in a statement that the lawsuit “doubles down on a flawed argument that will slow innovation, raise advertising fees, and make it difficult for thousands of small businesses and publishers to grow.” Digital advertising currently accounts for about 80% of Google’s revenue, and it greatly supports its other, less profitable endeavors.

Tuesday’s lawsuit comes as the US government increasingly looks to curb Big Tech’s dominance, though such legal action could take years to complete and Congress has not passed any recent legislation seeking to limit the influence of the tech industry’s biggest players.

The European Union has been more active. Launched an antitrust investigation Google’s digital advertising dominance in 2021. British and European regulators are also looking into whether an online display advertising services agreement between Google and Meta breached the rules in fair competition.

An internet services trade group of which Google is a member called the lawsuit and its “radical structural remedies” unjustified.

Competition for advertising is fierce and “governments’ claim that digital advertising does not compete with print, broadcast and outdoor advertising defies reason,” said Matt Schrewers, president of the Computer and Communications Industry Association.

The lawsuit is “huge,” said Dina Srinivasan, a Yale University fellow and ad technology expert, because it pits the entire nation — state and federal governments — in a bipartisan legal assault against Google. In December 2020, 16 states and Puerto Rico sued Google over the exact same issues.

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The current online advertising market, Srinivasan said, “is Broken and not working at all. The fact that brokers get 30% to 50% of the share on every ad trade is a “mad incompetence of getting into the American economy”. She called it “a colossal tax on the free internet and consumers in general.” It also directly affects the viability of a free press.”

As with many highly complex technical markets, it took time for state and federal regulators and policymakers to catch up and understand the online advertising market. Srinivasan noted that it took a decade before they woke up to the dangers of high-speed trading in the financial markets and began taking measures to discourage it.

It said this lawsuit seeks to apply the same rules that apply to financial markets to the digital advertising market. Brokers, banks and other companies with sometimes competing interests are not allowed to own the NYSE.

Google has roughly 29% of the digital advertising market in the US – and that includes all the ads people see on computers. Phones, tablets, and other internet-connected devices—in 2022, according to research firm Insider Intelligence. Facebook’s parent company, Meta, comes in second, with about 20% of the market. Amazon is a distant third, but it’s growing.

But that is not the lawsuit’s concern. It focuses on the technical market mechanisms that Google controls, including the ad server it developed based on its market-dominating DoubleClick purchase in 2008. The Department of Justice says Google owns more than 90% of the businesses that serve ads to websites and controls them. About 80% of Google’s advertising network is the “buyer” where advertisers compete to place ads.

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The lawsuit states that over the past 15 years, Google has used acquisitions and market power across adjacent ad technology markets to crush the rise of competitors, tighten its control over the manner and means through which digital advertising transactions occur, and prevent publishers and advertisers from working effectively with Google’s competitors. .

This is the latest legal action taken against Google by the Department of Justice or local state governments. In October 2020, for example, the Trump administration and 11 state attorneys general sued Google for violating antitrust laws, alleging anticompetitive practices in the search and search advertising markets.

When asked why the DOJ would bring the lawsuit when a similar complaint had already been filed by states, Assistant Attorney General Jonathan Kanter, the department’s chief antitrust official, said, “We did our own investigation, and that investigation took place over many years.”

The states involved in the lawsuit, which was filed on Tuesday, include California, Virginia, Connecticut, Colorado, New Jersey, New York, Rhode Island and Tennessee.

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Associated Press technology writer Ortotay reported from San Francisco and Pajak from Boston. Associated Press technology writer Matt O’Brien contributed to this report.

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This story was first published Jan. 25, 2023. It was updated Jan. 25, 2023 to correct for the number of states involved in a 2020 lawsuit. She was 16, not 35.