By: Isabella Eisenhart
Edited By: Cynthia Huang
OVERVIEW
On Tuesday, January 24th, 2023, a civil antitrust lawsuit was filed against Google by the Justice Department, along with the Attorneys General of California, Colorado, Connecticut, New Jersey, New York, Rhode Island, Tennessee, and Virginia, for monopolizing digital advertising technology products that violation of Sections 1 and 2 of the Sherman Antitrust Act. Section 1 of the Sherman Antitrust Act prohibits “restraint of trade,” including horizontal price fixing, horizontal market allocation, horizontal boycotts and oversees multilateral restraints of trade. Section 2 prohibits unilateral anticompetitive conduct by dominant firms, meaning monopolization, like exclusionary conduct.
THE LAWSUIT
The lawsuit alleges Google of anticompetitive acquisitions, self-dealing, and forcing businesses to use their own products and services. Seeking to break apart Google’s monopoly over online advertisement that burdens consumers, advertisers, and even the U.S. government, the Department of Justice alleged that Google looks to destroy “rivals in the online ad marketplace through acquisitions and to force advertisers to use its products by making it difficult to use competitors’ offerings” (Ortutary, et al).
Attorney General Merrick Garland says during the press conference, “Monopolies threaten the free and fair markets upon which our economy is based. They stifle innovation, they hurt producers and workers, and they increase costs for consumers.” According to Garland, Google has, in the last fifteen years, participated in exclusionary conduct. This has contributed to weakening competition, delayed the growth of rival technologies. Additionally, the tech superpower has manipulated online advertisement auctions, forcing advertisers and publishers to use Google’s tools.
During the press conference, Head of the Department of Justice’s Antitrust Division, Jonathan Kanter, said “In the complaint, the department alleges that 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 website publisher revenues, stymieing innovation and flattening our public marketplace of ideas.” Using the U.S. Army’s recruitment ads, as an example, Kanter stated that the federal government has been a victim of Google’s conduct.
The Department of Justice stated that Google has “dominion over digital advertising technology to funnel more transaction to its own ad tech products where it extracts inflated fees” and “abuses its monopoly power to disadvantage website publishers and advertisers,” resulting in lower revenue for publishers and website creators and increasing costs for advertisers paying more than they would “in a market where unfettered competitive pressure could discipline prices and lead to more innovative ad tech tools that would ultimately result in higher quality and lower cost transactions for market participants.”
The lawsuit also focuses on Google’s acquisition history, “calling out specific businesses it wants sold off, including Google’s advertising exchange, which matches publishers and advertisers in real time for the billions of ads across the web” (Sisco). Starting in 2008, Google bought DoubleClick, a company that helped websites sell ad space and in 2009 it purchased AdMob, a mobile company. In 2011 it bought another website tool, AdMeld and in 2010, Google acquired Invite Media, which was used by big companies to place online ads. Google also currently owns AdX, one of the “most widely used exchanges that match advertisers and publishers in automatic auctions occurring in the milliseconds it takes to load a webpage” (Sisco).
T
he Department of Justice demands that Google start by separating from “controlling the technical tools that manage the buying, selling and auctioning of digital display advertising, remaining with search” (Ortutary, et al).
RESPONSES
As 80% of Google's revenue comes from digital ads, and in response, Alphabet Inc. (Google’s parent company) has stated that the lawsuit, depends on a flawed argument and would “slow innovation, raise advertising fees, and make it harder for thousands of small businesses and publishers to grow.” Similarly, President of the Computer & Communications Industry Association, Matt Schruers, stated that advertisement competition is aggressive and that the government’s “contention that digital ads aren’t in competition with print, broadcast, and outdoor advertising defies reason.” CEO of the tech-funded Chamber of Progress, Adam Kovacevich, said the lawsuit was erroneous as, “Google’s online ad market share is now at an all time low, and it just laid off 12,000 employees in the midst of a declining advertising market — so this DOJ case seems pretty disconnected from economic reality.”
Dina Srinivasan, a Yale University fellow and AdTech expert, said that this lawsuit aligns state and federal governments in a bipartisan legal offensive. She said that the online ad market is “broken and totally inefficient” and “the fact that intermediaries are getting 30% to 50% of the take on each ad trade” is “an insane inefficiency to have baked into the U.S. economy” because it is a “a massive tax on the free internet and consumers at large” which also affects free press. Srinivasan stated that this lawsuit “seeks to apply to the digital ad market the same rules that apply to the financial markets.” For example, the New York Stock Exchange is not allowed to be owned by brokers, banks, or other competing interests.
GOOGLE’S SHARES
In 2022, according to research firm Insider Intelligence, Google held 29% of the U.S. digital advertising market, including ads on computers, phones, tablets, etc. The Department of Justice also stated that Google has over a 90% share of advertisements to websites and 80% of their ads network to where advertisers compete for advertisements. According to data from eMarketer, a digital advertising data service, “Google is the largest company in the digital ad market,” worth nearly $280 billion in 2023, an upwards increase from $250 billion in 2022 (Sisco). Because of Google's dominant influence, the company can collect 30 cents per every 1 dollar that advertisers spend trying to sell or display ads using Google’s tools.
SUMMARY
Overall, the lawsuit highlights how Google has used its dominance over the advertisement technology market and acquisitions for three primary reasons: 1) to neutralize rivals, 2) to have stricter control over digital advertising transactions, and 3) to prevent publishers and advertisers from working effectively.
Works Cited
“Congressional Research Service Careers.” Congressional Research Service (Library of Congress), 21 July 2022, https://loc.gov/crsinfo/.
Ortutay, Barbara, et al. “Justice Dept. Sues Google over Digital Advertising Dominance.” AP NEWS, Associated Press, 25 Jan. 2023, https://apnews.com/article/justice-department-sues-google-c6afce17327b30a098b1bd6a7e947b81.
Sisco, Josh. “Google Accused of Monopolizing $250B U.S. Digital AD Market.” POLITICO, 24 Jan. 2023, https://www.politico.com/news/2023/01/24/new-doj-lawsuit-could-break-up-google-00079229.
Comments