The Justice Department is suing Google for digital advertising dominance

The Justice Department is suing Google for digital advertising dominance

WASHINGTON (AP) — The Justice Department and eight states filed an antitrust suit against Google on Tuesday, seeking to quash its alleged monopoly over the entire online advertising ecosystem as a painful burden on advertisers, consumers and even the U.S. government.

The government claimed in the complaint that Google is trying to “neutralize or eliminate” rivals in the online advertising market through acquisitions and to force advertisers to use its products by making it difficult to use competitors’ offerings. It’s part of a new, albeit slow and faltering US push to rein in big tech companies that have experienced largely unbridled growth over the past decade and a half.

Monopolies threaten the free and fair markets on which our economy is based. They stifle innovation, they hurt producers and workers, and they increase costs for consumers,” Attorney General Merrick Garland said at a news conference Tuesday.

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

The lawsuit, the latest lawsuit filed by the government against Google, accuses the company of unlawfully monopolizing the way ads are displayed online by excluding competitors. Google’s ad manager helps large publishers with high direct sales manage their ads. The ad exchange, meanwhile, is a real-time marketplace for buying and selling online display ads.

Garland said Google controls the technology used by most major website publishers to list ad space for sale, as well as the largest ad exchange that brings publishers and advertisers together when ad space is sold. The result, he added, is that “website creators earn less and advertisers pay more.”

The lawsuit, filed in federal court in Alexandria, Virginia, demands that Google divest itself of the business that controls the technical tools that manage the buying, selling and auctioning of digital display ads while it deals with search – the core business – and other products and services, including YouTube, Gmail and cloud services.

Alphabet Inc., Google’s parent company, said in a statement that the lawsuit “doubles down on a flawed argument that would slow innovation, increase advertising costs and make it harder for thousands of small businesses and publishers to grow.” Digital advertising currently accounts for about 80% of Google’s revenue, generally supporting its other, less lucrative endeavors.

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

The European Union has become more active. It launched an antitrust investigation to Google’s digital advertising dominance in 2021. UK and European regulators are also investigating whether an agreement for online display advertising services between Google and Meta violates the rules on fair competition.

An internet services trade group, of which Google is a member, described the lawsuit and the “radical structural remedies” as unwarranted.

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

Dina Srinivasan, a Yale University fellow and adtech expert, said the lawsuit is “huge” because it aligns the entire nation — state and federal governments — in a bipartisan legal offensive against Google. In December 2020, 35 states and the District of Colombia sued Google over the exact same issues.

The current online advertising market, Srinivasan said, “is broken and totally inefficient.” The fact that intermediaries get 30% to 50% of the revenue from each ad transaction is “an insane inefficiency baked into the US economy.” She called it “a huge burden on the free internet and consumers in general. It also directly affects the viability of a free press.

As with many highly complex tech markets, it has taken time for federal and state regulators and policy makers to catch up and understand the online advertising market. Srinivasan noted that it took ten years for them to wake up to the dangers of rapid trading in financial markets and start taking measures to discourage it.

This lawsuit seeks to apply the same rules to the digital advertising market as it does to financial markets, she said. Brokers, banks and other companies that sometimes have conflicting interests are not allowed to own the New York Stock Exchange.

Google controlled nearly 29% of the US digital advertising market, including all the ads people see on computers. phones, tablets and other internet-connected devices — in 2022, according to research firm Insider Intelligence. Facebook parent company Meta is second, with nearly 20% of the market. Amazon is a distant but growing third.

But that’s not the concern of the lawsuit. It targets the technical market mechanisms that Google controls, including the ad server it developed from its 2008 purchase of market-dominant DoubleClick. DOJ says Google owns more than 90% of the business that serves ads on websites and controls more than 80% of the “buy-side” business where advertisers compete to place ads.

Google, the lawsuit argues, has over the past 15 years “used acquisitions and market power in adjacent ad technology markets to quell the rise of rivals, tighten its control over the ways and means by which digital ad transactions take place, and prevent publishers and advertisers to work effectively with Google’s rivals.”

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

When asked why the Justice Department would file the lawsuit when a similar complaint has already been filed by states, Assistant Attorney General Jonathan Kanter, the Department’s top antitrust official, said: “We conducted our own investigation, and that investigation revealed many took years.”

The states participating in Tuesday’s lawsuit are California, Virginia, Connecticut, Colorado, New Jersey, New York, Rhode Island and Tennessee.

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AP Technology Writer Ortutay reported from San Francisco and Bajak from Boston. AP Technology Writer Matt O’Brien contributed to this report.

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