Google’s $20 billion ad tech company is in the middle of an antitrust battle with the DOJ over monopolistic behaviour.
TakeAway Points:
- The DOJ has filed a significant antitrust action against Google, alleging monopolistic conduct in the $20 billion ad tech company.
- Possible solutions include outlawing incentive payments, disclosing user information to competitors, or even dismantling the business.
- The world is paying more attention as UK and EU regulators look into Google’s hegemony in ad tech.
Google Faces a Clash Over Antitrust
Google is preparing for another significant legal battle as the US Department of Justice (DOJ) targets its $20 billion ad tech business. This follows a series of antitrust actions against the tech giant, including a recent victory over Google’s online search practices. The upcoming case, which begins next week in Alexandria, Virginia, accuses Google of monopolistic control over digital advertising. The DOJ, led by antitrust head Jonathan Kanter, alleges that Google has used “anti-competitive, exclusionary, and unlawful means” to maintain its dominance in the ad tech market.
The lawsuit highlights potential conflicts of interest due to Google’s ownership of companies that operate on all sides of the digital advertising market. This includes technology used by publishers to sell ad space, the largest exchange for bidding on that space, and the software advertisers use to access the market. The case has gained more significance after Alphabet, Google’s parent company, lost two similar lawsuits in the past nine months. These losses have raised the possibility of significant court-imposed changes to Google’s business model, potentially reshaping or even splitting the company.
Market and Legal Repercussions
The DOJ’s case against Google is part of a broader antitrust campaign that has seen the tech giant face multiple legal challenges. In August, a US judge labeled Google a “monopolist” for paying billions to Apple and other companies to secure its position as the default search engine. In December, a San Francisco jury found that Google had shut out rivals from its Android app Play Store, generating billions in profits through excessive fees. These cases, combined with the upcoming ad tech lawsuit, represent one of the biggest challenges Google has faced in its 26-year history.
Chief Executive Sundar Pichai is tasked with navigating these existential threats while maintaining the company’s cohesion. Bernstein analyst Mark Shmulik commented, “Like all empires, time remains undefeated and the barbarians are at Google’s gate. Facing a three-front legal battle, it’s hard to envision Google escaping unscathed.” However, Shmulik also noted that “investors have mostly shrugged off the regulatory headlines as more noise in a noisy world.”
The potential remedies in the ad tech case could range from banning incentive payments to partners and requiring Google to share user data with rivals to more drastic measures like spinning off units or breaking up the company entirely. Barak Richman, a professor at George Washington University’s law school, described the case as “a fascinating case that is harder and perhaps more important than the Google search case.”
The Competitive and Global Environment
Google’s legal troubles are not confined to the United States. The UK Competition and Markets Authority recently found that Google is “using its market power to hinder competition” in ad tech by rigging auctions and giving its own platforms preferential treatment. The European Union’s antitrust regulator is also investigating Google’s ad tech business, suggesting that mandatory divestment of some services might be necessary to address their concerns.
Google has denied the allegations and has repeatedly tried to get the case dismissed. The company argues that the ad tech sector is highly competitive, with large competitors like Amazon, Meta, Microsoft, and Adobe owning rival platforms. Alphabet’s lawyers, led by Kent Walker, have also claimed that the government has manipulated its definition of the digital ad market to classify Google as a monopoly.
Despite these defenses, Google executives appear more concerned about the outcome of this case than previous ones. The company even attempted to pre-empt the government’s claim for monetary damages by sending an unsolicited cheque for the full, unspecified amount being sought, which was rejected.
