Google is once again facing off against the U.S. Justice Department in a high-profile antitrust trial that could significantly impact its advertising business. This trial, set to begin Monday in federal court in Alexandria, Virginia, centers on claims that Google has illegally maintained its dominance in three key areas of the online advertising ecosystem. The lawsuit, brought by the Biden administration’s DOJ and 17 state attorneys general in January 2023, accuses Google of monopolizing the digital advertising market through anti-competitive practices.
New York University Law School professor Eleanor Fox emphasizes that the stakes for both sides are substantial, highlighting the broader implications for the tech industry. The trial follows closely on the heels of another recent legal battle in which Google was found guilty of monopolizing the general search engine market by a federal court in Washington, D.C. In that case, Judge Amit Mehta ruled against Google in a decision that could shape the legal landscape for Big Tech. Google plans to appeal.
In this new ad tech case, the government alleges that Google monopolized markets for publisher ad servers, ad exchanges, and advertiser ad networks. These platforms form the backbone of digital advertising, allowing advertisers to purchase and publishers to sell ad space on the internet. At the core of the DOJ’s argument is the claim that Google leveraged its dominant position in search to expand into online advertising, using anti-competitive tactics to gain control of the industry.
Prosecutors argue that Google created a “moat” around the ad tech industry by first launching Google Ads in 2000, a platform allowing advertisers to buy space on Google-owned web pages. It later developed a tool for third-party websites, but when Google’s products didn’t gain traction, the DOJ says the company turned to acquiring rivals. In 2008, Google acquired DoubleClick, a leading publisher ad server, for $3 billion, along with an ad exchange platform, AdX.
According to the DOJ, Google’s strategy involved restricting access to real-time ad demand from Google Ads to publishers who didn’t use its DoubleClick ad server and AdX platform. This move allegedly allowed Google to dominate as a buyer, seller, and auctioneer in the digital display advertising market. Antitrust expert Erik Hovenkamp from Cornell Law School points out that these allegations are serious, with minimal justification for Google’s actions, potentially leaving advertisers and publishers as the primary victims.
Google, however, defends its practices, stating in court filings that advertisers and publishers choose its products due to their quality and innovation, not because they are forced. The company also criticized the DOJ for challenging acquisitions that were previously approved by regulators. Google maintains that the digital ad market remains competitive and continues to grow.
Financially, the case could have significant repercussions. In 2020, Google’s ad tech products generated $20 billion in gross revenue, accounting for 11% of Alphabet’s total revenue, with $1 billion in operating profit. Analysts estimate that this segment now represents around 8% of Google’s revenue, still a substantial portion. The DOJ claims that without Google’s alleged anti-competitive behavior, website owners would make more from hosting ads, while advertisers would pay less for ad space. This, in turn, could reduce the reliance on subscriptions and paywalls by publishers.
Experts are divided on the potential outcome of the trial. While Hovenkamp doesn’t believe that the DOJ’s recent victory in the search engine case will directly impact this one, NYU’s Eleanor Fox sees potential for the DOJ to use parts of that ruling to strengthen its argument regarding Google’s market power. If found guilty, the DOJ has proposed that Google divest parts of its ad tech business to restore competition in the market.
The outcome of this case will be closely watched, as it could reshape the future of digital advertising and set a precedent for other tech giants facing scrutiny over their market practices.