The Department of Justice is suing Google over its dominance in advertising, and wants to break up the company

The Department of Justice is suing Google over its dominance in advertising, and wants to break up the company

Zoom in / Let’s see, I got to my Google Ads space, and with three houses…that would be $1,400.

Ron Amadeo / Hasbro

This has been expected for some time, but today the Department of Justice and eight states are suing Google for its alleged dominance of the online advertising market. The government has a problem with Google’s “ad technology,” or the tools used to automatically match advertisers with website publishers. To solve this problem, it seems, the Department of Justice has told Google that it is considering splitting the company.

“Today’s complaint alleges that Google used illegal, exclusionary, and anti-competitive conduct to eliminate or severely reduce any threat to its dominance of digital advertising technologies,” said Attorney General Merrick Garland. “No matter the industry and no matter the company, the Department of Justice will vigorously enforce our antitrust laws to protect consumers, protect competition, and ensure economic fairness and opportunity for all.”

The press release provides a quick summary of the issues facing the Department of Justice:

Google’s anticompetitive conduct included:

  • Acquisition of competitors: engaging in a pattern of acquisitions to gain control of key digital advertising tools used by website publishers to sell advertising space;
  • Force adoption of Google tools: Limiting website publishers to their newly acquired tools by restricting the unique demand an advertiser must have for an ad exchange, and thus, conditioning effective real-time access to its ad exchange on publisher ad server usage;
  • Distorted auction competition: restrict real-time bidding on ad exchange publisher inventory, and impede the ability of competing ad exchanges to be on the same terms as Google’s ad exchanges; And
  • Auction manipulation: Manipulating auction mechanisms across many of its products to insulate Google from competition, deny competitors scale, and stem the rise of competing technologies.

Google is the largest digital advertising medium in the US, but not by much. Axios reports that Google has 28.8% of all digital ad spending in the US, followed by Meta at 19.6%. There are also a lot of companies with a lot of growth potential, such as Amazon, TikTok, Spotify, and Apple, but for now, these companies tend to focus only on their specific platforms.

Department of Justice diagram of the Google Ads business.
Zoom in / Department of Justice diagram of the Google Ads business.

Ron Amadeo

It’s not the overall market share that the DOJ is worried about, though: It’s the market share of the individual tools used by publishers and ad companies. On the “sell side” (the side of websites with ad space for sale — like this one), the DOJ says Google’s “DoubleClick for Publishers” ad server has more than 90 percent market share. On the “buy side” (the side of advertisers looking for a place for their ads), Google’s ad network for small businesses has 80 percent market share, while “Display & Video 360” for large ad agencies has 40 percent of the market share. The Google Ad Exchange platform, which matches buyers and sellers, has a 50 percent market share.

As for the resolution, the DOJ says, “To correct Google’s anti-competitive behavior, the Department is seeking equitable compensation on behalf of the American public as well as triple damages for losses incurred by federal government agencies that overpaid for advertisements displayed on the Web.” This enforcement action It marks the first antitrust case in nearly half a century in which the Department has sought damages for a civil antitrust violation.” Basically, Google wants to pay back the money.

Google published a blog post stating that it disagrees with the government’s recent antitrust suit. After the usual talk about how the market is more competitive than the plaintiff believes, it adds a new threat not mentioned in the press release, saying, “The Department of Justice is calling for the cancellation of two acquisitions reviewed by US regulators 12 years ago (AdMeld) and 15 years ago ( DoubleClick).

It’s hard to believe that Google will ever be dismantled. We hear the threat often, but the last time the government broke up a company was nearly 40 years ago. at that time, phone companyBell Systems, to what would eventually become AT&T, Verizon, and Lumen Technologies/CenturyLink/Qwest. The US government’s willingness to regulate corporations has declined a lot since then, and today the threat is usually just a starting point for negotiation.

In the lead-up to this lawsuit, Google told the DOJ last year that it would be willing to “split” the advertising business by transferring one unit of Google to its parent company, Alphabet. This is a move that seems like it would hardly register when Google and Alphabet have the same CEO, CFO, and stock ticker, and they all share the same (very large) money pile.

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