Google vs. DOJ: Round Two – Is the Ad Market Next in Line for Antitrust Scrutiny?

Google Faces Another Antitrust Showdown: This Time, It’s About Ads

Google’s dominance is once again under the microscope as the Justice Department (DOJ) prepares to argue that the tech giant illegally monopolized the digital advertising market. This case, slated for Monday, marks a rematch for Google, who just suffered a loss in the DOJ’s previous antitrust lawsuit targeting its search business.

While a win for the DOJ in either case wouldn’t immediately spell "the end of Google," a second victory would deliver a powerful blow, bolstering the agency’s campaign against tech monopolies and validating its focus on vertical integration: the way companies leverage different business lines to amplify their dominance.

The current case revolves around Google’s alleged stranglehold on the complex web of advertising technology tools that connect publishers, advertisers, and exchanges. These tools, known collectively as ad tech, encompass the "demand-side" of buying space on websites, the "supply-side" of publishers offering advertising inventory, as well as the exchanges that mediate between these two.

The DOJ argues that Google has engaged in a "campaign to condition, control, and tax digital advertising transactions over 15 years," creating an unfair playing field for competitors. The suit details how Google’s dominance in search laid the groundwork for its ad network, which was later enhanced by its 2009 acquisition of DoubleClick, giving it a large publisher base. With control over both sides of the market, the DOJ claims Google manipulated ad auctions to its advantage, imposed restrictive conditions on access to its tools, and ultimately stifled competition.

Google counters that the government is attacking its valuable tools and innovations, ignoring the robust competition it faces and overlooking the efficiencies its products offer to publishers and advertisers. The company insists its tools empower players in the industry and contribute to better advertising experiences.

Navigating the intricacies of the ad tech market can be challenging, even for judges who aren’t immersed in its complexities. Therefore, the outcome may hinge on which side can present a more compelling narrative, explains antitrust expert Rebecca Haw Allensworth.

The initial expectation of a jury trial has been replaced by a bench trial, a shift that followed Google’s payment of a reported $2.3 million. The company claimed this payment represented the "maximum amount of damages" claimed by the government, effectively nullifying the need for a jury. Notably, Google recently faced a jury verdict in an antitrust case brought by Epic Games over the Google Play Store, highlighting the potential challenges of navigating a jury-based proceedings.

The case is expected to unfold over several weeks, involving testimony from industry leaders and experts including YouTube CEO Neal Mohan, The Trade Desk’s chief revenue officer Jed Dederick, and BuzzFeed’s chief business officer Ken Blom.

One key issue at the heart of the dispute is whether the government can compel Google to collaborate with its competitors. The government relies heavily on arguments based on the "duty to deal" principle, a legal concept that requires certain companies to engage with their competitors, even if it restricts their own business strategies. However, the Supreme Court ruling in Verizon Communications, Inc. v. Law Offices of Curtis V. Trinko casts doubt on the applicability of this principle, highlighting that antitrust law doesn’t generally require companies to deal with rivals.

The DOJ is navigating a legal landscape that may not favor forcing Google to work with its competitors. For this reason, the government is attempting to frame its arguments in a way that avoids appearing to demand Google share its products or design. Instead, the DOJ will focus on exposing Google’s alleged manipulative tactics and highlighting the sacrifices it made to suppress competition, seeking to argue that these actions ultimately harm the greater market.

The government’s strategy will likely center on Google’s response to the rise of header bidding, a strategy that allowed publishers to explore other ad exchanges, potentially cutting into Google’s control. The DOJ contends Google created a system called "Open Bidding" to seemingly enable competitors while secretly gaining greater visibility into ad auctions and manipulating them to its advantage, ultimately squeezing out smaller players.

The government hopes to lean on the Aspen Skiing precedent, where a company’s decision to discontinue a shared access arrangement to hurt a competitor was deemed harmful to the market. In this case, the government seeks to demonstrate that Google employed similar tactics, sacrificing short-term profits to solidify its dominance and harm competitors. They will argue that Google’s alleged actions represent a deliberate move to thwart competition, rather than a mere product design choice.

Google will likely argue that it has never engaged in activities that hindered competition. They will be eager to highlight the benefits their tools bring to publishers and advertisers, emphasizing the efficiency and value they offer.

A ruling against Google, depending on the court’s remedies, could drastically alter the ad tech landscape. Publishers and advertisers may face a new and perhaps less efficient environment as they adjust to a less centralized marketplace. The longer-term goal of the government is to inject competition back into the ad tech space, breaking Google’s control and fostering a more diverse market.

Ultimately, this case is about more than just Google. The outcome will be closely scrutinized by the industry, setting precedents that could shape regulations and reshape the future of online advertising. As the government tries to take down Goliath once again, it remains to be seen whether David will finally prevail.

Article Reference