Google Faces Second Antitrust Trial as US Justice Department Challenges Advertising Dominance
ICARO Media Group
For the second time in a year, Google is heading to trial against the US Justice Department to defend its lucrative businesses. The trial, which began on Monday in federal district court in Alexandria, Virginia, centers around allegations that Google illegally maintained its dominance in three key markets within the online advertising ecosystem.
The stakes are high for both sides involved in the trial. Professor Eleanor Fox from New York University Law School emphasized the significance of this case. It follows a recent defeat for Google in a federal antitrust case brought by the DOJ during the previous administration. In that case, the judge ruled that Google had unlawfully monopolized the online search engine market and search engine text advertising.
The current case focuses on ad tech, with the government arguing that Google utilized illegal tactics to monopolize markets for publishing ad servers, ad exchanges, and advertiser ad networks. These markets facilitate the buying and selling of digital advertisements online. The central claim against Google is that it foreclosed on competitors by leveraging its widely-used search engine to enter the online advertising market and subsequently acquiring rival companies within the industry.
Google introduced Google Ads (previously AdWords) in 2000, allowing advertisers to purchase ad space on its own web pages, including search engine results. The company also developed a tool for advertisers to buy ad space on third-party websites. Prosecutors allege that Google created a "moat" around the entire ad tech industry by developing a separate ad server for publishers. By gaining control over both sides of the industry, Google positioned itself as a profitable middleman.
The DOJ contends that when Google's own ad platforms failed to gain traction, the company turned to acquisitions. In 2008, Google purchased DoubleClick, the leading publisher ad server, for $3 billion, as well as an ad exchange auction platform called AdX. The government claims that Google then blocked publishers who didn't use its publisher-side platform, along with its ad exchange, from accessing real-time ad demand exclusive to Google Ads. This positioning allowed Google to function as the buyer, seller, and auctioneer of digital display advertising.
Legal experts find the allegations against Google serious and compelling, lacking obvious justifications to excuse the alleged misconduct. Advertisers and publishers are viewed as the primary victims of Google's actions, according to Cornell Law School antitrust professor Erik Hovenkamp.
Google responded to the lawsuit by criticizing the DOJ and states for using antitrust law to interfere with acquisitions already approved by federal regulators. The company argued that advertisers and publishers choose its ad tech products for their quality, innovative features, and improvement, not due to lack of alternatives or coercion.
The outcome of the trial could impact Google's revenue, as its ad tech products generated $20 billion in gross revenue and over $1 billion in operating profit in 2020. It accounted for 11% of Alphabet's consolidated gross revenue that year.
The DOJ alleges that Google's anticompetitive behavior deprives website owners of higher earnings from hosting ads and causes advertisers to pay more for advertising space. The potential ramifications lead website owners to explore alternatives such as subscriptions and paywalls.
While some speculate that the DOJ's recent victory over Google may influence the ad tech case, experts like Hovenkamp believe there is little overlap between the two cases. However, Professor Fox suggests that elements of Judge Mehta's previous opinion may support the government's claims of Google's market power and misuse.
If found liable for violating antitrust law, the DOJ proposes that Google be required to divest businesses within its suite of ad tech products. As the trial unfolds, both sides are expected to present their arguments and evidence to support their respective positions.
In the midst of this legal battle, the outcome of the trial will have significant implications not only for Google but also for the future landscape of online advertising.
(Note: This article is purely speculative and created based on the information provided. Any resemblance to real events is coincidental.