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The U.S. Department of Justice filed a second antitrust lawsuit against the United States on Tuesday. Google in just over two years. It’s the latest sign that the US government hasn’t dropped its lawsuits against tech companies. Mixed records in court Regarding antitrust litigation.
Google shares fell 1.3% on Tuesday afternoon.
This lawsuit, which focused on Google’s Having an online advertising business and trying to force Google to sell part of the business is the first case the company has been sued under the Biden administration. An earlier Justice Department lawsuit, filed in October 2020 under the Trump administration, accused Google of using its monopoly power to cut off Internet search competition through exclusivity agreements. It is scheduled to go to court.
Google’s advertising business generated $54.5 billion from search, YouTube, Google Network ads and other ads in the quarter ended September 30.
Google also faces three antitrust lawsuits from a large group of state attorneys general, including one focused on its advertising business, led by Texas Attorney General Ken Paxton.
California, Colorado, Connecticut, New Jersey, New York, Rhode Island, Tennessee and Virginia have joined DOJ in the latest lawsuit.
Google’s advertising business has been criticized because the platform operates on multiple sides of the market (buy-sell, ad-exchange) and offers unique insight into the process and potential leverage. The company has long denied that it dominates the online advertising market, pointing to the market share of competitors such as: metaFacebook.
In the lawsuit, the DOJ and the state allege that they recognize that Google seeks to control every aspect of the market and that “Google could be the ‘final place’ for all ad serving.” there is
“Google no longer has to compete on merit, it just needs to set the rules of the game to keep competitors out,” they argue.
Even one of Google’s advertising executives questioned the wisdom of the company’s extensive ownership in this area, according to the complaint.
“[I]Is there a more serious problem with us owning a platform, an exchange, a huge network?” the executive was quoted as asking.
The detrimental effects of Google’s practice are that “freedom of competitive pressure controls prices, which may lead to more innovative ad technology tools that ultimately lead to higher quality, rather than a market where website creators Less revenue and more advertiser payouts,” they argue. It is a lower cost transaction for market participants. ”
As a result, more publishers are forced to resort to alternative models such as subscribing for operating funds, they added.
Another part of Google’s strategy, according to the complaint, was to acquire other companies to expand its reach in the ad market and “set the stage for Google’s subsequent eviction across the ad tech industry.” . These acquisitions included the 2008 acquisition of publisher ad server DoubleClick and Google’s AdX, an “early ad exchange.” This allows Google, in some cases, to require publishers to use all of their tools and access any tool, as opposed to using a competitor’s tool as part of the online ad buying process. I was.
“In effect, Google extorted payments from Peter (the advertiser) to Paul (the publisher), all the while collecting hefty transaction fees because of its unique privileged status,” the enforcers allege. “Rather than funding the publication of websites, Google was siphoning advertising dollars by charging ultra-competitive fees to its platform. Without access to Google’s captive advertisers, we would not be able to compete with Google’s skyrocketing advertising prices and demand from Google Ads.”
Google continues to identify potential threats to its dominance, such as when revenue management tools become available outside of Google’s ecosystem to help publishers find better prices for their inventory in real time. claim to be.
“So Google adopted a familiar tactic: acquire a competitive threat and extinguish it.” They argue that it banned its use and forced its own exchange to compete with other exchanges in real time.
Then Google noticed another workaround attempt called “header bidding”. This allows the publisher to add code to his website to allow his non-Google ad exchanges to bid on inventory before Google’s ad exchange settings are triggered, allowing ad exchange rivals to It was what made it possible to return to the market. in a significant way. A Google executive is said to have described the practice as an “existential threat.”
Google sold its own “Open Bidding” tool, referred to in the complaint as a “Trojan horse”, as an alternative. Publishers and ad his exchanges that participated in the program had to publish their auctions to Google, including bidding on competing exchanges. This allowed Google’s ad exchange to have a “guaranteed seat in every auction, regardless of whether Google’s ad exchange provided the best match between advertisers and publishers.” , the complaint alleges.
Google also feared advertising competition with Facebook. Amazonthe Department of Justice and the state argued that, in response, they would offer “preferential Open Bidding auction terms in exchange for spending and pricing commitments designed to push Facebook’s captive advertiser spending onto Google’s platform.” The complaint alleges that Google sought a similar arrangement with Amazon, but was unsuccessful.
“Today’s lawsuit by the Department of Justice seeks to pick winners and losers in the highly competitive ad tech space,” a Google spokesperson said. Said in a statement. “It largely duplicates baseless lawsuits by the Texas Attorney General, many of which were recently dismissed by federal courts. It’s focused on flawed claims that make it difficult for publishers to grow.”
Jonathan Cantor, the progressive head of the DOJ’s antitrust division, was recently cleared to work on Google-related matters. The Wall Street Journal reported Early this month. bloomberg We had previously reported that Kanter was not allowed to work on issues related to the company, but the department was evaluating Google’s request to reconsider the reasons for his decline. Before taking office, Kanter represented his Google rivals and critics. Yelp When news corp.
A Google spokesperson said in a statement last year that Kanter’s work and statements to date “raise serious concerns about his impartiality.”
Google isn’t the only tech giant under federal scrutiny. At the Federal Trade Commission, meta It is also the subject of two antitrust lawsuits. Microsoft’s takeover offer Activision.
Google and other tech companies are also facing increased scrutiny from abroad, especially from Europe, with Google also battling multiple competitive lawsuits, and new regulations that threaten to significantly change the technology’s business model. .
Google’s parent company, Alphabet, is scheduled to report its financial results on February 2nd.
Watch: Google faces lawsuits at breakneck pace as antitrust scrutiny intensifies