Why Google is being sued by the US Justice Department for its ad biz

The United States Justice Department has filed its second antitrust lawsuit against Google in just over two years. This time, it is focusing on Google’s online advertising business by alleging that it is using anticompetitive behavior to maintain a monopoly on digital ads.

The suit alleges that Google buys up competition and strong arms advertisers into using Google’s ad technology over competing companies.

“Over the past 15 years, Google has engaged in a course of anticompetitive and exclusionary conduct that consisted of neutralising or eliminating ad tech competitors through acquisitions; wielding its dominance across digital advertising markets to force more publishers and advertisers to use its products; and thwarting the ability to use competing products. In doing so, Google cemented its dominance in tools relied on by website publishers and online advertisers, as well as the digital advertising exchange that runs ad auctions,” said a press release announcing the lawsuit by the United States Department of Justice.

“The complaint filed today alleges a pervasive and systemic pattern of misconduct through which Google sought to consolidate market power and stave off free-market competition,” it continued before adding that in its pursuit of outsized profits, Google has caused great hard to online publishers and advertisers as well as American consumers.

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Google’s advertising business, which includes YouTube, Google Network ads and other platforms, has long drawn critics because the platform operates on both sides of the market. It buys, sells and engages in ad exchanges. This gives it unique insight into the process of advertising and the protentional leverage that it can use.

Saying that, the company has continuously denied that it dominates online advertising and has often pointed to other competitors in the market including Meta’s Facebook. However, the Justice Department disagrees and argues that Google acquires competitors to obtain control over key digital advertising tools used by website publishers to sell advertising space, according to the release.

“As a result of its illegal monopoly, and by its own estimates, Google pockets on average more than 30% of the advertising dollars that flow through its digital advertising technology products; for some transactions and for certain publishers and advertisers, it takes far more. Google’s anticompetitive conduct has suppressed alternative technologies, hindering their adoption by publishers, advertisers, and rivals,” it wrote.

In response to the suit, Google released a statement on January 24 saying, “Today’s lawsuit from the [Department of Justice] (DOJ) attempts to pick winners and losers in the highly competitive advertising technology sector. It largely duplicates an unfounded lawsuit by the Texas Attorney General, much of which was recently dismissed by a federal court. DOJ is doubling down on a flawed argument that would slow innovation, raise advertising fees, and make it harder for thousands of small businesses and publishers to grow.”

It went on to state that Google is one of hundreds of companies that enable the placement of ads across the internet and cited examples such as Microsoft’s acquisition of advertising platform Xander last year and Amazon’s advertising business which is growing faster than Google and Meta’s advertising arms.

“With this increased competition, it’s no wonder fees across the industry are reportedly flat or falling for digital display advertising technology,” it said. “No one is forced to use our advertising technologies – they choose to use them because they’re effective. Publishers who choose to use our advertising platforms keep the vast majority of the revenue our tools help facilitate. In total, we pay billions of dollars directly to the publishing partners in our ad network every year.”

It added that to DOJ should not be forcing companies to reverse 15-year-old investments that they have nurtured and worked hard to make successful particularly when these investments were already reviewed by regulators and allowed to proceed.

The case follows a civil antitrust suit that was filed against Google by the Justice Department in 2020. In the case, the Justice Department argued that Google monopolised search and advertising which are different markets from the digital advertising technology markets. The Google search litigation is scheduled for trial in September 2023, according to the release.

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