The Ministry of Justice is suing Google for dominance of digital advertising

WASHINGTON (AP) — The Justice Department and eight states filed antitrust lawsuits against Google on Tuesday, seeking to shatter its alleged monopoly over the entire online advertising ecosystem as a harmful burden on advertisers, consumers and even the U.S. government.

The government alleged in the complaint that Google is looking to “neutralize or eliminate” rivals in the online advertising market through acquisitions and to force advertisers to use their products by making it difficult to use competitors’ offerings. It’s part of a new, albeit slow and halting, push by the United States to rein in big tech companies that have enjoyed largely unfettered growth over the past decade and a half.

“Monopolies threaten the free and fair markets on which our economy is based. They stifle innovation, they hurt manufacturers and workers, and they increase costs for consumers, Attorney General Merrick Garland said at a news conference Tuesday.

For 15 years, Garland said, Google has “pursued a course of anticompetitive conduct” that has stalled the rise of rival technologies and manipulated the mechanics of online ad auctions to force advertisers and publishers to use its tools. In doing so, he added, Google “engaged in exclusionary conduct” that has “greatly weakened,” if not destroyed, competition in the ad tech industry.

The case, the latest legal action brought by the government against Google, accuses the company of illegally monopolizing the way ads are displayed online by excluding competitors. Google’s ad manager allows large publishers with significant direct sales to manage their ads. The ad exchange, meanwhile, is a real-time marketplace for buying and selling online display ads.

Garland said Google controls the technology used by most major website publishers to offer ad space for sale, as well as the largest ad exchange that matches publishers and advertisers together when ad space is sold. The result, he added, is that “website creators earn less and advertisers pay more.”

The lawsuit, filed in federal court in Alexandria, Virginia, demands that Google divest its business of buying, selling and auctioning digital display advertising, keeping search — its core business — and other products and services, including YouTube, Gmail and the cloud. services.

Digital ads currently account for roughly 80% of Google’s revenue, and by and large supports its other, less lucrative endeavors. But the company, along with Facebook’s parent company Meta, has seen its market share slip in recent years as smaller rivals grab larger chunks of the online advertising market. Beyond that, the overall online ad market is cooling as advertisers tighten spending and prepare for a potential recession.

Alphabet Inc., Google’s parent company, said in a statement that the case “doubles down on a flawed argument that will slow innovation, raise advertising fees and make it harder for thousands of small businesses and publishers to grow.”

Tuesday’s lawsuit comes as the U.S. government increasingly looks to rein in Big Tech’s dominance, though such legal action could take years to complete and Congress has passed no recent legislation seeking to curb the influence of the tech industry’s biggest players.

The European Union has been more active. It launched an antitrust investigation into Google’s digital ad dominance in 2021. British and European regulators are also looking into whether an online display advertising services deal between Google and Meta violates rules on fair competition.

An internet services trade group that includes Google as a member described the lawsuit and its “radical structural remedies” as unjustified.

Matt Schruers, president of the Computer & Communications Industry Association, said competition for advertising is fierce and that “the government’s claim that digital ads are not in competition with print, broadcast and outdoor advertising defies reason.”

Dina Srinivasan, a Yale University fellow and adtech expert, said the lawsuit is “huge” because it aligns the entire nation — state and federal — with a bipartisan legal offensive against Google.

The current online advertising market, Srinivasan said, “is broken and totally inefficient.” The fact that middlemen get 30% to 50% of the fee on each ad deal is “a crazy inefficiency baked into the American economy.” She called it “a massive tax on the free internet and consumers at large. It directly affects the viability of a free press as well.

As with many highly complex technical markets, it has taken time for federal and state regulators and policymakers to catch on and understand the online advertising market. Srinivasan noted that it took a decade for them to wake up to the dangers of high-speed trading in the financial markets and start taking measures to counter it.

Google had nearly 29% of the US digital advertising market – that includes all the ads people see on computers. phones, tablets and other Internet-connected devices – in 2022, according to research firm Insider Intelligence. Facebook’s parent company Meta is number two, and has almost 20% of the market. Amazon is a distant but growing third at more than 11%.

Insider estimates that both Google and Meta’s share of the ad market will decline, while rivals such as Amazon and TikTok are expected to see gains.

This is the latest legal action against Google by either the Department of Justice or local government. For example, in October 2020, the Trump administration and 11 attorney generals sued Google for violating antitrust laws, alleging anticompetitive practices in the search and search advertising markets.

Asked why the Justice Department would file suit when a similar complaint has already been filed by states, Assistant Attorney General Jonathan Kanter, the department’s top antitrust official, said, “We conducted our own investigation, and that investigation occurred over many years.”

Tuesday’s lawsuit essentially brings the Biden administration and new states into line with the 35 states and the District of Colombia that sued Google in December 2020 over the exact same issues.

The states participating in the case include California, Virginia, Connecticut, Colorado, New Jersey, New York, Rhode Island and Tennessee.

___

AP Technology Writer Ortutay reported from San Francisco and Bajak from Boston. AP Technology Writer Matt O’Brien contributed to this report.