On Oct. 20, 2020, the Justice Department filed a civil antitrust suit against Google for monopolizing search and search advertising. On Jan. 24, 2023, the Justice Department filed another lawsuit against Google claiming that it monopolized the advertising market. These lawsuits may impact both advertisers and marketers, consumer privacy, as well as the overall tech sector.
The Point: Why This Matters
- Increased competition? The DOJ and participating states allege that Google sought to control all aspects of the advertising market, violating the Sherman Act and monopolizing key digital advertising technologies used by advertisers and publishers. The outcome of the lawsuit may have a significant impact on the advertising industry, including increased competition and potential reduction in ad costs.
- Setting privacy precedent? The lawsuit highlights the importance of data privacy and the need for companies to be transparent in their data collection and usage practices. The outcome of the case may set a precedent for future regulations and oversight in the industry.
What the 2020 Justice Department Suit Alleges
The 2020 suit alleges that as a result of Google’s illegal monopoly, and by its own estimates, it makes, on average, over 30% of the advertising dollars that flow through its digital advertising products, and that for some transactions and for certain publishers and advertisers, it makes even more.
The DOJ believes that Google’s anticompetitive conduct has suppressed potential alternative technologies, which has had the effect of reducing or hindering their adoption by publishers, advertisers and rivals. Specifically, the DOJ alleges that Google has unlawfully maintained monopolies in search and search advertising by:
- “Entering into exclusivity agreements that forbid preinstallation of any competing search service.”
- “Entering into tying and other arrangements that force preinstallation of its search applications in prime locations on mobile devices and make them undeletable, regardless of consumer preference.”
- “Entering into long-term agreements with Apple that require Google to be the default — and de facto exclusive — general search engine on Apple’s popular Safari browser and other Apple search tools.”
- “Generally using monopoly profits to buy preferential treatment for its search engine on devices, web browsers, and other search access points, creating a continuous and self-reinforcing cycle of monopolization.”
The Justice Department Files Second Suit Against Google
On Jan. 24, the Justice Department filed a second civil lawsuit against Google. The latest suit is focused on Google’s online advertising business and seeks to make Google divest parts of the business. This DOJ lawsuit was joined by the states of California, Colorado, Connecticut, New Jersey, New York, Rhode Island, Tennessee and Virginia.
Filed in the US District Court for the Eastern District of Virginia, the Justice Department and the states allege that Google sought to control all sides of the advertising market, knowing “it could become ‘the be-all, and end-all location for all ad serving,’” in violation of Sections 1 and 2 of the Sherman Act. The suit goes on to say that Google monopolizes key digital advertising technologies, (i.e. the “ad tech stack”) that website publishers use to sell ads and that advertisers rely on to purchase ads and market to potential customers.
Additionally, the Justice Department indicated that Google’s anticompetitive conduct has included:
- Acquiring competitors: “Engaging in a pattern of acquisitions to obtain control over key digital advertising tools used by website publishers to sell advertising space.”
- Forcing adoption of Google’s tools: “Locking in website publishers to its newly-acquired tools by restricting its unique, must-have advertiser demand to its ad exchange, and in turn, conditioning effective real-time access to its ad exchange on the use of its publisher ad server.”
- Distorting auction competition: “Limiting real-time bidding on publisher inventory to its ad exchange, and impeding rival ad exchanges’ ability to compete on the same terms as Google’s ad exchange.”
- Auction manipulation: “Manipulating auction mechanics across several of its products to insulate Google from competition, deprive rivals of scale, and halt the rise of rival technologies.”
Google responded to the latest lawsuit in a blog post, stating that the “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.” The blog post, which is written by Dan Taylor, vice president of Global Ads at Google, stated that the DOJ is demanding that Google divest two acquisitions that were already reviewed by US regulators 12 years ago (AdMeld) and 15 years ago (DoubleClick). “In seeking to reverse these two acquisitions, DOJ is attempting to rewrite history at the expense of publishers, advertisers and internet users,” said Taylor.
The Google blog post emphasized that the “government shouldn’t pick winners and losers in a competitive industry” and goes on to discuss others in the technology sector that have strong, competitive advertising markets, including Microsoft, Apple, Amazon, TikTok, Comcast, Disney and even Walmart and Target.
Related Article: US Department of Justice Looks to Break Google's Advertising Business
Would Smaller Advertising Companies Have Resources to Compete?
Because Google is such a big player in the technology sector, the impact of the DOJ’s lawsuits will be felt in many areas, both positively and negatively. Repercussions could affect advertisers and marketers, consumer privacy trends and innovation.
Matt Hallett, head of product solutions at Amperity, an enterprise CDP provider, told CMSWire that if the DOJ were to split Google horizontally or vertically into subcomponents, it would increase competition from other smaller players, such as Yahoo, Bing, The Trade Desk, Amazon and many others.
“These companies would likely be able to increase their market share and profitability, and advertisers might see a reduction in costs for ads,” said Hallett, adding that the downside of breaking apart Google's advertising division might be less innovation within the industry. “Google has been at the forefront of innovation in advertising due to its scale and significant resources, which permit it to invest heavily in new technology and products. Smaller companies might not have the funds for research and development, potentially slowing down innovation.”
Related Article: What Do the Google Antitrust Lawsuits Mean for Marketers?
Progress Could Stall Toward Customer Data Privacy
Because Google is often the focus when it comes to consumer data privacy standards, a decision by the DOJ could impact industry trends that are just beginning to take shape.
“A breakup might also impact the progress toward increased customer data privacy,” said Hallett. “Google is a predominant collector of consumer data for advertising purposes and will be the last to phase out support for third-party cookies via their popular Chrome browser. Google has telegraphed motion in the market to be more adherent and conscious towards consumer privacy.”
For advertisers and marketers, such a breakup may positively impact the industry.
“Separating Google will increase competition in the advertising industry, which could lead to lower costs and more innovative products for advertisers," Hallett said. "With multiple companies vying for ad dollars, there would likely be more opportunities for advertisers to reach their target audiences through various channels. More competition could increase efficiency in ad spending and a better return on investment."
The Google search litigation (the first DOJ lawsuit) is scheduled for trial in September 2023, while the date for the most recent litigation is still forthcoming.