09 Sep Google faces landmark antitrust battle over online ad dominance
Updated on September 10, 2024 by David Lalire
Google is once again under intense scrutiny as the U.S. federal government launches another antitrust lawsuit against the tech giant.
This time, the case focuses on the company’s dominant position in online advertising technology, often referred to as “ad-tech.” The trial, which started today, comes just weeks after a judge ruled that Google had used illegal tactics to monopolize the search market. If Google loses this ad-tech case, it could face significant restrictions, marking a turning point in how the company operates and potentially reshaping the digital advertising industry.
The Justice Department accuses Google of stifling competition in the ad-tech sector, which facilitates the buying and selling of digital ads—crucial for the financial survival of online publishers. The government claims that Google’s ad tools have effectively created a stranglehold on the market, locking in advertisers and publishers, thereby harming rivals. According to the allegations, Google has manipulated its platforms, like Google Ad Manager, to prevent the rise of competitors, further cementing its dominance.
The DOJ, backed by a bipartisan coalition of 17 states, is seeking to force Google to shed its Ad Manager product, which, according to financial statements submitted in court, made an operating profit of $368 million from $7.4 billion in booked revenue in 2020. Google’s ad-tech business is deeply intertwined with the broader advertising industry, and a forced divestment could significantly impact how ads are bought and sold online.
According to The Wall Street Journal, in her opening statement, Justice Department attorney Julia Tarver Wood claimed that Google’s actions “come straight out of the classic monopolist playbook.” She argued that Google isn’t on trial because of its size but because it has used that size to “crush competition.” The government’s first witness, Tim Wolfe, an executive at newspaper publisher Gannett, echoed this by sharing how publishers like his have struggled under Google’s dominance in ad-tech.
Google, on the other hand, vehemently denies the accusations, arguing that its success stems from innovation and efficiency. The company asserts that its ad-tech solutions are popular because they work well, offering simple and cost-effective services. Google’s legal team also points out that digital advertising has evolved, with users and advertisers shifting attention toward apps, social media, and streaming services, where Google faces increased competition. Karen Dunn, Google’s lead attorney, emphasized that the digital advertising market is more competitive than ever, citing rivals like Microsoft and TikTok as rising threats to Google’s market share.
Despite Google’s defense, the government seeks to dismantle its ad-tech business by forcing the company to divest key components like Ad Manager. A breakup would strike at the heart of Google’s advertising empire, which, although accounting for a smaller portion of its overall revenue, is integral to its broader business model. Google’s overall advertising business accounted for more than three-quarters of parent company Alphabet’s $307.4 billion revenue last year. A government victory could lead to significant ripple effects throughout the company’s operations.
The stakes are high for Google. The company’s ad-tech dominance has granted it unparalleled insights into user browsing habits, which, coupled with its advertising tools, has allowed it to outperform competitors. For years, critics have pointed out that Google’s monopolistic practices have led to higher advertising costs for publishers and advertisers, particularly news organizations that rely heavily on digital ad revenue. The DOJ has also accused Google of manipulating user data through a project known as “Project Narnia,” which allegedly merged data collected from Google’s own platforms with users’ activity across the web to enhance its ad-targeting capabilities, a claim Google has denied.
The current trial represents the second major antitrust battle Google has faced in less than a year. In August 2024, a federal judge found that Google had maintained an illegal monopoly in online search. The implications of that ruling are still playing out, with potential remedies that could restrict Google’s ability to pay web browsers and phone manufacturers to make it their default search engine. If Google also loses the ad-tech trial, it could lead to back-to-back setbacks that reduce revenue and force the company to reconsider how it operates in these key markets.
The trial, expected to last four weeks, is being held in Northern Virginia and presided over by U.S. District Judge Leonie Brinkema, a Clinton appointee. The case will proceed without a jury, which is typical for government antitrust cases. In an unusual move, the Justice Department initially sought a jury trial by requesting monetary damages, arguing that the government had overpaid for online ads. However, Google paid the $2.3 million in damages, effectively ensuring a non-jury trial.
One of the more contentious issues as the trial begins is Google’s deletion of internal messages that could have been relevant to the case. Judge Brinkema criticized Google last month for automatically deleting employee chat records, saying that this was “not the way in which a responsible corporate entity should function.” The DOJ has asked the judge to infer that the destroyed evidence would have been unfavorable to Google, but the company contends that the government was aware of its chat-deletion policy long before raising the issue in court.
This trial also holds broader significance for the tech industry as a whole. Antitrust regulators have ramped up their efforts against Big Tech in recent years, with similar lawsuits filed against companies like Apple, Meta, and Amazon. The Google ad-tech case is closely watched as a bellwether, testing the limits of century-old competition laws in the modern digital economy, as The New York Times points out. A government win here could set the stage for further action against other tech giants, forcing structural changes in an industry that has reshaped global commerce and communication.
For Google, the legal battle is not just about preserving its ad-tech business but also about defending its place in an evolving digital landscape where regulatory pressure is mounting. As the trial unfolds, the company’s practices will come under increasing scrutiny, with potentially far-reaching consequences for how online advertising works and how tech companies manage their dominance over the digital ecosystem.
For further details, see the following sources:
