Department of Justice brings major antitrust suit against Google’s ad business, seeks divestiture

“Google is committed to competing fair and square,” according to the Mountain View company’s code of conduct.

According to a massive 149-page antitrust complaint filed against Google by the U.S Department of Justice, Google has utterly failed to live up to that commitment.

In the lawsuit filed Tuesday in federal court in Virginia, the DOJ alleges that Google “has corrupted legitimate competition in the ad tech industry by engaging in a systematic campaign to seize control of the wide swath of high-tech tools used by publishers, advertisers, and brokers, to facilitate digital advertising.”

The complaint concludes that “Google has used anticompetitive, exclusionary, and unlawful means to eliminate or severely diminish any threat to its dominance over digital advertising technologies.”

The government seeks not only damages and injunctive relief, but asks the court to order the divestiture of the companies that Google acquired on its path to monopolize several separate markets within the digital advertising industry in the United States.

The lawsuit follows a 2020 antitrust suit brought by the DOJ and 11 states that alleges Google monopolizes search. According to a DOJ press release, that case is expected to go to trial in September 2023 in the federal district court for the District of Columbia.

In the new lawsuit, the DOJ is joined by the attorney generals of eight states, including California Attorney General Rob Bonta. California did not join the 2020 suit.

The new filing is based on Google’s alleged domination of three distinct markets: “publisher ad services,” “ad exchanges” and “advertisers ad networks.”

The three markets can be loosely described as the markets of advertisers with digital advertising to place, websites, or “publishers,” with space for ads to run, and the exchange where the bids of advertisers and publishers are processed.

The three markets are interlinked and by dominating all three, Google has allegedly been able to take more than 30 percent of the revenue from the sale of digital advertising flowing through its exchange.

The DOJ says that website publishers in the U.S. sell 5 trillion digital ads every year.

“Today’s online ads are bought and sold in enormous volumes in mere fractions of a second, using highly sophisticated tools and automated exchanges that more closely resemble a modern stock exchange than an old-fashioned, bilateral contract negotiation for newspaper ad space,” according to the filing.

The complaint provides a primer on how the online advertising industry works and methodically walks through how Google’s alleged monopolization of the three markets is to the detriment of advertisers who wish to buy placement for their ads and the websites who get revenue from publishing digital ads.

The primer is intended to give visibility into an industry that is frequently opaque to outsiders.

DOJ alleges that “over the past fifteen years, Google has acquired and maintained mutually reinforcing monopoly positions in tools across the ad tech stack in pursuing dominance over the ad tech industry.”

In pursuit of monopoly power, Google allegedly acquired competitors who had key advertising tools; forced website publishers to use Google’s tools to sell advertising inventory; and manipulated online advertising auctions to “to insulate Google from competition, deprive rivals of scale, and halt the rise of rival technologies.”

“The harm is clear,” DOJ concludes, “website creators earn less, and advertisers pay more, than they would in a market where unfettered competitive pressure could discipline prices and lead to more innovative ad tech tools.”

The government asserts its claims under Sections 1 and 2 of the Sherman Act, originally enacted in 1890 in response to price-fixing by monopoly businesses.

While forced divestiture is a possible antitrust remedy in Sherman Act cases, in modern times it has rarely been ordered.

The most famous case in the last 50 years was the 1984 break-up of AT&T, which ended up creating seven regional phone companies, sometimes known as the “Baby Bells.”

The government attempted to force divestiture on Microsoft in 2001 as a result of its bundling Internet Explorer with its operating system. The government won the case in the trial court but the ultimate settlement did not include divestiture.

A pending suit by the Federal Trade Commission against Facebook seeks to unwind its acquisitions of WhatsApp and Instagram. Facebook originally succeeded in dismissing the FTC’s original complaint, but in January 2022, the government was cleared to proceed with an amended complaint.

The Google lawsuit has been assigned to U.S. District Judge Leonie M. Brinkema of the U.S. District Court for the Eastern District of Virginia. Brinkema was appointed by President Bill Clinton in October 1993 after serving as a magistrate judge on the same court for eight years. She is 79 years old.

In a blog post on its website, a Google spokesperson said, the lawsuit “attempts to pick winners and losers in the highly competitive advertising technology sector … 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.”