January 31, 2023

By BARBARA ORTUTAY, ERIC TUCKER and FRANK BAJAK

WASHINGTON (AP) — The Justice Department and eight states on Tuesday filed an antitrust lawsuit against Google to destroy 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 trying to “neutralize or eliminate” competitors in the online advertising market through acquisitions and that it is trying to force advertisers to use its products by making competitors’ offerings more difficult to use. It’s part of a new, albeit slow and halting, US push to rein in big tech companies that have enjoyed largely unbridled 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 producers and workers, and they raise costs for consumers,” Attorney General Merrick Garland said at a news conference on Tuesday.

For 15 years, Garland said, Google had “pursued a course of anti-competitive behavior” that stalled the rise of competing technologies and manipulated the mechanics of online ad auctions to coerce advertisers and publishers into using its tools. In doing so, he added, Google engaged in “exclusive behavior” that “greatly weakened,” if not destroyed, competition in the ad tech industry.

The lawsuit, the government’s latest lawsuit against Google, accuses the company of unlawfully monopolizing the way ads are served online by foreclosures of competitors. Google’s Ads Manager allows large publishers with significant direct sales to manage their ads. The Ad Exchange, on the other hand, is a real-time marketplace for buying and selling online display ads.

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

The lawsuit, filed in federal court in Alexandria, Virginia, demands that Google divest itself of the businesses of controlling the technical tools that manage the buying, selling and auctioning of digital display advertising, and in search – its core business – and others Products remains services such as YouTube, Gmail and cloud services.

Alphabet Inc., Google’s parent company, said in a statement that the lawsuit “redoubts a flawed argument that would slow innovation, increase advertising fees and complicate the growth of thousands of small businesses and publishers.” Digital ads currently make up about 80% of Google’s revenue and broadly support its other, less lucrative ventures.

Tuesday’s lawsuit comes as the U.S. government increasingly seeks to curb big tech’s dominance, though such legal action can take years and Congress has failed to pass recent legislation aimed at curbing the influence of the tech industry’s biggest players.

The European Union was more active. She launched an antitrust investigation into Google’s digital advertising dominance in 2021. UK and European regulators are also investigating whether an online display advertising services agreement between Google and Meta breached fair competition rules.

An Internet services trade group of which Google is a member has called the lawsuit and its “radical structural remedies” unfounded.

Matt Schruers, President of the Computer & Communications Industry Association, said competition for advertising is fierce and “governments’ “claim that digital ads are not competitive with print, broadcast and outdoor advertising defies common sense.”

Dina Srinivasan, a Yale University fellow and adtech expert, said the lawsuit is “huge” because it brings the entire nation — state and federal governments — together in a bipartisan legal offensive against Google. In December 2020, 16 states and Puerto Rico sued Google over the exact same issues.

The current online advertising market, said Srinivasan, “is broken and utterly inefficient.” The fact that intermediaries get 30% to 50% of the revenue from every ad trade is “an insane inefficiency etched into the US economy.” She called it “a massive tax on free internet and consumers at large. It also directly affects the viability of a free press.”

As with many highly complex technical markets, it has taken time for federal and state regulators and policy makers to catch up and understand the online advertising market. Srinivasan noted that it took a decade before they became aware of the dangers of high-speed trading in the financial markets and started taking steps to prevent it.

This lawsuit aims to apply to the digital advertising market the same rules that apply to the financial markets, she said. Brokers, banks and other companies, which sometimes have competing interests, are not allowed to own the New York Stock Exchange.

Google held nearly 29% of the U.S. digital advertising market — which includes all the ads people see on computers. Phones, tablets and other internet-connected devices — in 2022, according to research firm Insider Intelligence. In second place is Facebook parent company Meta with nearly 20% market share. Amazon is a distant but growing third.

But that’s not what the lawsuit is about. It focuses on the technical market mechanisms that Google controls, including the ad server it developed based on its 2008 purchase of the dominant DoubleClick. According to the DOJ, Google has a more than 90% share of the business that serves ads on websites and controls about 80% of the “buy-side” Google Ads network, where advertisers compete to place ads.

Google, the lawsuit states, over the past 15 years has “used acquisitions and market power in adjacent ad-tech markets to quash the rise of competitors, its control over the ways and means by which digital ad transactions take place, and prevent publishers and advertisers from working effectively with Google’s competitors.”

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

When asked why the Justice Department would be filing the lawsuit when a similar complaint had already been filed by states, Assistant Attorney General Jonathan Kanter, the department’s chief antitrust officer, said, “We conducted our own investigation, and that investigation spanned many.” Years.”

States participating in Tuesday’s lawsuit include California, Virginia, Connecticut, Colorado, New Jersey, New York, Rhode Island and Tennessee.

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

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This story was first published on January 25, 2023. It was updated on January 25, 2023 to correct the number of states involved in a 2020 lawsuit. It was 16, not 35.

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