Today's Paper River Valley Democrat-Gazette Obits Public Notices Newsletters Distribution Locations Digital FAQ Razorback Sports Today's Photos Crime Puzzles

Google sued by states, U.S. over ad practices

Company accused of monopolizing service by Compiled by Democrat-Gazette Staff From Wire Reports | January 25, 2023 at 5:22 a.m.
Attorney General Merrick Garland, joined by Associate Attorney General Vanita Gupta and Assistant Attorney General Jonathan Kanter of the Justice Department's Antitrust Division, speaks at the Department of Justice in Washington, Tuesday, Jan. 24, 2023. The Justice Department and several states have sued Google, alleging that its dominance in digital advertising harms competition. (AP Photo/Carolyn Kaster)

The Justice Department and eight states have sued Google, saying the tech giant abused its online dominance to shut out competitors in digital advertising.

Filed Tuesday, the antitrust lawsuit says Google, owned by Alphabet Inc., had "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 suit seeks to break up Google's ad business, forcing the company to divest from key ad products. States taking part in the suit include California, Virginia, Connecticut, Colorado, New Jersey, New York, Rhode Island and Tennessee.

"Each time a threat has emerged, Google has used its market power in one or more of these ad-tech tools to quash the threat," the lawsuit said. "The result: Google's plan for durable, industrywide dominance has succeeded."

The effort marks the fifth antitrust lawsuit filed by U.S. officials against Google since 2020 as lawmakers and regulators around the world try to rein in the power that big tech companies exert over online information and commerce.

In Europe, Google, Amazon, Apple and others have faced antitrust investigations and charges, while regulators have passed new laws to limit social media's harms and some practices such as collecting and using personal data.

The lawsuit announced Tuesday "adds another important complication to Google's efforts to deal with regulators worldwide," said William Kovacic, a former chairman of the Federal Trade Commission. "There's a chance one or more of these challenges is going to make its way through and hit the target."

U.S. Attorney General Merrick Garland said during a press conference Tuesday that Google's dominance in the ad market means fewer publishers are able to offer products without charging subscription or other fees, because they can't rely on competition in the advertising market to keep ad prices low.

As a result of Google's dominance, Garland said, "website creators earn less, and advertisers pay more."

The Justice Department's suit accuses Google of unlawfully monopolizing the way ads are served online by essentially excluding competitors. This includes its $3.1 billion acquisition in 2008 of DoubleClick, a dominant ad server, and subsequent rollout of technology locking in the split-second bidding process for ads that get served online.

DoubleClick gave Google a crucial role online, providing a marketplace for publishers and letting Google host more ads on sites across the internet.

At the time of the acquisition, Google had $16.6 billion in annual revenue, primarily from its search engine business. By 2021, the company's ad-tech division generated $31.7 billion in revenue, making it the second largest business unit after its flagship search engine. Through the first three quarters of 2022, the ad-tech unit has posted $24.3 billion in sales.

Google's ad manager lets large publishers who have significant direct sales manage their advertisements. The ad exchange, meanwhile, is a real-time marketplace to buy and sell online display ads.

The lawsuit demands that Google break off three different businesses from its core business of search, YouTube and other products such as Gmail.

Garland said Tuesday that "for 15 years, Google has pursued a course of anticompetitive conduct" that has halted the rise of rival technologies and manipulated the mechanics of online ad auctions to force advertisers and publishers to use its tools.

In so doing, he added, "Google has engaged in exclusionary conduct" that has "severely weakened," if not destroyed competition in the ad-tech industry.

Peter Schottenfels, a Google spokesman, said the lawsuit "attempts to pick winners and losers in the highly competitive advertising technology sector." It echoes the "unfounded" lawsuit led by Texas in 2020, he said, adding that the Justice Department's latest suit makes a flawed argument that would slow innovation and harm publishers.

Google has faced particular scrutiny in the United States. In 2020, a group of states led by Texas filed an antitrust lawsuit against Google involving ad-tech, while the Justice Department and another group of states separately sued Google over claims the company abused its dominance over online searches.

In 2021, some states also sued over Google's app store practices.

Google also has long faced accusations from online publishers that its control over the digital ads ecosystem unfairly sapped profits from the websites where the ads are displayed.

One group representing publishers, including The New York Times Co., has pushed Congress to allow the sites to negotiate the terms of ad deals collectively with Google and other online platforms. Normally, that kind of coordination would be illegal under U.S. antitrust laws. The publishers' efforts so far have been unsuccessful.

Last week, Google said it will lay off 12,000 employees, or 6% of its workforce, in response to a slowdown in the digital advertising market. The company said the cuts will allow it to prioritize projects involving artificial intelligence.

Information for this report was contributed by Eric Tucker, Barbara Ortutay, Frank Bajak and Matt O'Brien of The Associated Press; Cat Zakrzewski and Rachel Lerman of The Washington Post; and David McCabe and Nico Grant of The New York Times.

Print Headline: Google sued by states, U.S. over ad practices


Sponsor Content