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DOJ Suit Accuses Google of Illegally Monopolizing Online Ad Tech – Reason

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The U.S. Department of Justice (DOJ) has filed another civil antitrust suit against Google. This one accuses the company of maintaining an illegal monopoly on various aspects of digital advertising tech. And like so much federal antitrust action against tech companies, it comes at a time when the market is already challenging Google’s dominance.

DOJ’s previous antitrust complaint, filed in 2020, was concerned with Google’s search and search advertising businesses, largely objecting to deals made by Google’s parent company, Alphabet, to have its apps and search engine preset as the default on some browsers and devices. That suit—filed in conjunction with 11 states—is still ongoing.

The new suit, filed in conjunction with eight states—California, Colorado, Connecticut, New Jersey, New York, Rhode Island, Tennessee, and Virginia—seems to offer up more of the same spin: Google is big, Google is very successful, and therefore Google must be doing something bad to maintain this status.

It seeks to make Google get rid of its Google Ad Manager suite, which includes a publisher ad server, Doubleclick for Publishers, and the ad exchange, AdX.

Funny timing: The federal government doesn’t have a great track record when it comes to antitrust claims against tech companies, largely because it is reactionary and unimaginative. It looks at the current landscape, sees which companies are dominant, and assumes that without government intervention, things will always be thus. But tech is a dynamic field, with new—and hard to predict—products and services constantly disrupting the old behemoths. By the time a company becomes big enough that government regulators want to topple it, it’s likely that it’s already being threatened by market forces.

This was the case when the government went after Microsoft in the 1990s. The government was upset about the dominance of Microsoft’s operating system (Windows) and browser (Internet Explorer). But by the time the suit started winding its way through the courts, Microsoft was facing increasing competition from Apple computers and, not long after, from smartphones. “Smartphones supplemented and replaced desktop and laptop computers; social media and messaging apps gained on email; and Apple’s iPhone, Google’s Android operating system, and platforms such as Facebook and Twitter began to dethrone Microsoft,” I noted in this 2021 feature on the bipartisan antitrust crusade against tech companies.

In recent years, authorities have been obsessed with toppling Facebook, saying that it holds an unfair monopoly on social media services and its dominance prevents any new players from becoming successful. The government has been launching this legal crusade against Facebook as the company started shedding U.S. users and TikTok rose as a massive competitor to Facebook and Instagram, which are both owned by Meta.

The new DOJ suit against Google comes at a time when the company’s ad share is shrinking and it faces increasing ad services competition from a host of major players. Earlier this month, a Wall Street Journal headline put it succinctly: “Google and Meta’s Advertising Dominance Fades as TikTok, Streamers Emerge.”

“Google owner Alphabet’s digital ad sales missed analysts’ estimates for three quarters in a row and, for the first time since 2015, their combined market share with Meta dipped below 50% last year,” noted Jessica Melugin, director of the Center for Technology and Innovation at the Competitive Enterprise Institute (CEI). “Projections are for continued loss of market share in 2023 thanks to booming new ad types that appear on streaming TV platforms and e-commerce sites like Amazon.com, Target and Walmart. This is a competitive sector that’s moving quicker than politically-motivated antitrust regulators.”

The suit also comes as Google is feeling its search business threatened by the rise of ChatGPT and artificial intelligence tech. “For more than 20 years, the Google search engine has served as the world’s primary gateway to the internet. But with a new kind of chat bot technology poised to reinvent or even replace traditional search engines, Google could face the first serious threat to its main search business,” notes The New York Times. “One Google executive described the efforts as make or break for Google’s future.”

What DOJ is saying: In a press release, DOJ accuses Google of monopolizing “key digital advertising technologies, collectively referred to as the ‘ad tech stack,’ that website publishers depend on to sell ads and that advertisers rely on to buy ads and reach potential customers.”

“Today’s complaint alleges that Google has used anticompetitive, exclusionary, and unlawful conduct to eliminate or severely diminish any threat to its dominance over digital advertising technologies,” said Attorney General Merrick Garland.

DOJ accuses Google of acquiring competitors, requiring publishers who want “effective real-time access” to Google’s ad exchange to use Google’s publisher ad server, and “limiting real-time bidding on publisher inventory to its ad exchange.”

Google’s response: “Today’s lawsuit from the Department of Justice attempts to pick winners and losers in the highly competitive advertising technology sector,” writes Dan Taylor, Google’s vice president of global ads, in a blog post.

It largely duplicates an unfounded lawsuit by the Texas Attorney General, much of which was recently dismissed by a federal court. 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. We’ve already responded in detail to many similar claims made in the complaint led by the Texas Attorney General.

The lawsuit tries to rewrite history at the expense of publishers, advertisers and internet users.

DOJ is demanding that we unwind two acquisitions that were reviewed by U.S. 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. Both of these acquisitions enabled us to invest heavily in developing new and innovative advertising technologies. These deals were reviewed by regulators, including by DOJ, and allowed to proceed. Since then, competition in this sector has only increased.

Taylor notes that Google now faces competition from a number of major businesses, including Microsoft, which last year acquired an ad platform, Xandr, that has its own full ad tech stack and went on to beat out Google for a lucrative advertising deal with Netflix.

In addition, “Amazon’s advertising business is now growing faster than Google and Meta’s advertising businesses,” Taylor points out. Apple and TikTok, too, have growing advertising businesses, while Comcast, Disney, Walmart, and Target also “continue to invest in building their own online advertising technology services,” and a number of niche products and companies serve specialty markets.

Taylor also argues that DOJ misrepresents Google’s business model and products.

No one is forced to use our advertising technologies—they choose to use them because they’re effective. In fact, publishers and advertisers typically work with multiple technologies simultaneously to reach customers and make more money.

“Antitrust cases shouldn’t penalize companies that offer popular, efficient services, particularly in difficult economic times,” Taylor concludes. “And they shouldn’t force companies to reverse 15-year-old investments that they have nurtured and worked hard to make successful, especially when those investments were already reviewed by regulators and allowed to proceed.”

Google offers more detailed pushback against DOJ’s claims here.

What others are saying: “Google’s frequent assertions that the ad market is competitive strain credulity. Just three companies will capture a majority of US digital ad spending this year, according to eMarketer estimates shared by Bloomberg, with Google taking a plurality of the total,” writes Casey Newton in Platformer.

But that sort of depends on your definition of competitive. As Newton points out, Google has an estimated 26.5 percent share, which hardly screams illegal monopoly.

And this share “is down more than 10 percent from its peak in 2015,” due to the growth of Meta and Amazon’s ad businesses, notes Newton.

CEI Senior Economist Ryan Young questions the government’s definition of the relevant market here. “In an antitrust case, it is not enough to say that a company has a monopoly. One must also answer, a monopoly over what? That’s where this case stumbles,” said Young in an emailed statement.

“Online ad sales are clearly competitive, with falling prices, rising volumes, and new competitors like TikTok eating away at Google and Meta’s leading market shares,” Young continued. “That’s why Justice Department lawyers have created brand new market definitions that are much narrower, such as ‘publisher ad servers,’ ‘ad exchanges for indirect open web display advertising,’ and ‘advertiser ad networks.’ … The Justice Department’s wordplay is evidence of a weak case, not a monopoly.”

FREE MINDS

Journalism case hits federal court. Reason‘s Billy Binion has more details:

Alliance Defending Freedom (ADF) is most known for its work taking up controversial religious freedom cases. They famously defended Jack Phillips, a baker who was the subject of a high-profile suit after he declined to make a cake for a same-sex wedding. More recently, the organization argued in front of the U.S. Supreme Court in favor of Lorie Smith, a website designer who preemptively challenged a Colorado law so that she would not have to design wedding sites for gay couples in violation of her religious beliefs.

They are not known for defending foul-mouthed, left-leaning journalists whose bread and butter consists sometimes of criticizing the police. They’re doing so anyway.

That journalist is Priscilla Villarreal, whose presence in Laredo, Texas, is associated with her profanity-laced commentary on law enforcement and who police jailed for the crime of asking the government questions, getting answers, and publishing those responses. That would appear to be a fairly cut-and-dry infringement on her First Amendment rights. Yet, it’s a question that has stumped the U.S. Court of Appeals for the 5th Circuit in a case that could have far-reaching implications for anyone engaged in journalism, regardless of their political bent.

A district court granted the cops who jailed Villarreal qualified immunity. A three-judge panel of the 5th Circuit rejected that ruling, with one judge writing that “if [this] is not an obvious violation of the Constitution, it’s hard to imagine what would be.” Today, a majority of the 16 judges on the 5th Circuit will rehear the case en banc. More here.

FREE MARKETS

A Mississippi* lawmaker is moving to end civil asset forfeiture, the process by which police can seize—and sell—any property, possessions, or cash that that they allege is connected to a crime, even if the person who stands accused of the crime has not been convicted or even charged. Rep. Dana Criswell, a Republican, has introduced a bill that would end the current asset forfeiture regime and require the state to obtain a criminal conviction before seizing assets in most cases. The bill has been referred to the House Judiciary Committee.

Mississippi House Bill 622 (HB622) states “there may be no civil forfeiture.” Rather, property can only be forfeited if “the offense is of a state criminal law that authorizes the forfeiture of property; Guilt of the offense is established by proof of a criminal conviction, except as otherwise provided under subsection (4);” and “the state establishes that the property is subject to forfeiture under Section 10 of this act by clear and convincing evidence.” The exceptions outlined include situations where the defendant died, was deported by the federal government, was granted immunity or a reduced punishment in exchange for assisting law enforcement, fled the jurisdiction, or abandoned the property.

“Passage of the bill would effectively opt Mississippi out of a federal program that allows state and local police to get around more strict state asset forfeiture laws,” notes Mike Maharrey at the Tenth Amendment Center. “This is particularly important in light of a policy directive issued in July 2017 by then-Attorney General Jeff Sessions for the Department of Justice (DOJ) that remains in effect today.” (That directive called for more aggressive federal asset forfeiture.)

The Mississippi bill would also “address the ‘policing for profit’ motive inherent in civil asset forfeiture by requiring the state treasurer to deposit forfeiture proceeds into the general fund after payment of specific allowable expenses,” notes Maharrey. “Under the current law, police can keep up to 100 percent of forfeiture proceeds.”

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*CORRECTION: This post previously misstated the state considering civil asset forfeiture reform.