Google faces ad-related antitrust lawsuit

Alphabet, the parent company of online search giant Google, is the subject of a new antitrust lawsuit filed by the Department of Justice (DOJ) and eight states that alleges the firm “corrupted legitimate competition in the ad tech industry.”

The context

• Google’s ad revenue stood at $209bn in 2021, positioning it as the biggest advertising company worldwide.
• The firm has drawn scrutiny due to its operation as a buyer, seller and advertising exchange which, combined with its vast scale, is often said to give it a uniquely dominant position.
• Alphabet has pushed back against this view, highlighting the market share held by Meta, the owner of Facebook and Instagram, which generated ad revenues of $115bn in 2021.
• The DOJ and various states also sued Google in 2020, based around allegations that it deployed anti-competitive tactics to try and monopolise the markets for online search and search ads. That lawsuit is still in progress.

What the latest filing says

• The latest DOJ filing alleges that Google has taken actions which have compromised the ad tech space as the company aimed to become “‘the be-all, and end-all’ location for all ad serving.”
  
• "Competition in the ad tech space is broken, for reasons that were neither accidental nor inevitable," the filing continued.
• Google, it further alleges, “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 states joining the Department of Justice in the filing are: California; Colorado; Connecticut; New Jersey; New York; Rhode Island; Tennessee; and Virginia.

Under the microscope

• One aspect of Google’s strategy coming under the microscope is the results of certain acquisitions, like the $3.1bn purchase of ad-serving firm DoubleClick in 2007.
• Similarly, the purchase of ad optimisation platform Admeld in 2011 was argued to demonstrate a “familiar tactic: acquire, then extinguish, any competitive threat.”
• If the antitrust lawsuit is successful, it may result in Google being required to sell off parts of its ad business.

Google’s response

• A Google spokesperson told Axios that the DOJ’s latest lawsuit “attempts to pick winners and losers in the highly competitive advertising technology sector.”
• Moreover, the spokesperson suggested, the lawsuit could have negative effects for players across the online advertising space.
• “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," it was argued.

Sourced from Axios, CNBC