The U.S. Department of Justice is fed up with Google, and they aren’t going to take it anymore. Last week, the DOJ filed a civil antitrust lawsuit against Google for monopolizing digital ad tech, violating Sections 1 and 2 of the Sherman Act. Attorneys General for eight states joined in, including California, Colorado, Connecticut, New Jersey, New York, Rhode Island, Tennessee and Virginia.

According to the complaint filed in the U.S. District Court for the Eastern District of Virginia, the DOJ alleges that Google monopolizes multiple digital advertising technologies, referred to as “ad tech stack,” that website publishers use to sell ads and advertisers use to purchase advertising to reach their target audiences. Google has used its dominant market position, and the DOJ and states involved in the action want to “restore competition in these markets and obtain equitable and monetary relief on behalf of the American public.” The damages requested include losses sustained by federal government agencies that overpaid for online display advertising.

“This enforcement action marks the first monopolization case in approximately half a century in which the Department has sought damages for a civil antitrust violation,” the DOJ said in a January 24, 2023 news release.

Fifteen years of ad tech monopoly

The complaint alleges that Google has engaged in anticompetitive behavior in the digital ad tech space over the last 15 years by:

• Acquisitions: “Neutralizing or eliminating ad tech competitors” through serial acquisitions
• Forced adoption of Google ad tech: Using their dominance across digital ad markets to force publishers and advertisers to use Google products
• Auction competition and manipulation: Google limited real-time bidding on publisher inventory to its ad exchange, making it difficult for rival ad exchanges to compete fairly and impeding rivals to thwart the ability of others to use competing products.

“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 DOJ Attorney General Merrick B. Garland. “No matter the industry and no matter the company, the Justice Department will vigorously enforce our antitrust laws to protect consumers, safeguard competition, and ensure economic fairness and opportunity for all.”

Deputy Attorney General Lisa O. Monaco also commented on the allegations against Google.

“The complaint filed today alleges a pervasive and systemic pattern of misconduct through which Google sought to consolidate market power and stave off free-market competition. In pursuit of outsized profits, Google has caused great harm to online publishers and advertisers and American consumers. This lawsuit marks an important milestone in the Department’s efforts to hold big technology companies accountable for violations of the antitrust laws,” Monaco said.

According to the DOJ, Google averages 30% of its ad revenue that flows through the company’s digital ad technology products. Google earns more from some transactions and from certain publishers and advertisers. The DOJ alleges that publishers who sought alternatives to Google’s ad tech were punished.

“Today’s lawsuit seeks to hold Google to account for its longstanding monopolies in digital advertising technologies that content creators use to sell ads and advertisers use to buy ads on the open internet,” said Assistant Attorney General Jonathan Kanter of the DOJ’s Antitrust Division. “Our complaint sets forth detailed allegations explaining how Google engaged in 15 years of sustained conduct that had — and continues to have — the effect of driving out rivals, diminishing competition, inflating advertising costs, reducing revenues for news publishers and content creators, snuffing out innovation, and harming the exchange of information and ideas in the public sphere.”

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News/Media Alliance sides with DOJ

The News/Media Alliance, a nonprofit representing nearly 2,000 U.S. print and digital publishers, has spoken against Google in hearings and through written filings. They issued a statement last Tuesday, applauding the DOJ’s action against the tech giant.

“This marks an important day in our history where a dominant monopoly is being charged for blatantly anticompetitive behavior in the digital advertising market. This behavior impacts consumers’ data, prices, and the quality of information they receive, while journalism struggles to provide valuable and critical content that informs and enriches communities across the country,” said News/Media Alliance Executive Vice President & General Counsel, Danielle Coffey.

Timing of lawsuit

The last two weeks were tough for Google. In addition to the civil antitrust lawsuit about Google monopolizing digital ad tech, Google announced they were laying off 12,000 employees, representing about 6% of the company’s global workforce.

“Over the past two years we’ve seen periods of dramatic growth. To match and fuel that growth, we hired for a different economic reality than the one we face today,” Pichai wrote in the email, posted to Google’s blog. “I am confident about the huge opportunity in front of us thanks to the strength of our mission, the value of our products and services, and our early investments in AI. To fully capture it, we’ll need to make tough choices.”

“So, we’ve undertaken a rigorous review across product areas and functions to ensure that our people and roles are aligned with our highest priorities as a company. The roles we’re eliminating reflect the outcome of that review. They cut across Alphabet, product areas, functions, levels and regions,” said the CEO.

Insider Take

The lawsuit filed last week is different than the case the DOJ filed against Google in 2020 for using its dominant market power to monopolize search and search advertising. That case is set to go to trial in September 2023. The bottom line: Google has a dominant market position in ad tech solutions as well as search and search advertising. It will take years and continuous government and legal pressure to hold the company accountable for their anticompetitive behavior.

As of September 30, 2022, Google parent Alphabet reported $54.5 billion in advertising revenue, including Google search and other, YouTube ads and the Google Network. This represents 78.9% of the company’s total third-quarter revenue for 2022 of $69.1 billion. The company has 54.5 billion reasons to protect its digital ad tech and its search and search advertising revenue.

Takeaway for subscription companies: This type of antitrust behavior and litigation impacts virtually every company who advertises online, including subscription and membership-based companies. Google is also a subscription company with a range of subscription products, in addition to their search and ad tech products. Smaller companies are at Google’s mercy. They only have a few options: (a) use Google ad tech tools to avoid being penalized for using competitors’ products; (b) band together with other similar-sized companies to take a stand against Google; or (c) reach out to legislators, the DOJ, FTC and their state attorneys general to ask for relief. We don’t expect this to be “over” for years. In the meantime, we’re likely to see more of the same from Google.   

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