DOJ, States Sue Google for Monopolizing Digital Advertising Technologies

The Department of Justice and eight state attorneys general have filed an antitrust complaint in the Eastern District of Virginia against Google LLC. They allege that Google has constructed horizontal monopolies at every level of the Internet advertising supply chain and a vertical monopoly illegally tying the three levels together. 

The DOJ brings this action pursuant to Section 4 of the Sherman Act. The attorneys general of California, Colorado, Connecticut, New Jersey, New York, Rhode Island, Tennessee, and Virginia bring this action pursuant to Section 16 of the Clayton Act. The plaintiffs collectively seek to prevent and restrain Google’s violations of Sections 1 and 2 of the Sherman Act.

The supply chain, or “ad tech stack,” has three levels. The complaint describes how Google has obtained over 90% share of the sell-side publisher market, the service that sells and publishes the ad space on websites; over 40% share of the ad network market, the service that bids for ad space on behalf of advertisers; and over 50% share of the ad exchange market, the space in which advertisers compete in auctions for ad space. 

The DOJ and attorneys general describe how Google initially came to prominence in the early 2000s through their search engine and selling advertising space therein. They then sought to expand into selling ad space on other websites. However, their initial attempt to enter what is now called the ad publisher market failed to gain traction, so in 2007 they acquired DoubleClick for Publishers (DFP) who then had a 60% share of the market, as well as the then nascent AdX, an ad exchange platform.

The second Bush Administration’s Federal Trade Commission (FTC) considered intervening, but declined to do so, concluding that “DoubleClick does not have market power despite its high market share” and that “firms can and do switch ad serving firms when it is in their self-interest to do so.” DoubleClick’s then CEO observed, “Nothing has such high switching costs [as ad publishers] .”

In the ensuing years, Google allegedly used DFP’s market share to expand AdX’s market share and expand into the ad exchange market. They allegedly took numerous measures to force DFP users into using AdX to sell ad space and give preferential treatment to AdX users looking to buy DFP users’ ad space. For example, only through Google could market players see real-time bids for ad space.

To ostensibly stop competitors trying to circumvent AdX, in 2011 Google purchased the platform’s chief competitor, AdMeld. The Department of Justice under the Obama administration declined to intervene, assuming multi-platforming would be enough to keep Google from gaining monopoly power.

Further seeking to circumvent Google’s growing power, in 2012 and 2013 competitors began using a work-around to compare the winning bid from different auction platforms. Google responded with their own comparison software through which they would get a cut of the winnings even if their bids did not win.

In the ensuing years, Google allegedly stepped up their monopolistic efforts. The complaint describes how they used their own market share and various black-boxed software trickery to upcharge ad buyers so that ad sellers could make more money and keep selling through Google. When the company discovered that many winning bids on platforms outside of AdX came from Google’s own ad network services, they directed those services to underbid on competitor platforms, all but guaranteeing the winning bid would be on AdX.

When sellers began using DFP to set different minimum bids for the different ad exchange platforms, Google disabled this feature since the sellers were using it to circumvent AdX.

On top of the aforementioned market consolidation efforts, the DOJ and attorneys general argue that Google’s scale in and of itself is anticompetitive. They state that Google’s size allows it to collect enough data to predict what its competitors will offer (and thus beat said offers). Furthermore, Google has the capability to far better target ideal buyer/seller partnerships and capitalize on these desirable transactions far better than its competitors. The complaint even details evidence of Google taking these transactions at a loss, which was then paid for by overcharging on less important transactions.

Through this suit, the DOJ and state attorneys general seek declarations that Google violated the Sherman Act, an order forcing Google to divest from and break up its ad tech stack business, an order enjoin Google from engaging in further anticompetitive behavior, and an award of damages for the US government and state governments who have been overcharged by Google’s alleged monopoly.