Why Google faces its biggest antitrust challenge yet

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Today, let’s talk about a major new antitrust case against Google and the growing likelihood that something will have to be done at the company.

I’ll get into some details of the case shortly. But the first thing to notice is the growing consensus around the world that Google is too dominant, which has put more pressure on the United States to act.

Since 2017, when the European Commission fined Google a record $2.73 billion for self-preference with its comparison shopping service, the company has faced a steady stream of regulators accusing it of antitrust violations.

In 2018, EU antitrust regulators fined Google $4.3 billion for requiring smartphone makers to bundle and include the company’s apps with Android.

In 2019, the EU fined Google $1.49 billion for making unfair demands on publishers seeking to use their AdSense for search service.

The fines were little more than speeding tickets

The United States finally followed suit in 2020. A coalition of 10 states, led by Texas, filed a complaint against Google, arguing that it maintains an illegal monopoly on the online advertising business. That same year, the Justice Department accused the company of maintaining an illegal monopoly on search by making huge deals with partners like Apple and taking other steps to reduce competition.

Aside from some minor changes to the Play Store regarding yet other payment processing antitrust cases, Google has been largely unaffected by it all. The fines were little more than speeding tickets for a company that is expected to bring in $73.8 billion in digital ad revenue this year. Other, potentially more far-reaching cases are still moving through the courts.

On Tuesday, however, the US government filed what may be the most important case yet against the search giant. Here’s Leah Nylen Bloomberg:

The U.S. Department of Justice and eight states have purchased Google from Alphabet Inc. sued and called for the search giant’s advertising technology business to be broken up for allegedly illegally monopolizing the digital advertising market. […]

The lawsuit represents the Biden administration’s first major case challenging the power of one of the country’s largest tech companies, following an investigation that began under former President Donald Trump. It’s also one of the few times the Justice Department has called for the breakup of a major company since the Bell telecom system was dismantled in the 1980s.

The 139-page lawsuit calls on Google to divest the Google Ad Manager suite, which includes both Google’s publisher ad server, Doubleclick for Publishers, and Google’s ad exchange, AdX.

In a blog post, Google said the lawsuit “ignores the huge competition in the online advertising industry.” “It largely copies a baseless lawsuit by the Texas Attorney General, much of which was recently dismissed by a federal court,” reads a blog post attributed to the company’s vice president of global advertising, Dan Taylor. “DOJ doubles down on a flawed argument that would slow innovation, increase advertising costs, and make it harder for thousands of small businesses and publishers to grow.”

As with the company’s claims that the search market is brimming with challengers, Google’s frequent claims that the advertising market is competitive inspire credulity. Only three companies will account for the largest share of US digital ad spending this year, according to eMarketer estimates shared by Bloombergwith Google taking a multiple of the total.

There is reason to believe that the government has more solid ground with its case against Google

At the same time — and this really says how much tech regulation lags behind industry developments — Google’s estimated share of 26.5 percent is down more than 10 percent from its 2015 high. (Although it’s higher if you include YouTube , giving it another 2.9 percent of the market.) The decline is due to the continued growth of Meta, the second-ranked advertising company, and even more so to the rise of Amazon, which is expected to grow 11.7 this year. percent of the market will take up as many sponsored results on its search pages as its customers will bear.

Previous US government lawsuits have struggled to gain a foothold. Most famously, in 2021, a lawsuit against Facebook was dismissed for failing to demonstrate that the company had a monopoly on social networks, though it was later reinstated and is still pending.

But there is reason to believe that the government has more solid ground with its case against Google. First, it is rooted in real damage. The government says fees on Google’s ad exchanges allow it to keep 30 cents of every dollar spent on them — a significant burden on struggling digital publishers. As a result, the government says $100 million was overcharged for spending on online advertising for federal agencies, including the military.

Second, these are damages that are very much in line with traditional thinking on the antitrust point, which is to protect consumers. Since 2017, some progressives have argued for a broader understanding of competition law, taking into account workers’ wages, unemployment and other social issues. Lina Khan, who now heads the Federal Trade Commission, was an early advocate of this school of thought, which is derisively known (semi?) as “hipster antitrust.”

Hipster antitrust was, among other things, a response to many of technology’s biggest companies giving their services away for free. How can you argue that Google or Facebook or Amazon have an illegal monopoly when a consumer can simply choose to use another free service?

The lawsuit filed by the government against Google today is not such a case

Embedded in hipster antitrust was another idea, less often spoken out loud, that seemed to drive much of the proponents’ thinking: that Big Tech should only get this big; that lightly regulated companies with trillion-dollar market caps pose some kind of risk to the political body; and that they must be prevented from growing endlessly by absorbing smaller companies.

You see this kind of hipster antitrust in the FTC’s (misguided, I think) effort to prevent Meta from acquiring Within, the maker of the subscription fitness app Supernatural. VR is still a relatively small industry; the video game industry has a long history of console makers buying popular studios; and it’s unclear what harm Meta owning a fitness app could do to consumers or the market.

I’m mentioning all of that because of the lawsuit the government filed against Google today is not such a case. This isn’t a bunch of liberals sitting around trying to redefine antitrust law around some unrelated beef about Google. This is a bunch of Democratic appointees, building on the work of their Republican predecessors, arguing that: A market was getting too consolidated, prices were going up and users were being penalized.

Of course, the case will drag on for years to come, the ad industry will continue to evolve, and whatever relief consumers (and publishers) will experience if the government wins remains an open question. It would have been much better than Congress, which has spent the past five years debating what to do with tech giants in an endless series of theatrical hearings, passed new laws regulating the conditions under which companies like Google could compete.

But they didn’t, so we live in a world where publishers pay Google 30 percent of their revenue for every ad served. You don’t have to be a progressive funeral pyre to wonder what kind of web we could have, and what kind of digital publications could be sustainable, in a world where they were allowed to spend 80 or even 90 percent of the money they brought in. to keep.

I hope we find out. The government has filed its share of weak antitrust cases in recent years, but at first glance, this doesn’t seem to be one of them. Google has managed to whack other regulators with relative ease for years. But now that the Justice Department has been trained in its advertising business, the company faces perhaps its biggest challenge yet.

Zoë Schiffer contributed to this report.

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