The Department Of Justice's Lawsuit Against Google
Aa
Share
For years, Google has faced accusations from advertising and media industry executives.
Allegations against Google
The Department of Justice has accused Google of abusing its role as one of the largest brokers, suppliers and online auctioneers of advertisements placed on websites and mobile applications. The filing promises a protracted legal battle with far-reaching implications for the digital advertising industry.
Google also operates the most popular search engine and online video streaming site, YouTube, which raises allegations that it is tilting the market in its favour.
Filed in federal court in Virginia, the case concerns Google's abuse of its monopoly position in the advertising industry, harming online publishers and advertisers who try to use competing products. Eight states, including California and New York, joined the Justice Department's lawsuit.
The lawsuit asks the court to reverse Google's "anti-competitive acquisitions", such as its 2008 purchase of DoubleClick. Rivals say Google's power in digital advertising stems from a series of acquisitions that Google has used to build its advertising business.
While largely invisible to internet users, ad-tech tools controlled by Google make it easy to buy and sell digital ads that help fund online publishers. Google's business includes a tool through which publishers can offer ad space, a product for advertisers to buy these spaces, and an exchange that automatically connects bidders to websites as they load for individual users.
2020 lawsuit
The Department of Justice's 2020 lawsuit against Google related to its position in the online search markets, including permission to make Google the default search engine in Apple's Safari browser.
Last year, Google offered to split some of its advertising business into a separate company under the Alphabet umbrella to fend off a recent Justice Department investigation. Department of Justice officials declined the offer and instead opted to proceed with the trial.
Advertising earnings
Alphabet gets about 80% of its business from advertising. A new Justice Department lawsuit targets a subset of this ad business that brokers the buying and selling of ads on other websites and apps. Google reported $31.7 billion in revenue in 2021 from this brokerage business, about 12% of Alphabet's total revenue. Google gives around 70% of these revenues to online publishers and developers.
Google's respond
Google has attempted to settle claims against its ad technology company.
Google said it has no plans to sell or exit the advertising business. He also strongly disputed the claims in a lawsuit filed by state attorneys general led by Texas, with allegations similar to the Department of Justice complaint.
As well as offering to carve out some of its advertising business to avoid a Justice Department lawsuit, the company last year talked to the EU about a deal that would allow competitors to broker ad sales directly on the video service.
In 2021, the company agreed to give UK antitrust authorities effective veto power over elements of its plans to remove a technology called third-party cookies from Chrome in order to settle an investigation of the plan there.
In France, Google agreed to pay a fine of €220 million, equivalent to approximately $239 million, and to improve data access to rival ad firms so as not to use their data in a way that rivals could not reproduce, to settle a similar antitrust investigation in country.
Will there be shift in the online advertising industry?
Any divestiture of Google's advertising technology business would be a major shift in the online advertising industry.
Separating parts of Google's advertising business from the rest of the company can take years of litigation. Depending on the outcome of the case, ad-tech executives said the results could range from a higher share of ad dollars flowing to publishers to lower overall spend as digital advertising would be less efficient without Google's intermediation.
Google (Alphabet) share price
GOOG shares have seen a significant drop in the last year. They started 2023 at 89.70 and rose until last Monday, where they reached 101.21, but fell to 99.21 on Tuesday.
Source: wsj.com, finance.yahoo.com
