US Justice Department sues Google over digital advert market dominance

Government accuses company of breaking antitrust rules

The US federal government and eight states filed a lawsuit against Google alleging anti-competitive behaviour. AP
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The US Justice Department on Tuesday announced a lawsuit against Google, which it accuses of engaging in a “systematic campaign” of abusing its dominance in the digital advertising marketplace.

“Google has used anticompetitive, exclusionary and unlawful means to eliminate or severely diminish any threat to its dominance over digital advertising technologies,” the Justice Department wrote in its court filing.

California, where Google is headquartered, is one of eight US states to join the Justice Department's lawsuit.

The Justice Department said Google sought to eliminate threats in the digital advertising space by neutralising or eliminating them through acquisitions and by leveraging its dominance to force publishers “to use its products while disrupting their ability to use competing products effectively”.

“Each time a threat has emerged, Google has used its market power in one or more of these advertisement tech tools to quash the threat,” the department wrote.

“The result: Google's plan for durable, industry-wide dominance has succeeded.

“Google has thwarted meaningful competition and deterred innovation in the digital advertising industry, taken supra-competitive profits for itself, and prevented the free market from functioning fairly to support the interests of the advertisers and publishers who make today’s powerful internet possible.”

The lawsuit seeks to force Google to divest parts of its digital advertising businesses, including its advertisement exchange.

Attorney General Merrick Garland said at a press conference that “for 15 years, Google has pursued a course of anti-competitive conduct” that has halted the rise of rival technologies and manipulated the mechanics of online advertising auctions to force advertisers and publishers to use its tools.

Google’s parent company Alphabet said in a statement that the suit “doubles 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”.

An internet services trade group that includes Google as a member described the lawsuit and its “radical structural remedies” as unjustified.

Matt Schruers, president of the Computer and Communications Industry Association, said competition for advertising is fierce and the “governments' contention that digital ads aren’t in competition with print, broadcast, and outdoor advertising defies reason”.

Google operates an advertisement-buying service for marketers and an advertisement-selling service for publishers. It also runs a “high-speed auction” wherein publishers look to purchase advertisement space and advertisers seek to buy it.

Citing rivals such as Amazon, Meta and Microsoft, Google has argued that the market for online advertising is competitive.

Google retains $0.30 on average from funds that transfer from advertisers to publishers using the company's advertisement tech tools. The Justice Department claimed Google internal documents show that the company acknowledges it would earn less in a competitive market.

The department said Google's anticompetitive behaviour means that website creators are earning less and advertisers are paying more than they would in a marketplace that allowed for more advertisement tech tools, which would lower the cost of transactions.

The lawsuit filed on Tuesday was the second federal antitrust suit filed against Google, which was sued by former president Donald Trump's administration in 2020.

Google shares were down 1.3 per cent on Tuesday afternoon.

News agencies contributed to this report

Updated: January 24, 2023, 9:08 PM