CNN
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Google suffered what may be the biggest court defeat in its history this summer when a federal judge declared the company’s flagship search engine an illegal monopoly and sided with state and federal authorities.
Now the Justice Department is hoping for a double whammy, as Google begins trial again this week—this time in a separate antitrust case that could potentially reform some of the most fundamental economic aspects of running a website.
In the long-awaited confrontation, which begins Monday, the U.S. government and more than a dozen states will challenge another key source of Google’s economic power: its massive advertising business.
At the heart of the big-money legal battle is the $31 billion portion of Google’s advertising business, which connects website publishers with advertisers and determines which banner ads appear on countless sites across the Internet. When an Internet user visits a publisher’s website, for example, it’s often Google that’s working in the background as the page loads. The company runs billions of real-time auctions every day to figure out, in a split second, whose ads should appear where.
Google’s search engine may have been the killer app that made the company the daily destination of millions of consumers, but it was the company’s advertising technology that helped Google monetize much of the rest of the web – and Google took illegal steps to stifle competition in that space, states and the Justice Department say.
From taking over ad tech rivals through anti-competitive mergers to forcing companies to use Google’s advertising products to controlling key companies in every part of the advertising supply chain, the governments say, Google has driven up prices for advertisers and choked off revenues from websites.
The lawsuit even names the U.S. military as one of the advertisers allegedly harmed by Google’s practices. According to the lawsuit, the U.S. government has spent $100 million buying internet advertising since 2019.
Authorities called for the breakup of Google’s alleged ad tech monopoly – which is separate from Google’s search or search advertising business.
It is the second of two challenges to Google’s power by the U.S. Department of Justice since the Trump administration and the latest test of the U.S.’s renewed commitment to enforcing domestic competition laws. But for Google, which denies a monopoly in the adtech industry, the case is an attack on what it calls an indispensable tool for small businesses and publishers.
Google described the online advertising industry as dynamic and competitive and called the government’s lawsuit filed last year a misguided attempt to pick winners and losers.
In its court filings, Google argued that the Justice Department’s lawsuit focuses too much on website advertising. Google competes with hundreds of companies that offer their own ad exchanges or ad tech tools, including Amazon, Meta, Microsoft and TikTok, to name a few, according to its filings. Advertisers can choose to use Google’s tools or those of competitors, or even redirect their ad spend from websites to other formats and platforms that don’t use Google’s ad tech, such as Instagram or Netflix.
“As apps become more important to digital content providers,” Google wrote in a pre-trial brief, “so too does the amount of inventory they sell through apps and the amount they spend on advertising technology to manage that inventory.”
Both sides will make opening statements on Monday before District Judge Leonie Brinkema of the U.S. District Court for the Eastern District of Virginia. Brinkema, a Clinton appointee, is a former Justice Department lawyer who also presided over numerous terrorism and immigration-related cases as a judge.
Both senior Google partners and critics could testify in the trial, which is expected to last several weeks. The list of potential witnesses includes current or former executives from Comcast, Disney, Gannett, the New York Times and Meta, as well as some senior Google employees such as YouTube CEO Neal Mohan.
In a courtroom in Alexandria, across the Potomac River from the U.S. Capitol, government lawyers are expected to argue that, among other things, Google’s control over technologies that serve both advertisers and publishers, as well as an ad exchange where ad bids are placed, creates conflicts that encourage Google to engage in self-dealing.
“In effect, Google positioned itself to act simultaneously as a buyer, seller, and auctioneer of digital display advertising,” the 2023 lawsuit states.
The agreement has cost publishers and advertisers hundreds of millions of dollars in additional fees since 2019, according to estimates in a U.S. Department of Justice pretrial document.
Google itself argues in its documents that advertising prices continue to fall across the industry and that its market share in the display advertising market has been “steadily declining since 2013”.
It is not clear what specific penalties Google will face if Brinkema ultimately agrees with the Justice Department. The trial, which begins Monday, is only a first step in determining whether Google violated the law. Still, a breakup of Google’s adtech business could potentially trigger a restructuring of the digital advertising industry and Google’s role in it.
The US government believes that a break-up would create new or different financial incentives for all market participants. But Google argues that it could hurt smaller websites that rely on its tools or simply benefit other large, established giants in the digital advertising industry.
