Justice Dept. Sues Google Again Alleging Monopolistic Ad Tactics

A Justice Department lawsuit filed Tuesday against Google accuses the internet giant of illegally acting like a monopoly with its digital advertising technology.

The lawsuit filed in federal court in Virginia seeks a court order to break up Google’s grip on online advertising sales and to protect advertisers and consumers.

Google controls 29% of online ad sales. Facebook is second at 20% while Amazon is third but moving up quickly.

More than merely competing, Google tries to “neutralize or eliminate” competitors through acquisitions and through contracts that compel advertisers to favor Google while shunning other internet providers, the Justice Department lawsuit says.

The lawsuit filed Tuesday in Alexandria, Virginia, is the second by the Justice Department against Google that alleges antitrust violations with its advertising practices.

It also represents a larger effort by the federal government to reduce the outsized influence of a few companies over the internet. The U.S. Senate is considering legislation to break up the large tech companies’ control over internet markets.

“Monopolies threaten the free and fair markets upon which our economy is based,” Attorney General Merrick Garland said at a news conference. “They stifle innovation, they hurt producers and workers, and they increase costs for consumers.”

Google’s digital algorithms pair advertisers, website publishers and consumers in high-speed auctions for ads targeted at specific potential customers and websites, the lawsuit says.

The website publishers can win rights to host the ads and receive payments for them only by using Google’s Ad Tech service.

At the same time, Google prohibits website publishers from using other advertising exchanges that compete with its AdX exchange for ads, the Justice Department says.

The lawsuit quotes a Google product manager saying, “Our goal should be all or nothing — use AdX as your [exchange] or don’t get access to our [advertising] demand.”

It compares Google’s dominance of digital advertising as being nearly the same as financial firms like Goldman Sachs or Citibank owning the New York Stock Exchange.

“Google, a single company with pervasive conflicts of interest, now controls: (1) the technology used by nearly every major website publisher to offer advertising space for sale; (2) the leading tools used by advertisers to buy that advertising space; and (3) the largest ad exchange that matches publishers with advertisers each time that ad space is sold,” says the Justice Department lawsuit, which was joined by eight state attorneys general.

Google keeps about 30 cents of every dollar spent through its advertising exchange, which would be a lesser margin in a competitive market, according to the lawsuit.

Alphabet Inc., Google’s parent company, reported revenue of $69.6 billion in the second quarter of 2022, up from $61.8 billion during the same quarter a year earlier. The company’s main revenue source is advertising through Google websites and its online products.

Global Ads Vice President Dan Taylor responded to the lawsuit in a blog post that said, “Today’s lawsuit from the DOJ attempts to pick winners and losers in the highly competitive advertising technology sector. It largely duplicates an unfounded lawsuit by the Texas attorney general, much of which was recently dismissed by a federal court.”

The company predicts that Justice Department efforts to protect consumers will backfire.

“DOJ is doubling 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,” Taylor wrote.

Google was joined in criticizing the Justice Department by Jessica Melugin, the director for technology and innovation at the Washington, D.C.-based public policy organization Competitive Enterprise Institute.

Melugin said the Justice Department incorrectly assumes its intervention is needed to ensure advertising competition with Google.

“Digital ad rates have been dropping, not rising and we’re seeing more competitors entering that market,” Melugin told The Well News.

Government intervention such as through the Justice Department lawsuit interferes with free market forces that already protect consumers, she said.

“If you get in the way of that cycle, you can expect costs to go up, not down,” Melugin said.

She suspects the lawsuit hides the true motives of the Justice Department.

“It’s a very political goal and that’s beating up on Big Tech,” she said. “It doesn’t help consumers.”

The lawsuit filed Tuesday is the second by the Justice Department against Google alleging antitrust violations in the past three years.

In October 2020, the Trump administration and 11 state attorneys general sued Google while claiming the company used unfair business practices in the search and search advertising markets.

The pending lawsuit says Google blocked competitors by reaching agreements with Apple and Samsung to be the default search engine on their devices.

Tom can be reached on Twitter at @tramstack.