December 18, 2020
In the U.S. District Court for the Eastern District of Texas, 10 state attorneys general charged Google with abusing its dominance by overcharging publishers for ads and elbowing out rivals. The lawsuit also contends that Google struck a deal with Facebook to limit the latter’s efforts to compete for ads. Google claimed the suit is “baseless” and said that it intends to fight it. Another group of states is expected to file a case against Google. This lawsuit is the first to focus on tools that connect buyers and publishers of ad space.
The New York Times reports that this suit has been signed only by Republican prosecutors and “is not expected to be part of the Justice Department case against the company.”
The second group of states set to file against Google is a mix of Republicans and Democrats and “could combine with the federal agency’s case.” Google’s ad selling system dates from 2007 when it bought DoubleClick, “which offered advertising technology and acted as a marketplace, in a deal that has since been criticized as central to Google’s dominance.”
Prosecutors stated that, after buying DoubleClick, Google “quickly began to use its new position to exert leverage … [and] Google then tried to destroy a process designed by publishers to introduce more competition into the market for online ads.”
In the previous system, “publishers were able to sell ad space in more online marketplaces at once, reducing their reliance on Google’s ad tech.” Prosecutors related that the Google-Facebook agreement limited the latter’s involvement in ad process in exchange for Google giving it “an advantage in other ad auctions it runs.” Currently, Google “controls software at every step of the ad sales process.”
The lawsuit states that, “after achieving a monopoly, Google has been able to squeeze publishers for a high cut of each ad sold on its platforms,” which it calls a “monopoly tax” that “is ultimately borne by American consumers through higher prices and lower quality on the goods, services and information those businesses provide.”
Facebook, not named in the suit, has not commented on it, and “Google said the allegations involving Facebook were inaccurate.” According to eMarketer, Google and Facebook “accounted for about 54 percent of U.S. digital advertising in 2019,” broken down into 31 percent for Google and 23 percent for Facebook.
The Verge reports that the suit “specifically takes issue with Google’s historical requirements for publishers, whether limiting them to a single exchange or extracting licensing fees for the use of Google.” But the most detailed alleged complaint singles out how Google sabotaged “header bidding,” which “allows advertisers to route a single request through multiple exchanges at once,” because it saw the practice a major threat to its hegemony.
Google did eventually allow header bidding, but reportedly “rigged that system to rout requests to its own exchange, even when a competitor had submitted a higher bid.”