Justice Department Sues Google for Monopolizing Digital Ads Tech

Justice Department Sues Google for Monopolizing Digital Advertising Technologies

By Shelly Kramer - January 25, 2023

The News: In late January, the U.S. Justice Department and eight states sued Google, calling for the breakup of the search giant’s digital advertising business over alleged monopolization of the digital ads. Google is the dominant player in the $278.6 billion US digital advertising market, controlling most of the technology used to buy, sell, and serve online advertising. Read more on CNN.

Justice Department Sues Google for Monopolizing Digital Advertising Technologies

Analyst Take: The Justice Department (DOJ) and eight states, California, Colorado, Connecticut, New Jersey, New York, Rhode Island, Tennessee, and Virginia, have sued Google, calling for the breakup of the search giant’s digital advertising technology business over alleged monopolization of the digital advertising. Google is the dominant player in the $278.6 billion U.S. digital-ad market, controlling most of the technology used to buy, sell, and serve digital advertising. The lawsuit is the Biden administration’s first major case challenging one of America’s Big Tech, and marks one of the few times the federal government has called for the breakup of a major company since it dismantled Bell telecom in the 1980s.

The complaint alleges that Google has used anticompetitive, exclusionary, and unlawful conduct to eliminate or severely diminish any threat to its dominance over digital advertising technologies. As part of the lawsuit, the US government has called for Google to be broken up and for the court to order the company to spin off at least its digital advertising exchange and its ad server for publishers, if not more.

The DOJ claims that Google not only controls the platform publishers use to sell digital advertising inventory, but also the digital advertising tools marketers use to claim that inventory and the exchange that facilitates those transactions. This is not the first time the DOJ has sued Google. The DOJ sued Google for similar reasons in 2020, accusing it of illegal monopolization of the search and digital advertising markets. At the time, the DOJ asked the court to “break Google’s grip on search distribution so that competition and innovation can take hold.”

“Google’s anticompetitive behavior has raised barriers to entry to artificially high levels, forced key competitors to abandon the market for ad tech tools, dissuaded potential competitors from joining the market, and left Google’s few remaining competitors marginalized and unfairly disadvantaged,” the lawsuit reads.

Google responded claiming the lawsuit would slow innovation, raise digital advertising fees, and make it harder for thousands of small businesses and publishers to grow. Google added that a federal judge last year knocked down a claim that Google colluded with Facebook in a separate antitrust suit led by the state of Texas. Google highlights other companies making moves in the digital advertising industry as well, including Microsoft, Amazon, Apple, and TikTok.

Google has a lot going on these days. Its dominance in the digital ad industry has long been a reality and anti-competitive concerns abound. It’s interesting that eight states have joined the DOJ suit. Last year, Google attempted to avoid a potential lawsuit from the DOJ by offering to separate its digital advertising auctions business, which sells and puts ads on customers’ websites, from Google’s digital advertising arm. Google would have put the division under the umbrella of Google’s parent company, Alphabet. This was not enough to convince the DOJ that Google is not engaging in anti-competitive practices and this battle is far from done. Now Google faces challenges in its search dominance from the likes of OpenAI’s ChatGPT — and its partnership with Microsoft and Microsoft’s intent to power its Bing Search engine with ChatGPT. One thing is certain: this will be fascinating to watch play out.

Disclosure: Fatty Fish is a research and advisory firm that engages or has engaged in research, analysis, and advisory services with many technology companies, including those mentioned in this article. The author does not hold any equity positions with any company mentioned in this article.