Despite previous speculation about how the government could dismantle Google’s dominance in the digital advertising marketplace, the Justice Department’s lawsuit, which it filed Tuesday along with 11 Republican state attorneys general, focuses on Google’s ads business on a limited basis.
Rather than interrogating the mechanisms of Google’s ad stack, government lawyers approached Google’s digital advertising business by targeting its dominance in online search.
With this approach, the suit “strikes at the heart of Google’s grip over the internet for millions of American consumers, advertisers, small businesses and entrepreneurs beholden to an unlawful monopolist,” said Attorney General William Barr in a statement.
Barr has been hands-on in the investigation, especially after antitrust chief Makan Delrahim recused himself due to prior work lobbying for Google’s acquisition of DoubleClick. However, despite speculation that Barr was rushing investigators to file suit ahead of the election, the Justice Department denied any political motives or that the probe was rushed on a call with reporters today.
In the suit, the Justice Department outlined how Google used its search monopoly to build a powerful search advertising business—earning $40 billion annually in the U.S., according to the suit. Those revenues were then shared with distributors such as carriers, Android manufacturers, web browsers and Apple to get prime placement on their respective technologies.
According to the suit, “These enormous payments create a strong disincentive for distributors to switch.”
“In exchange for this privileged access to Apple’s massive consumer base, Google pays Apple billions of dollars in advertising revenue each year, with public estimates ranging around $8–12 billion,” according to the suit. “The revenues Google shares with Apple make up approximately 15–20 percent of Apple’s worldwide net income.”
Once Google has that default status, the DOJ said, users “rarely switch,” and partners like Apple can’t afford to turn down the revenue sharing profits.
The suit continues that search ads are not easily substitutable with other forms of physical or digital advertising and, because of that, Google is able to “maintain prices above the level that would prevail in a competitive market.”
In a statement, Google svp of public affairs Kent Walker called the suit “deeply flawed” and stressed that the company pays for prime placement and that users who want to can change their search preferences.
“We understand that with our success comes scrutiny, but we stand by our position,” Walker said. “American antitrust law is designed to promote innovation and help consumers, not tilt the playing field in favor of particular competitors or make it harder for people to get the services they want.”
The DOJ suit does not indicate how Google can remedy its alleged antitrust abuses but instead suggests “structural relief,” such as a breakup or divestiture.
In a press call Tuesday, deputy attorney general Jeffrey Rosen declined to elaborate about possible fixes or whether the Justice Department discussed a settlement with Google. But he did leave open the possibility of additional action.
“Our review of competitive conditions in the marketplace does continue,” Rosen told reporters, alluding to ongoing investigations of other tech companies, including Facebook. “Google would not be an exception to that.” The Wall Street Journal reported that Barr’s DOJ is still investigating Google’s ad-tech practices.
An effort to zero-in on Google’s digital ad dominance could come from elsewhere yet. A coalition of 50 states and territories, led by Texas Attorney General Ken Paxton, has been focused on Google’s digital ad stack.
