Here's Where Google Did (And Didn't) Exercise Monopoly Power

U.S. District Court judge Leonie Brinkema ruled that Google has monopolized the open web display advertising market and illegally worked to protect that dominance. As she noted, “In addition to depriving rivals of the ability to compete, this exclusionary conduct substantially harmed Google’s publisher customers, the competitive process, and, ultimately, consumers of information on the open web.” Brinkema’s ruling is exceedingly thorough, which is probably why it took longer than she expected to finalize, and it offers a lot of insight for other jurisdictions, courts, and policymakers considering how to ensure markets remain competitive. Brinkema agreed that Google held a monopoly position in the publisher server market and the ad exchange market; however, under U.S. antitrust law, a monopoly position is not enough—plaintiffs must show “whether the company’s conduct, when considered as a whole, harmed competition and therefore harmed consumers.” This is where the judge’s ruling got very interesting, although I’m sure for many publishers, this part resurfaced long-buried trauma. Brinkema astutely organized the plaintiff’s allegations into three categories: Establishing a dominant position across the adtech stack through the acquisitions of DoubleClick and Admeld. Tying DoubleClick for Publishers (DFP) to AdX to lock publishers into exclusively using Google’s sell-side adtech tools rather than those offered by competitors. Leveraging its tied adtech tools to engage in a series of acts that diminished rivals’ scale, thwarted their ability to compete, and harmed customers. On the first category, the judge disagreed that the DoubleClick and Admeld acquisition were anticompetitive by themselves. Even though these companies ultimately gave Google a dominant position, Google had not exercised monopoly power to acquire them. In her justification, Brinkema noted that neither the Federal Trade Commission nor the Department of Justice decided to intervene. Regardless of whether you think they should have, there is a huge gap in U.S. law—there are virtually no rules for how companies should behave in the digital advertising marketplace. As Google later demonstrated, a company can acquire a dominant position by virtually any means available to them. And, when a company does achieve a dominant position, there are no specific rules on what is fair or foul. On the second category, Brinkema agreed that Google illegally tied AdX and DFP to significantly harm competition. Specifically, Google required publishers to use DFP if they wanted access to AdX (and the huge pool of AdWords buyers). Google used this tie not only to lock in publishers, but also to disadvantage any competing publisher ad servers. On the third category, Brinkema thoroughly and clinically summarized Google’s efforts to retain that DFP-AdX tie through subsequent efforts to manipulate auction dynamics. Perhaps my biggest takeaway from the ruling is how strongly Brinkema appears to believe the harms to publishers extend well beyond the supracompetitive take rate to all of the auction manipulation, likely costing publishers more than the tens of billions that may be counted simply by looking at the monopoly fees charged by Google. Brinkema found that Google “introduc[ed] a series of anticompetitive policies, practices and technology changes to its sell-side adtech tools that were not in its publisher customers’ best interests.” The first sin was First Look, where publishers were required to allow AdX the ability to buy on any ad impression before anyone else. Further tilting the playing field in its favor, Google then implemented Last Look, where Google required publishers to give it the opportunity to make the last bid on any auction after being able to see all competing bids. Google should have had to bid in the dark like everyone else and would likely bid a much higher price to win the best inventory placements. Last Look surely resulted in harm to all publishers, but the largest impact was likely felt by premium publishers whose websites offered higher-quality environments for brand equity and thus would attract higher bids. As Brinkema noted, “the anticompetitive effects of Last Look have been compounded by Google’s sell-side dynamic revenue share.” When publishers started using header bidding as a way to get out from under Google’s onerous rules, Google deftly rolled out Open Bidding to squash any competitive threat against the tie-up of AdX and DFP. Then, in 2019, as regulators around the world were starting to take notice, Google eliminated Last Look and replaced it with unified pricing rules. Here, Google required publishers to set the same price floor on AdX as they did on other exchanges. Brinkema succinctly summarized the impact of Google’s actions when she wrote: “By forcing Google’s publisher customers to use a product they would not necessarily have otherwise used, by making it difficult for rival publisher ad servers to compete on the merits, and by significantly reducing rivals’ market share, the tying of DFP to AdX has had a substantial anticompetitive effect in the publisher ad server market for open-web display advertising.” Also noteworthy, Brinkema rejected Google’s claims that its actions were “procompetitive product design choices made for valid business reasons” which “improved safety and privacy, countered fraud, reduced latency, promoted investment, decreased prices.” In nearly every debate on Capitol Hill about legislation to restrict the anticompetitive behavior of Big Tech platforms, we inevitably hear that the platforms need exceptions for fraud, privacy, or other benign business reasons. Policymakers should take note that Google will attempt to use any exceptions to justify anticompetitive behavior. The next step in the legal process will be crucial—deciding what remedies are needed to both atone for Google’s misdeeds and ensure that this anticompetitive behavior does not persist. I seriously doubt that behavioral remedies, such as contractual limitations and transparency requirements, will be sufficient. What’s more, I think it would be exceedingly hard for the courts to oversee a construct of behavioral remedies, especially when Google has shown itself to be so adept at micromanaging the adtech market to its benefit. The obvious preferred path forward would be structural remedies, similar to as imagined in the AMERICA Act, where Google would not be allowed to operate on both sides of the marketplace, simultaneously representing buyers and sellers and operating the exchange. In a healthy marketplace, buyers and sellers have their own, independent agents who advocate solely for their client’s interest, and when it comes time to finalize any agreement, there is a neutral third party to execute the deal terms in a transparent fashion. Average Americans understand and expect this dynamic whether they are buying a house or stock shares. Going forward, there will be more legal maneuvering, discussions about the appropriate remedies, and eventually appeals. But it is important to note that the European Union and two U.S. courts have now found Google to have illegally maintained a monopoly in search and adtech. The through line in all of these cases is the egregious and calculated activities of Google to harm competition, consumers, and publishers, all in an effort to maintain monopoly-fueled profits.

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Here's Where Google Did (And Didn't) Exercise Monopoly Power

Breaking down Leonie Brinkema's landmark ruling

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Chris Pedigo

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