Google ads are everywhere. Now they're being taken to court, too
Google says growth of social media advertising undercuts government's case, among other factors
One month after a judge declared Google's search engine an illegal monopoly, the company faces another antitrust lawsuit that threatens to break up the company — this time over its advertising technology.
The U.S. Justice Department, joined by a coalition of states, and Google each made opening statements Monday to a federal judge who will decide whether the firm holds a monopoly over online advertising technology.
The regulators contend that Google built, acquired and maintains a monopoly over the technology that matches online publishers to advertisers. Dominance over the software on both the buy side and the sell side of the transaction enables Google to keep as much as 36 cents on the dollar when it brokers sales between publishers and advertisers, the U.S. government contends in court papers.
They allege that Google also controls the ad exchange market, which matches the buy side to the sell side.
"One monopoly is bad enough. But a trifecta of monopolies is what we have here," Justice Department lawyer Julia Tarver Wood said during her opening statement.
Google says the government's case is based on an internet of yesteryear, when desktop computers ruled and users carefully typed precise World Wide Web addresses into URL fields. Advertisers now are more likely to turn to social media companies like TikTok or streaming TV services like Peacock to reach audiences.
In her opening statement, Google lawyer Karen Dunn likened the government's case to a "time capsule with with a Blackberry, an iPod and a Blockbuster video card."
Dunn said Supreme Court precedents warn judges about "the serious risk of error or unintended consequences" when dealing with rapidly emerging technology and considering whether antitrust law requires intervention. She also warned that any action taken against Google won't benefit small businesses, but will simply allow other tech behemoths like Amazon, Microsoft and TikTok to fill the void.
According to Google's annual reports, revenue has actually declined in recent years for Google Networks, the division of the Mountain View, Calif.-based tech giant that includes such services as AdSense and Google Ad Manager that are at the heart of the case, from $31.7 billion US in 2021 to $31.3 billion US in 2023.
Case follows major loss for Google
The proceedings, which began Monday in Alexandria, Va., over the alleged ad tech monopoly, were initially going to be a jury trial, but Google manoeuvred to force a bench trial, writing a cheque to the federal government for more than $2 million US to render moot the only claim that required a jury.
The case will now be decided by U.S. District Judge Leonie Brinkema, who was appointed to the bench by former president Bill Clinton and is best known for high-profile terrorism trials including that of Sept. 11 defendant Zacarias Moussaoui. Brinkema, though, also has experience with highly technical civil trials, working in a courthouse that sees an outsize number of patent infringement cases.
The Virginia case comes on the heels of a major defeat for Google over its search engine, which generates the majority of the company's $307-billion US in annual revenue. A judge in the District of Columbia declared the tool a monopoly, maintained in part by tens of billions of dollars that Google pays each year to companies like Apple to lock in its product as the default search engine presented to consumers when they buy devices like iPhones.
And in December, a judge declared Google's Android app store a monopoly, in a case brought by a private gaming company.
In the search engine case, the judge has not yet imposed any remedies. The government hasn't offered its proposed sanctions, though there could be close scrutiny over whether Google should be allowed to continue to make exclusivity deals that ensure its search engine is consumers' default option.
Peter Cohan, a professor of management practice at Babson College, says the Virginia case could potentially be more harmful to Google because the obvious remedy would be requiring it to sell off parts of its ad tech business that generate billions of dollars in annual revenue.
"Divestitures are definitely a possible remedy for this second case," Cohan said "It could be potentially more significant than initially meets the eye."
In the Virginia trial, the government's witnesses are expected to include executives from newspaper publishers including The New York Times Company and online news sites that the government contends have faced particular harm from Google's practices.
"Google extracted extraordinary fees at the expense of the website publishers who make the open internet vibrant and valuable," government lawyers wrote in court papers.
"As publishers generate less money from selling their advertising inventory, publishers are pushed to put more ads on their websites, to put more content behind costly paywalls, or to cease business altogether."
The government's first witness was Tim Wolfe, an executive with Gannett, a newspaper chain that publishes USA Today as its flagship. Wolfe said Gannett feels it has no choice but to continue to use Google's ad tech products, even though the company keeps 20 cents on the dollar from every ad purchase, not even accounting for what it takes from the advertisers. He said his company simply can't give up access to the huge stable of advertisers that Google brings to the ad exchange.
On cross-examination, Wolfe acknowledged that despite Google's supposed monopoly, Gannett was able to work with other competitors to sell its available inventory to advertisers.
The government's case also attempts to use the words of Google's own employees against them. In openings, Justice Department lawyers cited an email sent by a Google employee wondering whether the company's control of the technology on all three sides presented "a deeper issue" to consider.
"The analogy would be if Goldman or Citibank owned the NYSE [New York Stock Exchange]," wrote the employee, Jonathan Bellack.
Google denies excessive fees
Google disputes the claim that it charges excessive fees compared to its competitors. It also asserts that the integration of its technology on the buy side, sell side and in the middle assures that ads and web pages load quickly, and enhances security. And it says customers have options to work with outside ad exchanges.
Google says the government's case is improperly focused on display and banner ads that load on web pages accessed by desktop, and fails to take into account consumers' migration to mobile apps and the boom in ads placed on social media sites over the last 15 years.
The government's case "focuses on a limited type of advertising viewed on a narrow subset of websites when user attention migrated elsewhere years ago," Google's lawyers wrote in a pretrial filing. "The last year users spent more time accessing websites on the 'open web,' rather than on social media, videos or apps, was 2012."
The trial is expected to last several weeks.
With files from CBC News and Reuters
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