Google hounded yet again by antitrust regulators for its incredibly popular ad-tech business.
Google has been taking antitrust flak for its ad-tech business for quite some time, as discussed by the Wall Street Journal. In 2021, the company had to pay a fine of 220 million euros ($237 million USD) to France following an investigation of inadequate data access to competing ad-tech firms. In January 2023, the Department of Justice (DOJ) sued Google for “monopolizing digital advertising technologies,” in violation of (sections one and two) of the Sherman Antitrust Act. Unable to catch a break from regulators, the tech giant now faces a complaint from the European Commission to break up its ad-tech business. The EU’s antitrust complaint, like those of France and the U.S., alleges that Google abuses its market share sell-side, buy-side, and through the exchange of internet ads between publishers and advertisers to lock publishers into its services while purchasing rival firms and making entrance unprofitable.
What exactly is an “ad tech stack”?
Google’s advertising business includes tools publishers use to offer ad space (DoubleClick for publishers, 90 percent market share), tools advertisers use to purchase this space (GoogleAds, 80 percent market share, and Display & Video 360, 40 percent market share), and an exchange to match the two (Google AdExchange, 50 percent). What’s wrong with such a vertically integrated advertising system? The DOJ claims that Google is guilty of hindering website publishers from generating “advertising revenue that supports the creation and maintenance of a vibrant open web, providing the public with unprecedented access to ideas artistic expression, information, goods, and services.”
I note with a raised eyebrow the irony of a federal agency paying lip-service to a “vibrant open web,” and regard as flatly absurd its claim that Google has prevented rather than provided the public with “unprecedented access” to ideas and commodities.
Specifically, Attorney General Merrick Garland alleges that Google unlawfully “has used anticompetitive, exclusionary, and unlawful conduct to eliminate or severely diminish any threat to its dominance over digital advertising technologies.” Deputy Attorney General Lisa Monaco goes further, claiming that, “in pursuit of outsized profits, Google has caused great harm to online publishers and advertisers and American consumers” (italics added). What exactly are “outsized profits” and how comfortable does one feel about bureaucrats determining them? Associate Attorney General Vanita Gupta answers this rhetorical question by revealing another motive for the suit: “increased advertising costs for . . . the United States government, including for our military.”
For these vague and economically specious reasons, the DOJ sought “both equitable relief on behalf of the American public as well as treble damages for losses sustained by federal government agencies that overpaid for web display advertising.” How the DOJ determines what constitutes “overpaying” and how prices would be lower with multiple firms lacking the efficiency gains from Google’s network effects, economies of scale, and reduction of the double-marginalization problem is not explained in the DOJ’s press release and remains elusive.
All those who believe in limited government, free markets, and individual rights should be alarmed by a governmental agency — be it the American DOJ, the English Competition and Markets Authority (also investigating Google’s ad-tech business), or the EU’s European Commission — claiming the prerogative to specify appropriate prices beyond which American citizens and their firms are liable for litigation, fines, and dismantling.