Google takes a cut of at least 30% of the money web publishers and advertisers spend via its technology — and can do so thanks to a monopoly it’s built through illegal anticompetitive behaviour.
So say the US department of justice and eight states in a civil lawsuit they filed last month that seeks “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”.
The suit accuses Google, which reported global revenue of nearly $32bn in 2021, of 15 years of market abuse during which it has violated the Sherman Antitrust Act. Enacted in 1890, it is the principal US legislation enforcing free markets and was invoked against Microsoft in 1999.
Google became the darling of Silicon Valley as a scrappy start-up with an innovative way to search the emerging internet. That Google is long gone
— US government lawsuit
While search is the biggest source of revenue for Google and its parent company Alphabet, it makes a significant amount of money from display advertising — where it shows adverts on other publishers’ websites.
“The harm is clear,” say the plaintiffs. “Website creators earn less, and advertisers pay more than they would in a market where unfettered competitive pressure could discipline prices and lead to more innovative ad tech tools that would ultimately result in higher quality and lower-cost transactions for market participants.”
The consequences “hurt all of us” because publishers earn less advertising revenue and therefore resort to “subscriptions, paywalls, or alternative forms of monetisation”.
The lawsuit points out “one troubling but revealing” statistic: “Google keeps at least 30c — and sometimes far more — of each advertising dollar flowing from advertisers to website publishers through Google’s ad tech tools.”
It says the company’s own internal documents “concede that Google would earn far less in a competitive market”.
The damning indictment accuses Google of having bought its way to monopolistic control with acquisitions. It is an “industry behemoth” that has “corrupted legitimate competition by engaging in a systematic campaign to seize control of the wide swath of hi-tech tools used by publishers, advertisers and brokers to facilitate digital advertising”.
“Having inserted itself into all aspects of the digital advertising marketplace, Google has used anticompetitive, exclusionary, and unlawful means to eliminate or severely diminish any threat to its dominance over digital advertising technologies.”
Google launched Google Ads in 2000, which sold advertising to appear next to search results. The “power of this instantaneous, highly targeted advertising technique” proved popular for the nascent digital advertising industry.
“Not satisfied with its dominance on the advertising side of the industry alone, Google devised a plan to build a moat around the emerging ad tech industry by developing a tool that would be used by website publishers as well,” write the plaintiffs, with their own emphasis.
The company, the lawsuit says, became the dominant player on both sides of the digital advertising industry. “[It] could play both sides against the middle. It could control both the publishers with digital ad space to sell, as well as the advertisers who want to buy that space. With influence over advertising transactions end-to-end, Google realised it could become ‘the be-all, and end-all location for all ad serving’.”
Google is robbing from Peter (the advertisers) to pay Paul (the publishers), all the while collecting a hefty transaction fee for its own privileged position in the middle
— US government lawsuit
The department of justice accuses Google of “robbing from Peter (the advertisers) to pay Paul (the publishers), all the while collecting a hefty transaction fee for its own privileged position in the middle”.
This “turned the entire purpose of the digital advertising industry on its head. Rather than helping to fund website publishing, Google was siphoning off advertising dollars for itself through the imposition of supra-competitive fees on its platforms.”
The lawsuit is the second the US government has brought against Google — in 2020 it brought one accusing the company of monopolising search. That case is due to come to court later this year.
“Two decades ago, Google became the darling of Silicon Valley as a scrappy start-up with an innovative way to search the emerging internet. That Google is long gone,” the latest suit alleges.
Google was a “monopoly gatekeeper for the internet” that used “pernicious” anticompetitive tactics to maintain and extend its monopolies.
In response, Alphabet said the department of justice was trying “to pick winners and losers in the highly competitive advertising technology sector”.
“[It] is doubling down on a flawed argument that would slow innovation, raise advertising fees and make it harder for thousands of small businesses and publishers to grow.”
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