Google’s core advertising business is in trouble on both sides of the Atlantic. In the US, 17 state attorneys launched a lawsuit against Google in 2021 –based on concerns that it is abusing its dominant position in online advertising. This week, the federal government joined in on the action and filed its own anti-trust lawsuit to break up Google’s ad business.
Meanwhile in Europe, the European Commission pursues an investigation into market abuses by Google in the online advertising market. The probe was launched in 2021 and is expected to evolve into a legal proceeding this year.
What regulators are concerned about
The focus on the ongoing investigations in the EU and US are different, but rest on the same premise that the structure of the online ad market – largely owned by Google – gives it the incentive and motive to engage in unfair commercial practices in breach of competition rules.
Authorities are concerned that Google is leveraging its strong position on the buy and sell sides of the ad market to exclude rivals and extract monopolistic rents. In other words, Google is accused of forcing ad buyers and sellers to use its services and of overcharging them for it.
Google’s ad business, which accounts for more than 80% of its revenues, is heavily integrated along the ad-tech value chain. Google not only buys and sells ads, it also operates the main “ad exchange” for these transactions.
The argument goes that these conditions create an inevitable conflict of interest. Dina Srinivasan, a lawyer that has taken up arms against big tech, draws a parallel between ad and financial markets. The idea is that banks are not allowed to own stock exchanges due to conflicts of interest, so why should Google be allowed to do this in ad markets?
Srinivasan argues in a paper that Google is “engaging in conduct that lawmakers prohibit in other electronic [financial] trading markets: Google’s exchange shares superior trading information and speed […] steers buy and sell orders to its exchange and websites (Search & YouTube), and Google abuses its access to inside information”.
Legal pressure piling up
Google faces mounting scrutiny over its role in online ad markets. In 2021, the French competition authority sanctioned Google for abusing its dominant position in online ad markets by giving preferential treatment to its own technologies, hurting its rivals and publishers in the process.
Also in 2021, the EU and UK competition authorities, investigated Google’s move to withdraw third party cookies due to concerns that this amounted to a power grab of the ad market and to privacy washing.
In 2022, US court filings revealed that Google struck a deal with Facebook back in 2018, the so-called Jedi-Blue agreement which involved Google providing Facebook with preferential ad treatment in exchange for Facebook withholding the deployment of a new advertising bidding technology with the potential to reduce Google’s ability to outperform its rivals.
Last year, the EU adopted the Digital Markets Act (DMA) to tackle the unfair commercial practices of large tech companies such as Google and Meta. One key provision seeks to tackle the lack of transparency in online ad markets, by forcing gatekeepers to reveal information about ad prices and how they are calculated.
The consequence of these market conditions for publishers is that they are deprived of crucial ad revenues needed to support a free and independent press. Many publishers have either been forced to show more ads, put up a paywall or increase subscription fees (paywalls are good so long as publishers are not forced to use them!).
Several finance litigation firms are now courting European publishers in a bid to secure claimants for damages. These firms want to use the 2021 decision of the French competition authority against Google as a basis for awarding damages to publishers. The sums involved will of course depend on how many publishers decide to take part.
However, what many publishers are currently after behind closed doors is a much broader and deeper investigation by EU authorities than the one concluded in 2021 in France. Many hope that the Commission will follow suit with the US federal government and drop reservations about sanctioning Google over fears that this will undermine good transatlantic EU-US relations.
Iacob Gammeltoft, EU policy manager