The US is targeting Google’s monopoly on the online advertising business in Big Tech’s latest lawsuit

WASHINGTON (Reuters) – The US Department of Justice has charged Alphabet Inc (GOOGL.O) Google on Tuesday abused its dominance in digital advertising, threatening to dismantle a key company at the heart of one of Silicon Valley’s most successful internet companies.

The government has said Google should be forced to sell its group of ad managers, to tackle a business that generated about 12 percent of Google’s revenue in 2021 but also plays a vital role in the cloud company’s search engine and overall sales.

“Google used illegal, exclusionary, and anticompetitive means to eliminate or severely reduce any threat to its dominance in digital advertising technologies,” the antitrust complaint said.

Google, which handles 80% of its revenue from its advertising business, said the government was “doubling down on a flawed argument that will slow innovation, raise advertising fees, and make it difficult for thousands of small businesses and publishers to grow.”

The federal government said its investigations and lawsuits into Big Tech aim to level the playing field for smaller competitors to a group of powerful companies that includes Amazon.com. (AMZN.O)Facebook Owner Meta Platforms (META.O) and Apple (AAPL.O).

“By suing Google for its monopoly on advertising technology, today the Department of Justice aims to upend the power of the internet giant,” said Charlotte Solomon, director of competition policy at Public Knowledge. “The complaint describes several anti-competitive strategies by Google that have impeded our Internet system.”

The lawsuit, filed on Tuesday by the administration of Democratic President Joe Biden, comes on the heels of an antitrust lawsuit filed in 2020 against Google during the term of office of Donald Trump, a Republican.

The 2020 lawsuit alleged violations of antitrust law in how the company obtained or maintained dominance through its monopoly on Internet search and is scheduled to go to trial in September.

Eight countries are in the suit

Eight states joined the lawsuit filed on Tuesday, including California, Google’s home state.

California Attorney General Rob Ponta said Google’s practices “stifled creativity in a place where innovation is critical.”

Colorado Attorney General Phil Weiser said Google’s dominance has resulted in higher fees for advertisers and less money for publishers with ad space to display. “We are taking measures by filing this lawsuit to get rid of Google’s monopoly and restore competition in the field of digital advertising,” he said in a statement.

Google shares fell 1.9 percent on Tuesday.

In addition to the well-known search, which is organic, Google makes money through its tangled advertising tech business. The government has requested the withdrawal of the Google Ad Manager suite, including Google’s ad exchange, AdX.

Google Ad Manager is a suite of tools including one that allows websites to offer ad space for sale and exchange that serves a marketplace that automatically matches advertisers with these publishers.

Advertisers and website publishers have complained that Google has not been transparent about where the advertising money goes, specifically how much goes to publishers and how much to Google.

The lawsuit raises concerns about some products in the ad technology suite, where publishers and advertisers use Google tools to buy and sell ad space on other websites. This business was about $31.7 billion in 2021 or 12.3 percent of Google’s total revenue. About 70% of this revenue goes to publishers.

“Withdrawal of advertising technology may not be a game-changer, but it may be subtlely important to the targeting ability of Google Ads,” said Paul Gallant of the Queen Washington research group.

“It connects to all the other Google companies and ties them together,” Gallant said. “I think Google may be more concerned about losing advertising technology down the road than people might think.”

The company has made a series of acquisitions, including DoubleClick in 2008 and AdMob in 2009, to help make it a dominant player in online advertising.

“POIROT PROJECT”

While Google remains the long-term market leader, its share of digital advertising revenue in the US fell to 28.8% last year from 36.7% in 2016, according to Insider Intelligence.

The Justice Department requested a jury to decide the case, which was filed in the US District Court for the Eastern District of Virginia.

The lawsuit outlines a number of Google’s attempts to control the advertising market.

The complaint discussed bidding, a way companies can bypass Google to bid on advertising space on websites.

He sets up a series of projects including one called “Project Poirot” named after Agatha Christie’s principal investigator, Hercule Poirot. The project was designed to “identify and respond effectively to ad exchanges that have adopted key bidding technology.”

The 149-page complaint said Google doubled down after Project Poirot’s initial success in manipulating advertisers’ spending to reduce competition from rival ad exchanges. Rivals AppNexus/Xandr lost 31% of DV360 advertiser spend, Rubicon lost 22%, OpenX lost 42%, and Pubmatic lost 26%, the complaint said.

(Cover) By Diane Bartz and David Shepherdson. Additional reporting by Sheila Dang; Editing by Chris Sanders and Grant McCall

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