WASHINGTON, Jan 24 (Reuters) – The U.S. Justice Department sued Alphabet’s (GOOGL.O) Google on Tuesday, accusing the company of abusing its dominance in the digital advertising business and saying it should be forced to sell its ad management suite , in the latest government move to thwart the market power of big tech companies.
The lawsuit concerns a Google business that accounts for 80% of its revenue. The Justice Department is asking the court to force Google to spin off a key part of its ad tech business.
“Google used anticompetitive, exclusionary, and illegal means to eliminate or substantially reduce any threat to its dominance in digital advertising technologies,” the antitrust lawsuit says.
Google said the government is “doubling down on a flawed argument that slows innovation, drives up advertising costs and makes it harder for thousands of small businesses and publishers to grow.”
The federal government said it was trying to level the playing field for rivals from Big Tech, including Amazon.com (AMZN.O), Facebook owner Meta Platforms (META.O) and Apple Inc (AAPL.O).
The lawsuit was filed Tuesday by the administration of Democratic President Joe Biden, after Republican Donald Trump filed a 2020 antitrust lawsuit against Google while in office.
The 2020 lawsuit, which accuses the company of violating antitrust law by gaining or maintaining dominance by monopolizing online search, is scheduled to go to trial in September.
Eight states sued
Eight states joined Tuesday’s lawsuit, including Google’s home state of California.
California Attorney General Rob Bonta said Google’s approach “stifles creativity in areas where innovation is critical.”
Colorado Attorney General Phil Weiser said Google’s dominance has led to higher fees for advertisers and less revenue for publishers who provide ad space. “We are taking action to file this lawsuit to undo Google’s monopoly and restore competition in the digital advertising business,” he said in a statement.
Google shares fell 1.9 percent on Tuesday.
In addition to its well-known free search, Google also generates revenue through its interconnected advertising technology business. The government asked to spin off the Google Ad Manager suite, including Google’s ad exchange AdX.
Google Ad Manager is a suite of tools that includes a tool that allows websites to offer ad space for sale, and an exchange that serves a marketplace that automatically matches advertisers with those publishers.
Advertisers and website publishers have complained that Google is not transparent about where ad revenue goes, specifically how much goes to publishers and how much goes to Google.
Tuesday’s lawsuit raised concerns about certain products in the ad tech stack, where publishers and advertisers buy and sell ad space. The business is about $31.7 billion in 2021, accounting for 12.3% of Google’s total revenue. About 70% of revenue goes to publishers.
The company made a series of acquisitions, including DoubleClick in 2008 and AdMob in 2009, to help it become the dominant player in online advertising.
While Google still leads the market by a wide margin, its share of U.S. digital ad revenue has been declining, from 36.7 percent in 2016 to 28.8 percent last year, according to Insider Intelligence.
The Justice Department requested a jury verdict in the case, which has been filed in the U.S. District Court for the Eastern District of Virginia.
The lawsuit lays out a series of attempts by Google to dominate the advertising market, with the government arguing that the company has the “technical tools to eliminate the threat of competitors.”
The complaint discusses headline bidding, a way companies can bypass Google’s bidding for ad space on websites.
It lists a series of projects, including one called “Project Poirot,” named after Agatha Christie’s master detective Hercule Poirot. The project “aims to identify and effectively respond to ad exchanges that employ header bidding techniques.”
The 149-page complaint said Google doubled down on its bet after Project Poirot’s initial success in manipulating its advertisers’ spending to reduce competition from rival ad exchanges. Competitors AppNexus/Xandr lost 31 percent of DV360 advertiser spend, Rubicon 22 percent, OpenX 42 percent and Pubmatic 26 percent, the complaint said.
Reporting by Diane Bartz and David Shepardson; Additional reporting by Sheila Dang; Editing by Chris Sanders and Grant McCool
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