The U.S. Justice Department and eight states sued Alphabet Inc’s Google on Tuesday to break up the search giant’s ad technology business, citing alleged illegal monopoly of the digital advertising market.
“The lawsuit we’re filing today seeks to hold Google accountable for what we say is a longstanding monopoly on digital advertising technology that content creators use to sell ads and advertisers use to buy ads on the open Internet,” said Jonathan, the Justice Department’s antitrust chief. . Kanter said at a news conference announcing the lawsuit Tuesday.
New York, California and Virginia are among the states signing on to the complaint filed in Virginia federal court.
In a blog post, Google said the lawsuit “attempts to pick winners and losers in the competitive ad tech space. The case “largely repeats baseless allegations brought by the Texas attorney general. lawsuits, most of which were recently dismissed in federal court. The Justice Department 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. “
Alphabet shares extended losses following the news, falling as much as 2.5% to hit session lows. The stock fell 23% in the 12 months through Monday, underperforming the Nasdaq 100 .
“No matter the industry, no matter the company, the Department of Justice vigorously enforces our antitrust laws,” Arty said. General Merrick Garland said at a news conference.
The lawsuit is the first major case challenging the power of one of the largest U.S. tech companies after the Biden administration began an investigation under former President Donald Trump. It was also one of the few times since the Justice Department dismantled the Bell Telecom system in 1982 that it has called for a major company to be broken up.
Google is the dominant player in the $278.6 billion U.S. digital advertising market, controlling much of the technology used to buy, sell and deliver online ads. The DoJ said Google’s dominance enabled it to save advertisers at least $0.30 for every dollar spent through its online advertising tools. A resolution in the case could take years.
“Google’s ubiquitous power throughout the ad technology industry has been questioned by its digital advertising executives,” the complaint states. “The analogy is if Goldman Sachs or Citibank owned the New York Stock Exchange.”
The lawsuit is the second antitrust lawsuit the Justice Department has brought against Google and the fifth major U.S. case challenging the company’s business practices. State attorneys general have filed three separate lawsuits against Google, accusing it of violating antitrust laws by dominating the online search, advertising technology and app markets on its Android mobile platform.
Google has engaged in 15 years of anticompetitive conduct, including a “model of acquisitions to gain market dominance,” Kanter, the Justice Department’s antitrust chief, said at a news conference.
These include the $3.1 billion acquisition of online advertising giant DoubleClick in 2007 (a deal the Justice Department is now seeking to unwind), Invite Media in 2010 for $81 million and AdMeld in 2011 for $400 million.
The Justice Department complaint also seeks damages from Google for allegedly overbilling federal government agencies such as the U.S. Army that buy online ads. The U.S. government has spent more than $100 million on online display ads since 2019, the agency said, but the complaint does not indicate how much the Justice Department is seeking to recover.
The allegations in the Justice Department lawsuit echo those brought in 2020 by 16 state attorneys general, as well as Puerto Rico. The lawsuit is pending in New York federal court.
The Mountain View, Calif.-based company ranked No. 1. It ranks first in the $626.9 billion global digital advertising market in 2023, with the U.S. accounting for the lion’s share, according to estimates by research firm EMarketer. Alphabet’s ad business is expected to bring in $73.8 billion in digital ad revenue in the U.S. by 2023. Most of that ($58.5 billion) came from Google’s search advertising business. The remaining $15.3 billion came from display advertising. Google offers ad-buying services for marketers, ad-selling services for publishers, and a trading platform where both parties can close deals in lightning-fast auctions.
These exchanges operate similar to online stock trading platforms with an automated bidding process. Rivals and publishers have complained that Google uses parts of the fast network, such as its ad exchange, to benefit other areas and undercut rivals. Google alone is on track to generate about $65.7 billion in digital ad revenue in the U.S. this year, or about 26.5% of the market, compared with 2.9% for YouTube, according to EMarketer.
The company’s market share has slipped from a high of 37.4 percent of U.S. digital ad spending in 2015, according to EMarketer.
Google believes that the online advertising market is a crowded and highly competitive market. In court filings and congressional testimony, the company noted that its competitors include other major players in the ad tech market, such as Amazon.com, Meta Platforms and Microsoft.
The department’s scrutiny of Google’s control of the ad tech market dates back to the Trump administration. The Ministry of Justice under Atti’s leadership at the time. General William Barr has instead sued Google’s search business, accusing the company of using exclusive distribution deals with wireless carriers and handset makers to exclude competition. The case will go to trial in September.
The agency continues to investigate ad tech under Biden. After Jonathan Kanter was confirmed to lead the antitrust division in November 2021, Google asked the Justice Department to review whether Kanter should be recused from all actions by the company because he has represented its critics in the past. Kantor has been barred from participating in Google’s antitrust investigation while the Justice Department considers the possibility that he may recuse himself. The Justice Department eventually ruled that Kanter could handle the Google-related case.