Explainer: What does the US ruling on Google's illegal ad tech monopoly mean?
Photo: AFP
By Kenrick Cai and Peter Henderson, Reuters
A US judge's ruling that Google has illegal monopolies in ad technology sets up the possibility of US prosecutors seeking a breakup. Here's what the case involves and what Google owner Alphabet faces from here.
What is this about?
The most important thing is what this is not about: this is not about search, Google's bread and butter, although there is a separate antitrust case about search. The Justice Department's ad technology case revolves around Google Network, a division of the business that manages its auction-style system that advertisers use to purchase digital ad space. The ad tech chooses what ad to put where at what cost.
Federal prosecutors said that Google's power over the ad tech allows it to illegally fend off competition, which hurts web publishers, such as news outlets. The judge agreed. Google's argument was that it out-competed rivals with superior technology.
Advertising accounted for about 75 percent of Alphabet's $US350.02 billion ($NZ586b) in revenue for 2024. The Google Network business accounted for only 8.7 percent of the revenue.
What happens next?
The judge who ruled there are illegal monopolies now will hear arguments about what to do. The Justice Department had been seeking, at a minimum, the divestiture of Google Ad Manager, a platform within the Network division. Ad Manager represented 4.1 percent of overall revenue and 1.5 percent of operating profit in 2020, according to Wedbush research and analysis of court documents.
More recent figures were redacted from court documents.
How big a deal is this for Google?
Erik Hovenkamp, a professor at Cornell Law School, earlier in the case had predicted that if it lost, Google would probably have to divest some, not all, of its display advertising business, and the net effect would be a drop in revenues of less than 10 percent.
Google has even been open to some ad tech divestiture. Reuters first reported on 18 September that Google itself offered to sell its advertising exchange, which is part of Google Ad Manager, to appease European antitrust regulators. Publishers rejected the proposal, sources said.
Could this have ripple effects?
The most serious implication of the ruling might be how the company manages the ripple effects of court-ordered remedies across other parts of its ad tech suite, Nikolas Guggenberger, a law professor at the University of Houston, has said. In theory, a DOJ win would make it easier for advertisers and publishers to switch ad tech platforms.
There is also the political precedent set in terms of political will: the Biden and Trump administrations both have supported this case so far, showing an almost unique level of cooperation on the two sides of the political aisle in the prosecution of Big Tech.
There is a separate, higher stakes antitrust case about Google's search technology that continues, and this is a flesh wound compared to the implications of a loss in search, analysts say. A judge in Washington next week will hold a trial related to search.
Is this the end?
No. Google already has said it will appeal. The federal judge next must decide what the remedies are to the illegal monopoly. It will be some time, likely years, before this is finished, unless a settlement is agreed.
-Reuters
US Federal District Judge Leonie Brinkema ruled Thursday that tech giant Google LLC had violated federal anti-trust law by engaging in anti-competitive acts to attain monopoly power and depriving competitors of the ability to compete.
An accompanying order issued by the judge required both parties to submit a joint proposed schedule for further briefing on their respective positions on remedies in the case.
Judge Brinkema found Google liable under three counts including 1) monopolization of the publisher ad server market; 2) monopolization of the ad exchange market; and 3) unlawful tying of the company’s publisher ad server and ad exchange.
The particular technology in the case includes software that the tech giant uses to assist with transactions between advertisers and online publishers who sell the ad space. Google was accused of holding a monopoly on this software and tying that monopoly to its stranglehold over several of the marketplaces that facilitate deals between advertisers and online publishers.
Much of Judge Brinkema’s opinion was dedicated to explaining the complex world of programmatic advertising while explaining how targeted advertising enabled by technological advances has upended the industry and how advertisers and publishers do business with each other.
Judge Brinkema explained that Google’s free services including its search engine, apps, and location services have enabled the company to collect “detailed knowledge about billions of people who have used its products.” This information has in turn been used to match advertisers to users and “increase its advertiser customers’ return on ad expenditures.” Brinkema concluded that since nearly 80 percent of the company’s revenue has been generated from this activity, “Google is fundamentally in the business of advertising.”
Google’s substantial market share and “supracompetitive” pricing for its services were cited as evidence of the company having achieved monopoly status in the digital ad network and ad tech stack marketplaces.
Google has expressed ambivalence over the ruling declaring that they had won “half the lawsuit” in defeating one of the counts while vowing to appeal the adverse portions of the ruling.
This is the second anti-trust case in the last two years that has ended with a judgment against the tech giant. A case over the company’s search engine was decided in August of 2024 with the court finding that Google had achieved a monopoly in online searches with potential remedies including the sale of the Chrome browser.
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