The Department of Justice’s Antitrust Case In opposition to Google’s Ad Tech Organization

Executive Summary

  • Subsequent March, the Office of Justice’s (DOJ) advertising technology (advertisement tech) antitrust case against Google will start off, and the U.S. District Court docket for the Eastern District of Virginia will look at how Google has obtained and operated diverse advert tech resources to turn into a dominant on the net advertiser.
  • To get at demo, the DOJ will want to demonstrate that Google has each monopoly ability in a relevant advertisement tech current market and used anticompetitive perform to both get or maintain that monopoly power.
  • Google’s widespread integration of distinctive advert tech instruments into its offerings and vigorous opposition will not give rise to antitrust legal responsibility in isolation if Google can exhibit that the perform was pro-competitive or that it lacked the capability to extract monopoly rents.


Subsequent March, the Department of Justice’s (DOJ’s) next key antitrust circumstance versus Google will start, with the company in this circumstance arguing that Google has illegally monopolized various parts of the promotion technology (advertisement tech) market place. Google presently operates web-site publisher ad servers, advertiser ad networks, and critically, the advert trade in among them. In apply, this suggests that Google can offer advertisers impressions on its affiliated publishers and supply publishers special access to its advertisers. When each publishers and advertisers can go exterior of Google’s networks, the DOJ will argue that Google has applied monopoly electric power and anticompetitive perform to correctly forego these opposition.

To win at demo, DOJ will will need to confirm two features for its main statements. To start with, it will have to exhibit that Google has monopoly electric power in a related advert-tech industry. Next, it must present that Google accomplished this monopoly electrical power making use of anticompetitive carry out made to exclude rivals and not just through vigorous and efficient competitors. As Google will argue, it is unclear regardless of whether the firm has monopoly electrical power in any applicable market place due to aggressive pressures from rivals and other products and services like movie and software ads. And even if it does have monopoly power, the perform at query might not basically hurt levels of competition in the aggregate.

This insight breaks down the big arguments from the DOJ and Google on both equally features of the case and delivers insights into their relative merits. In advance of Congress begins to author antitrust legislation focusing on huge engineering firms, it should carefully consider how the courts interpret and utilize existing legislation in this situation.

Track record: Google and Advert Tech

Promoting plays a essential position in the World wide web economic system, as most web sites do not demand a use payment, but rather elevate revenue by way of selling advertising and marketing house. Advertisers buy what are recognized as impressions, which are essentially a screen of their advertisements to a website’s buyers. The American Motion Forum has beforehand posted an perception on how electronic advertising and marketing is effective.

Related to this situation, Google currently competes in all a few layers of the advertisement tech stack. Initially, for sites striving to provide marketing place and viewer impressions, Google presents its publisher ad server as a result of DoubleClick, which troubles requests for advertiser bids for publisher ad area. Second, for advertisers, Google features equally Google Ads and Display screen & Video clip 360, which give bids to the publisher advert servers for advertising on a web page. In involving it all, Google Ad Exchange connects publishers and advertisers, such as Google’s possess companies.

Figure 1: An outline of the ad tech market place in the DOJ’s grievance.

Below this arrangement, Google can offer corporations on equally sides of the trade obtain to a huge selection of associates and superior focus on the requires of its clients by giving an all-in-a single providing, so to talk. However this providing also raises aggressive problems, for if Google has monopoly ability in any one particular current market, it can leverage that monopoly ability to hurt opposition in other pieces of the advert tech current market.

Factor 1: Monopoly Energy

Simply because monopoly energy could be made use of to exclude rivals, the U.S. District Court for the Eastern District of Virginia will very first study no matter whether Google has monopoly electrical power in a appropriate market. While courts often use size and focus as a proxy for monopoly electrical power, monopoly ability refers to the capability of a business to value previously mentioned aggressive concentrations. Even if a business has a 90 p.c current market share, if no barriers to entry or network results exist, raising charges would guide to new entrants and maverick corporations having a massive portion of these product sales. Consequently, courts will search at such things, and no matter whether choice substitutes exist that will finally restrict a firm’s capacity to increase charges about competitive degrees.

Publisher Ad Servers Marketplace: To start with, the DOJ alleges that Google has monopoly electrical power in the publisher advertisement servers marketplace. By means of its acquisition of DoubleClick, Google’s share of this market has remained previously mentioned 90 % for yrs, and obstacles to entry – this sort of as the value to establish these kinds of a network, substantial switching costs, and the issue to reach scale that would make it valuable to advertisers – could give Google the potential to increase the costs it will take from the trade (and away from the publisher) over competitive degrees. Yet, the DOJ complaint mainly ignores rivals for web page marketing space, together with in-house publisher ad servers, as corporations these kinds of as Fb and Snapchat work their have publisher servers. The complaint also mostly excludes movie and app ad publisher servers, which make it possible for websites with marketing place to provide online video adverts. If Google elevated charges on picture advertisements, publishers could only provide much more video advertising space, limiting Google’s skill to extract monopoly rents.

Advertisement Exchange Market: 2nd, the DOJ alleges that Google has monopoly energy in an “ad exchange for indirect open internet display advertising” market. In accordance to the grievance, Google AdX is the major advertisement exchange in the market, and the direct purchaser of far more than 50 percent of all advertisement impressions and income. Google also operates an Open up Bidding procedure by way of which other ad exchanges could buy its publisher ad stock, but this only represents 7 per cent of impressions gained. In this article, Google has a powerful defense. The DOJ’s industry definition once more excludes application, social, and movie advertisement exchanges, but also excludes direct income involving an advertiser and a web site publisher, as well as minimal auctions (i.e., auctions restricted to a subset of advertisers). By excluding so many options from thing to consider, the DOJ largely ignores the aggressive pressures on Google’s ad exchange enterprise.

Advertiser Advertisement Networks Marketplace: Finally, the DOJ alleges that Google has monopoly power in “advertiser ad networks for open up net screen advertising and marketing.” This proposed market definition is the most tenuous declare for the DOJ, as it alleges Google’s monopoly is 70 p.c but mostly ignores that advertisers do not need to bid for world wide web area. There are many other alternatives for advertisers to attain shoppers, this kind of as social media and movie applications. Even if the complaint’s 70 p.c marketplace share determine is precise, these substitutable alternatives for advertisers drastically restrict Google’s skill to raise costs over competitive price ranges.

Determine 2: Google’s applicable businesses in just about every stack, as properly as the relative current market share in accordance to the DOJ criticism

As displayed in the determine higher than, the DOJ grievance alleges that Google has much more than a 50 % industry share in all three proposed marketplaces, but the definition of the marketplace in each and every scenario could potentially exclude rivals that protect against Google from elevating prices earlier mentioned competitive concentrations. The DOJ will need to have to demonstrate to the courtroom that in fact these possibilities do not limit Google’s sector electrical power in a single of these marketplaces to progress to the next element.

Factor 2: Anticompetitive Carry out

Even if a firm has or may perhaps get hold of monopoly electricity, corporations can realize that electric power as a result of wholesome competitors. In these scenarios, courts will not declare the conduct illegal: A balanced sector must really encourage firms to make improvements to their items and do well on the merits. Thus, courts typically search to whether conduct that qualified prospects to, or could direct to, monopoly electric power is anticompetitive.

Nevertheless, as the American Bar Association of Antitrust Regulation Segment of Antitrust Regulation describes, defining anticompetitive perform “has been 1 of the most vexing issues in antitrust regulation.” Usually talking, carry out that stems from procompetitive reasoning these kinds of as increasing a product, producing efficiencies, or in any other case greater competing with rivals does not violate the law. At the same time, some circumstances have observed carry out as benign as purchasing an enter as anticompetitive for the reason that it harmed a rival’s means to acquire that input. When quite a few sorts of anticompetitive carry out such as tying two products and services alongside one another have been examined by the Supreme Courtroom, nearly no bright-line rules exist. The courtroom right here will most likely glimpse at both equally the result and the intent to decide ultimately if the conduct satisfies this ingredient.

The DOJ’s complaint cites a wide assortment of perform it alleges Google engaged in to proficiently prohibit opponents in each and every stack by tying its products and solutions and providers with each other. For instance, Google restricted advertiser needs to its advertisement trade, and its ad exchange to its advert servers. And when Google released its open up bidding possibility in response to a aggressive menace in header bidding (a process of bidding that bypassed its advertisement trade entirely), it would subsidize aggressive bids to defeat rivals, when elevating expenses on uncompetitive bids to offset the losses (identified as Undertaking Bernanke, as it resembled the “quantitative easing on the Ad Exchange”).

But, as is effectively-proven in antitrust regulation, a agency need not deal with a rival. Google generating its possess suite of products and solutions could have sizeable procompetitive justifications, this kind of as the operation of an efficient, 1-end store for advertisers and publishers. This kind of carry out could also support Google greater compete with diverse advertisement exchanges, including these for videos or apps. Google will most likely increase these, and a variety of other procompetitive justifications, at trial.

Importance for Congress

A range of bipartisan legislation focusing on big know-how firms, and the advertisement tech place commonly, has been introduced this Congress following stalling in the previous one particular. These charges choose a a lot more progressive view of antitrust enforcement holding that dimension by itself, and harm to opponents, need to give increase to antitrust scrutiny. This case will be a good prospect for legislators to choose stock of current antitrust specifications and the logic powering them. The conclusion, no matter of the end result, will deliver beneficial insights to Congress about the want for reform.