Ten attorneys general on Wednesday accused Google of illegally abusing its monopoly over the technology used to display ads online, adding to the company’s legal troubles with a case at the heart of its business.
Prosecutors said Google was overloading publishers for the ads that were running on the internet, crowding out competitors trying to question the company’s dominance. They also said that Google had an agreement with Facebook to curtail the social network’s own efforts to compete with Google for advertising dollars. Google said the suit was “unfounded” and would fight the case.
“If the free market were a baseball game, Google would position itself as the pitcher, batsman, and referee,” Texas attorney general Ken Paxton said in a video on Twitter announcing plans for the suit.
The complaint filed in the US District Court for the Eastern District of Texas adds to the fierce bipartisan backlash against one of the largest tech companies in the country. Regulators in the US and Europe have focused on the oversized role Amazon, Apple, Facebook and Google play in the modern economy, and everything from the way we shop to the information and entertainment that is available we see shaped.
In October, the Justice Department and eleven states said Google illegally maintained a monopoly over online search engines and the ads in user results. Another case against Google, filed by a separate group of states, is expected shortly. Last week, the Federal Trade Commission and more than 40 states accused Facebook of illegally suppressing competition by acquiring younger rivals, arguing that the company should be wound up. Apple and Amazon are also under federal antitrust investigations.
The lawsuit, filed on Wednesday, is the first by regulators in the US to focus on the tools that connect ad space buyers with publishers who sell them. Ads make up a large part of business profits. The Justice Department has its own antitrust investigation into advertising technology, said one person with knowledge of the investigation.
Prosecutors asked for fines and structural changes in the company, but did not add any details.
The prosecutors who signed the lawsuit are all Republicans and they are not expected to be part of the Justice Department’s proceedings against the company. The other states’ lawsuit against Google, which could be filed as early as Thursday, is expected to be signed by Republicans and Democrats and could be combined with the federal agency’s case.
Google’s own system of selling ads on the Internet was built over more than a decade. In 2007, Google bought DoubleClick, which offered advertising technology and acted as a marketplace, in a business that has since been criticized as central to Google’s dominance. Google now controls the software at every step of the ad sales process.
The company competes with a wide variety of competitors when it comes to offering advertising technology, and its services work alongside those of its competitors. In the past few years, companies like AT&T and Amazon have been trying to break into the online ad sales market.
“Attorney General Paxton’s ad-tech claims are unfounded, but he carried on despite all the facts,” said a Google spokeswoman, Julie McAlister. “We will defend ourselves emphatically against his unfounded claims in court.”
Publishers like Rupert Murdoch’s News Corporation have long claimed that Google’s dominance allows the company to make a bigger cut on every sale without adding to the cost of content creation. Google’s success contrasts sharply with shrinking newsrooms and the closure of many local newspapers. This year, Google announced that news publishers would receive more than $ 1 billion through a new licensing program over the next three years.
After attaining a monopoly, Google was able to pressure publishers for a high proportion of every ad sold on its platforms, according to prosecutors.
“The monopoly tax that Google imposes on American companies – advertisers such as clothing brands, restaurants and brokers – is a tax ultimately borne by American consumers through higher prices and lower quality of the goods, services and information provided by these companies,” they said in the lawsuit.
The lawsuit argues that Google used a variety of tactics to become the dominant player in online advertising, hurting publishers, competitors and consumers in the process.
Prosecutors said that after purchasing DoubleClick, Google “quickly began to leverage its new position”.
They said Google then tried to destroy a process developed by publishers to create more competition in the online ad market. Under this system, publishers could sell ad space on more online marketplaces at the same time, making them less dependent on Google’s ad technology.
The states said Google maintained its dominance in part through an agreement with Facebook to limit the social network’s involvement in the process. In return, Google gave Facebook an advantage in other ad auctions it ran, the prosecutor said.
“Companies’ efforts to avoid competition have been successful,” they said in the lawsuit. Facebook, which did not immediately post a comment, is not named as a defendant in the lawsuit. Ms. McAlister, the Google spokeswoman, said the allegations regarding Facebook were inaccurate. A Facebook representative declined to comment.
With the data behind many of the most popular services on the Internet, the two companies sit together on a treasure trove of data about what people are interested in, where they are going, and who they are interacting with. This information will help advertisers reach the right audience for marketing. Both companies also sell ads for their own websites.
According to research firm eMarketer, the two companies accounted for around 54 percent of digital advertising in the US in 2019. Google’s share was around 31 percent and Facebook’s 23 percent.
The publicly released version of the complaint is heavily edited and obscures important evidence that prosecutors cite to represent their case. However, the document refers to internal documents from Google and Facebook. In several places it is said that Google codenamed projects that were inspired by the Star Wars series, but the names themselves are black on the page.
The complaint widens the focus of lawsuits on Google’s business, said Charlotte Slaiman, director of competition policy at Public Knowledge, an advocacy group that has campaigned for more regulation for Google.
“The strong market position that Google has in search has also helped them build that strong market position in advertising technology and that is part of that complaint,” said Ms. Slaiman. “It’s also an indication of how broad the competitive challenges are in big tech.
Mr Paxton led the investigation into Google despite allegations of abusing the power of his office. Seven of Mr. Paxton’s lawyers said this year that he had done a favor and bribed a friend and donor. The employees have since left Mr. Paxton’s office or have been on leave or dismissed immediately.
Mr. Paxton was also charged with securities fraud in 2015. He has denied these allegations, as well as recent allegations made by his own employees.
He’s also a prominent ally of President Trump, leading some critics to view his investigation into Google as part of a larger conservative campaign against the tech giants.
But Ms. Slaiman said she believed that there would ultimately be bipartisan support for the concerns raised in the lawsuit.
She hoped Washington lawmakers could respond to the concerns by passing laws to contain businesses, rather than leaving the task entirely to prosecutors.
“It is really important that antitrust law is enforced,” she said, “but much more is needed.
Maurice Stucke, a law professor at the University of Tennessee and co-author of “Competition Overdose,” said the online advertising industry is a place for regulators to look and noted that it is also attracting the attention of regulators in Australia has drawn France and Britain.
“In no other market is there a unit that represents most buyers, most sellers, and controls the leading exchange,” he said. “You can create a system that looks tough and competitive on the surface, but really isn’t.”
The allegations of collusion with Facebook were noticed, Stucke said, because such examples of anti-competitive behavior are usually viewed as the linchpin of strong antitrust proceedings – the kind of evidence that should interest more states and even the Justice Department.
Cecilia Kang contributed to the coverage.