Google’s second antitrust trial could help shape the future of online advertising

A month after losing a landmark antitrust case brought by the Justice Department, Google is back in court to face federal prosecutors for a second time.

In August, a judge ruled that Google had a monopoly on internet search, the largest antitrust decision in the tech industry since Microsoft more than 20 years ago. This time, Google is defending itself against allegations that its advertising business operated like a monopoly, leading to higher ad prices for customers.

The trial is set to begin Monday in Alexandria, Virginia, and is expected to last at least several weeks. It is the first tech antitrust case brought by the Biden administration. The department’s earlier lawsuit was first filed in October 2020, when Donald Trump was in the White House.

While U.S. officials have spent the last few years going after Big Tech, only Google has so far been taken to federal court. The Justice Department sued Apple in March, alleging that its iPhone ecosystem is a monopoly that has led to its “astronomical valuation” at the expense of consumers, developers and rival phone makers.

In late 2020, the Federal Trade Commission filed an antitrust lawsuit against Facebook (now Meta), alleging that the company had built a monopoly through its acquisitions of Instagram and WhatsApp. Earlier this year, Meta asked the court to dismiss the lawsuit. In 2023, the FTC and 17 states sued Amazon for allegedly using its “monopoly power” to inflate prices, lower quality for shoppers, and unlawfully exclude rivals, undermining competition.

Google is focusing on its advertising tools, which are part of the company’s $200 billion digital advertising business.

The government claims that Google violates Sections 1 and 2 of the Sherman Act, which prohibit anticompetitive conduct. The Justice Department will argue that Google has bound publishers and advertisers to its products, and that websites have had to develop workarounds in response. A coalition of states has joined the case, including California, Colorado, Connecticut, New Jersey, New York, Rhode Island and Tennessee.

Google’s ad business has drawn plenty of criticism over the years because the platform operates on multiple sides of the marketplace — buying, selling and exchanging ads — giving the company unique insights and potential leverage. In its original lawsuit, the Justice Department cited an internal communication from a Google ad executive who said that having multiple sides of the ad-selling process was “like Goldman or Citibank owning the NYSE,” referring to the New York Stock Exchange.

At stake is how Google will be able to operate its portfolio of advertising products. The Justice Department, if successful, would seek to divest, at a minimum, the Google Ad Manager (GAM) suite, a marketplace that lets brands create and manage ad units and track ad campaigns, and lets publishers sell ad inventory.

This is completely different from Google’s flagship platform, Google Ads, which is primarily intended for businesses that want to advertise their products or services on search engines, websites, YouTube, and other partner sites.

In the most recent quarter, Google parent Alphabet reported $64.6 billion in advertising revenue, more than three-quarters of total sales. Of that, $48.5 billion came from search and other businesses like Gmail and Maps, and $8.7 billion came from YouTube.

The GAM suite is part of the Google Network business, which generated $7.4 billion in revenue in the second quarter, about 11% of total ad sales.

In addition to a potential partial breakup, Google could face a flood of lawsuits from advertisers seeking financial benefits if the DOJ succeeds. Analysts at Bernstein have said Google could face as much as $100 billion in such lawsuits.

In the first antitrust case, the court found that Google violated Section 2 of the Sherman Act, which prohibits monopolies. Judge Amit Mehta of the U.S. District Court for the District of Columbia agreed with the Justice Department, which argued that Google had maintained its share of the overall search engine market by creating strong barriers to entry and a feedback loop that maintained its dominance.

“Google is a monopoly and operates like a monopoly to maintain its monopoly,” Mehta wrote.

Google is now awaiting a penalty in the case. The Justice Department is asking for an extension of time, until February, to propose remedies, followed by a hearing in April. Google says the Justice Department should have already done its homework and be prepared to present its proposal in October.

What will each side argue?

In the second case, the Justice Department aims to show that Google gained unrivaled power by acquiring companies like DoubleClick in 2008 and by creating services that let ad buyers target ads to users across the internet.

The company’s M&A strategy “set the stage for Google’s subsequent exclusionary actions in the ad technology industry,” the Justice Department alleges. The agency alleges that Google controls 91% of the ad server market, the space publishers use to sell ads, and abuses its power to unfairly raise ad prices.

The Justice Department plans to call YouTube CEO Neal Mohan to testify live. Mohan was previously a vice president at DoubleClick before the acquisition. When incorporated into Google’s ad tech stack, DoubleClick’s technology allowed Google to require publishers to use all of its tools in some cases to access any of them, meaning they couldn’t use competitors’ services in parts of the online ad buying process, the agency said.

“Website creators earn less and advertisers pay more than they would if they operated in a market where unfettered competitive pressures could discipline prices and lead to more innovative ad technology tools that would ultimately result in higher quality and lower transaction costs for market participants,” the Justice Department said.

The government says some publishers have been forced to turn to alternative funding models, such as subscriptions, while others have gone bankrupt.

Google has long pushed back against claims that it dominates online advertising, pointing to the market share of competitors, including Meta. It will argue that buyers and sellers have many options, especially as the online advertising market has evolved.

Google will also argue that the Justice Department’s actions will slow innovation, increase advertising costs and make it harder for thousands of small businesses and publishers to grow.

The company says its advertising tools adjust to handle the billions of ad auctions that take place online every day, and the Justice Department doesn’t have an accurate picture of the ad space. Google will also tell the court that it has always offered competitive rates to customers who often mix and match ad platforms.

When it comes to making deals, Google will argue that DoubleClick and AdMeld were not successful acquisitions at the time and that regulators approved them.

In an attempt to prove its case, the DOJ listed potential testimony from Jerry Dischler, a former vice president of Google’s advertising platform who now runs the company’s cloud applications. It also noted the possibility of subpoenaing several Google product managers.

Also on the Justice Department list is Google AI Director Sissie Hsiao, who was previously director of global display, video and mobile app advertising, and Scott Sheffer, who is listed as Google’s vice president of partnerships. The government plans to include evidence from internal Google communications, testimony from publishers, advertisers and companies that have tried to compete with Google, and experts and professors from Stanford and Harvard, the documents show.

Google also noted that it may subpoena Nitish Korula, Google Assistant’s director of engineering, who was previously a senior technical advisor to search chief Prabhakar Raghavan. The company also requested testimony from Simon Whitcombe, vice president of Meta, and suggested testimony from executives at BuzzFeed and The New York Times.

While the Justice Department and Google have sent a list of executives who are expected to provide testimony or depositions, those individuals will not necessarily be subpoenaed.

Google declined to comment for this article.