Google’s Second Antitrust Trial Starts Monday. Here’s What’s at Stake. (Video)

For the second time in a year, Google (GOOG, GOOGL) is going to court against the U.S. Department of Justice to defend its profitable interests.

Starting Monday, prosecutors and Google lawyers are scheduled to deliver opening statements in federal district court in Alexandria, Virginia, in a case that alleges Google illegally maintained a dominant position in three markets in the online advertising automation ecosystem.

The case, to be decided by U.S. District Court Judge Leonie Brinkema, a Clinton appointee, was filed in January 2023 by the Biden administration’s Justice Department along with attorneys general from 17 states.

“The stakes are very high for both sides,” said Eleanor Fox, a professor at New York University School of Law.

The trial comes just a month after Google suffered a defeat in a high-stakes federal antitrust case brought by the Justice Department during the administration of former President Donald Trump. In that case, U.S. District Judge Amit Mehta ruled that Google illegally monopolized the overall internet search engine market and the text ads market on search engines.

Google announced that it will appeal the decision.

In the case of advertising technology, the government alleged that Google also implemented illegal methods to monopolize markets for ad servers, ad exchanges, and advertiser ad networks. Together, these markets allow advertisers to buy and publishers to sell digital ads online.

The government’s actions are based on allegations that Google closed the door to competitors by using its well-known search engine to enter the online advertising market and then bought out competitors in that sector.

First, in 2000, they said, Google launched Google Ads, formerly called AdWords, a platform that lets advertisers buy advertising space on Google’s own websites, including those that display web search results. Later that year, Google created another tool for advertisers to buy advertising space on third-party websites.

Prosecutors say Google then created a “moat” around the entire ad tech industry by developing a separate ad server for publishers. Once it had control over both sides of the industry, they said, Google positioned itself to profit as a middleman.

The Justice Department said that when Google’s own advertising platforms failed to gain popularity, the company began buying up rivals.

In 2008, Google acquired leading ad server publisher DoubleClick for $3 billion, as well as ad exchange auction platform AdX.

According to the Department of Justice, Google prevented publishers that did not use both the DoubleClick for Publishers platform and an ad exchange from accessing real-time advertising demand information available only in Google Ads.

“In effect, Google has positioned itself to simultaneously function as a buyer, seller, and auctioneer of digital display ads,” the complaint reads.

Cornell Law School antitrust professor Erik Hovenkamp said the allegations in the complaint are serious and compelling, with no obvious justifications that could justify the alleged misconduct.

“When it comes to advertisers and publishers, they are the primary victims of Google’s alleged misconduct,” Hovenkamp said.

Google did not respond to Yahoo Finance’s request for comment. In its response to the lawsuit, it criticized the DOJ and states for using antitrust law to try to derail acquisitions that federal regulators had already approved.

“Advertisers and publishers choose Google ad technology products because of their quality and Google’s commitment to continuous innovation and improvement, not because they have no other choice or are forced to do so,” Google said in court documents.

Prosecutors say that if Google did not engage in anti-competitive practices, website owners would make more money from placing ads and advertisers would pay less to provide ad space.

Financial pressures, they say, are driving website owners to opt for subscriptions, payments or alternative forms of monetization.

It is unclear how much of Google’s revenue is at risk in the case.

Wedbush analyst Dan Ives said in a note Thursday that Google’s collection of ad technology products generated $20 billion in gross revenue and just over $1 billion in operating profit in 2020. That amount represented 11% of Alphabet’s consolidated gross revenue that year. Ives estimated that the technologies likely now generate about 8% of Google’s gross revenue.

At the time of the complaint, the Justice Department said digital display ads generated more than $20 billion in revenue for U.S.-based publishers. Publishers sell about $5 trillion in digital display ads each year. And for every dollar that flows from advertisers to website publishers through ad technology tools, Google keeps 30% or more.

Hovenkamp disagrees with speculation that the Justice Department’s recent victory over Google will help the government’s case on ad tech. He assumes he will have little influence on the decision.

“If you compare the upcoming Google case with the previous one, both the practices and the markets are different. There is no overlap,” he said.

Fox, however, indicated that the DOJ will be able to use many parts of Judge Mehta’s opinion to support claims about Google’s market power and alleged abusive practices. At the same time, she said she expects Google to leave no stone unturned to try to show that ad tech markets are competitive and still growing.

“I believe the Department of Justice has a strong case to support Google’s monopoly position,” she said, adding that she found the government’s claims that Google is abusing its position in the ad exchange market to be particularly strong.

If Google is found liable for antitrust violations, the Justice Department has proposed that the company be required to divest some of the assets in its suite of ad technology products.

Alexis Keenan is a staff attorney at Yahoo Finance. Follow Alexis on X @alexiskweed

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