Google’s advertising dominance at the center of the next big antitrust showdown

Google is headed toward another showdown in a coordinated, global antitrust campaign aimed at breaking the tech giant’s decades-long dominance of digital advertising, this time with the future of its $20 billion ad tech business at stake.

Fresh off a victory over online search giant Google, the U.S. Justice Department will be back in court next week against its parent company, Alphabet, accusing it of monopolistic control of the digital advertising market.

The lawsuit dates back to January 2023, when Justice Department antitrust chief Jonathan Kanter and a group of U.S. states accused Google of using “anticompetitive, exclusionary, and unlawful means to eliminate or materially reduce threats to its dominance” as a major intermediary in ad technology — an automated marketplace that buys, sells, and places online video and display ads.

The case highlights the potential conflicts of interest that arise from Google’s ownership of businesses on all sides of the market. This includes the technology used by website publishers such as newspapers to sell advertising space, the largest marketplace where that space is auctioned off by companies looking to promote their products, and the software advertisers use to access the market.

The U.S. case, which begins Monday in Alexandria, Virginia, has taken on a new urgency after Alphabet lost two similar lawsuits in the past nine months, raising the possibility of big court-ordered changes to Google’s business that could transform or even break up the nearly $2 trillion big tech company.

In August, a U.S. judge in the Justice Department’s first antitrust trial called Google a “monopolist” that paid billions of dollars to Apple and other companies to secure its position as the default search engine, thereby limiting competition in online queries.

Last December, a U.S. District Court in San Francisco ruled that the company had prevented competitors from accessing its Android app on the Play Store, allowing it to generate billions of dollars in profits by charging exorbitant fees.

Together, the three U.S. cases amount to one of the biggest challenges Google has faced in the company’s 26-year history, at a time when AI-powered chatbots have the potential to transform the way users search for information online.

CEO Sundar Pichai must find a way to confront these potentially existential threats and keep the company together.

“Like all empires, time remains unconquered, and the barbarians are at Google’s gates. Facing a three-way legal battle… it’s hard to imagine Google emerging unscathed,” said Bernstein analyst Mark Shmulik.

But “investors have largely dismissed the regulatory headlines as more noise in a noisy world,” he added. “It’s hard to blame them.”

A judge’s decision on remedies in Epic Games’ lawsuit against the Google Play Store is expected to be released within weeks.

The government search case will take longer: The judge presiding over the case said he hopes to issue a decision by August 2025.

Potential remedies in the case, which have not yet been determined, include banning Google from paying bonuses to partners and requiring it to share user data with rivals, as well as forcing it to spin off units or even split the company entirely.

Barak Richman, a professor at George Washington University Law School, called the U.S. government’s ad tech lawsuit “a fascinating case, more difficult and perhaps more important than the Google search engine case.”

“This illustrates the political tension that arises when a company creates a new market that is inherently good and then imposes on it a permanent expansion that is inherently bad,” he said.

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At the heart of the ad tech case is the accusation that Google has dominated the sector for 16 years by buying up potential competitors, encouraging publishers to use its tools and manipulating ad auctions to its own advantage.

In 2008, Google bought DoubleClick, an ad server for publishers, and ADX, a nascent ad exchange, creating an ecosystem that tied publishers together, according to the DoJ.

“In effect, Google is positioning itself to simultaneously be a buyer, seller and auctioneer of digital display ads.”

The 2023 complaint quoted a Google product manager as saying, “Our goal should be all or nothing — use ADX as your (exchange) or not have access to our (advertising) demand.”

Another document filed last month quoted Google employees as saying: “The analogy would be if Goldman or Citibank owned the NYSE (New York Stock Exchange)… “(J)one of the very, very important reasons to keep adx off the buy-side is that it would create a HUGE conflict of interest in the market.”

The Department of Justice has ordered the company to divest itself of its Google Ad Manager suite in a bid to end its monopoly.

Google denies the allegations and has repeatedly tried to dismiss the case, describing the ad tech sector as highly competitive and pointing out that large rivals like Amazon, Meta, Microsoft and Adobe have competing platforms on all sides of the market.

Alphabet’s lawyers, led by global president Kent Walker, also argued that the government had gerrymandered its definition of the digital ad market to ensure it exceeded the 70% spending threshold required to be considered a monopoly.

The lawyers added that focusing solely on open online ads such as static banners — and excluding ads in apps — is an outdated view of the market and does not reflect modern advertising, which is increasingly app-based.

However, after a recent series of lawsuit losses, Google executives appear more concerned about the outcome than any previous case, according to a person involved in the tech giant’s preparations.

Google even attempted to preempt the government’s claim for monetary damages by sending an unsolicited check for the full, unspecified amount claimed, but the request was denied.

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The losses have also encouraged competitors to challenge Alphabet. Yelp, a site that offers online deals and reviews, sued the company, alleging that it uses its search engine to prioritize its own results. It has sought monetary damages and wants Google to spin off companies that benefited from its monopoly.

Bernstein’s Shmulik said the ad tech ruling could result in a class-action lawsuit in which advertisers claim Google overcharged them for years: “It’s possible that a lawsuit will be filed seeking more than $100 billion in damages.”

Alphabet is also under attack abroad. On Friday, the U.K. Competition and Markets Authority found that Google “uses its market power to hinder competition” in ad tech by manipulating auctions and giving its platforms preferential treatment. The company said the U.K. case “rests on misinterpretations” of the sector.

The EU’s antitrust regulator is investigating the ad tech business. “Only a mandatory divestment by Google of parts of its services would address” its concerns, the European Commission said when it brought the case in June.

As Bernstein’s Shmulik notes, not every major antitrust defeat ends badly, as Microsoft demonstrated when it was ordered to split up in 2000 after losing a precedent-setting Justice Department case over its dominant Windows platform.

He appealed the decision, which was overturned, allowing the party to reach a settlement with the new, more business-friendly administration of George W. Bush.

“It’s been 25 years since the Microsoft conviction and the regulations have had virtually no impact on the monopoly power of big tech companies,” he said.

While Democratic Joe Biden’s administration has stepped up antitrust efforts — led by Justice Department Chairwoman Kanter and Federal Trade Commission Chairwoman Lina Khan — there is little sign that Republicans and Donald Trump will be more lenient on big tech companies if they win the November election.

In an interview with the Financial Times last week, vice presidential candidate JD Vance said: “Google should be broken up… I think it’s way too big, way too powerful.”