Google is abusing its dominant position in the ad tech sector, UK government claims

The UK’s Competition and Markets Authority has provisionally ruled that Google’s dominance in the advertising technology market is harmful to competitors – and could therefore fine the tech giant up to 10% of its global annual turnover.

Since at least 2015, the company has allegedly operated its tools for buyers and sellers of ad space, such as Google Ads, in a way that shields its ad auction platform, AdX, from competitors. The CMA also alleges that Google prevents rival ad listing tools from competing with its own, DoubleClick For Publishers.

Such anti-competitive practices “could harm thousands of UK publishers and advertisers”. The body says advertisers spend around £1.8 billion a year on open advertising, advertising goods and services via apps and websites to UK consumers.

“We have made a preliminary determination that Google is using its market power to hinder competition when it comes to the ads people see on websites,” said Juliette Enser, interim executive director of Enforcement, in a press release. “Many companies are able to keep their digital content free or cheaper by using online advertising to generate revenue. The ads on these websites and apps reach millions of people in the UK — helping them buy and sell goods and services.

She added: “That’s why it’s so important that publishers and advertisers — who make this free content possible — can compete effectively and get a fair deal when buying or selling digital advertising space.”

SEE: UK regulator considers Microsoft-Inflection AI partnership a merger, but clears it of competition concerns

Google responds to accusations

The digital advertising technology sector, known as the “ad tech stack,” includes a variety of intermediaries that facilitate the sale of online advertising. Google owns four of them: Google Ads, DV360, AdX, and DoubleClick For Publishers.

Advertisers use Google Ads and DV360 to bid on ad space on websites and apps. DoubleClick For Publishers is a platform for website and app managers to list available ad space. AdX combines the two, matching the highest bidder with the website or app manager in a real-time auction.

The CMA alleges that Google is blocking competition from AdX and DoubleClick For Publishers through several practices, including:

• Providing exclusive or preferential access to AdX for advertisers using the Google Ads platform.
• Manipulating advertiser bids so that they have a higher value when auctioned on AdX than when auctioned on competing ad exchanges.
• Enabling AdX to place first bids in auctions run by DoubleClick For Publishers for online ad space, potentially meaning rivals won’t have a chance to bid.

Dan Taylor, vice president of global advertising at Google, responded to the accusations in a statement to TechCrunch, saying the case was based on “misinterpretations of the ad tech industry.”

“Our ad technology tools help websites and apps fund their content and enable businesses of all sizes to effectively reach new customers,” Taylor added.

The CMA issued only a statement of objection and did not rule that Google breached Chapter II of the Competition Act 1998, which prohibits the abuse of a dominant position that may affect trade in a country. It will consider Google’s submissions and suggest what action the search giant could take to stop its ongoing anti-competitive practices.

Multiple investigations into Google’s practices

The CMA’s investigation is linked to an investigation into Google’s abuse of its dominant position in the header bidding market, which began in March 2022. Header bidding is a service that allows websites to offer their advertising space to multiple buyers at the same time.

Google is also seeking to appeal a decision by a British court in June that allowed the lawsuit by Ad Tech Collective Action LLP to proceed. The online publisher collective claims that Google has abused its dominant position in the digital advertising technology sector, leading to losses of £13.6 billion.

But it’s not just the UK that has a problem with Google’s ad tech practices. The US Justice Department and state attorneys general launched an antitrust investigation in 2020, alleging that Google “illegally used distribution agreements to thwart competition”. That investigation is ongoing.

In August, a federal judge ruled that the tech company had a monopoly on general search and text advertising services and violated antitrust law.

The European Commission also told Google that a “mandatory divestment” of parts of its ad technology business would be the only way to address its own competition concerns, after revealing in March its preliminary view that the company had breached EU antitrust rules.

An EU investigation is underway into how Google is complying with the new Digital Markets Act, with regulators saying it is promoting its own services over third-party services in search results and is therefore “gatekeeping”.

In March, in response to the DMA, Google temporarily removed some of its search widgets, such as Google Flights, to allow individual businesses greater access to them.