Google faces new antitrust lawsuit after ruling declaring search engine a monopoly

ALEXANDRIA, Va. — A month after a judge ruled Google’s search engine an illegal monopoly, the tech giant faces another antitrust lawsuit that threatens to break up the company, this time over its advertising technology.

The Justice Department, led by a coalition of states, and Google on Monday filed opening statements before a federal judge in Alexandria, Virginia, who will decide whether Google has a monopoly on online advertising technology.

Regulators say Google has built, acquired and maintained a monopoly on the technology that connects online publishers with advertisers. Dominance over the software on both the buyer and seller sides of the transaction allows Google to keep as much as 36 cents on the dollar when it brokers sales between publishers and advertisers, the government alleges.

They claim that Google also controls the ad exchange market that allows buyers to be matched with sellers.

“One monopoly is bad enough. But here we have a trifecta of monopolies,” said Julia Tarver Wood, a Justice Department lawyer, in her opening statement.

Google says the government’s case is based on the internet of yesteryear, when desktop computers ruled and internet users were careful to type precise World Wide Web addresses into URL fields. Advertisers are now more likely to turn to social media companies like TikTok or streaming TV services like Peacock.

In her opening statement, Google attorney Karen Dunn compared the government’s case to “a time capsule containing a BlackBerry, an iPod, and a Blockbuster graphics card.”

Dunn said Supreme Court precedents warn justices of “serious risks of error or unintended consequences” when dealing with rapidly evolving technology and considering whether antitrust law requires intervention. She also warned that any action taken against Google would not benefit small businesses but would simply allow other tech giants like Amazon, Microsoft and TikTok to fill the void.

Google’s annual reports show that revenue for Google Networks, the division of the Mountain View, California-based tech giant that includes services such as AdSense and Google Ad Manager, has actually declined in recent years, from $31.7 billion in 2021 to $31.3 billion in 2023.

The case will now be heard by U.S. District Judge Leonie Brinkema, who is best known for her high-profile terrorism trials, including that of 9/11 defendant Zacarias Moussaoui. But Brinkema also has experience in highly technical civil litigation, working in a court that has a glut of patent infringement cases.

The Virginia case comes on the heels of Google’s major search engine defeat, in which a judge in the District of Columbia found the search engine to be a monopoly, sustained in part by the tens of billions of dollars Google pays each year to companies like Apple to block Google from being the default search engine presented to consumers when they buy iPhones and other gadgets.

In December, a judge deemed Google’s Android app store a monopoly in a case brought by a private gaming company.

In the search engine case, the judge has not yet imposed any remedies. The government has not proposed sanctions, although it could face close scrutiny over whether Google should be allowed to continue to enter into exclusivity deals that ensure its search engine is the default option for consumers.

Peter Cohan, a professor of management at Babson College, said the Virginia case could potentially prove more damaging for Google because the obvious solution would be to require the company to sell part of its advertising technology business, which generates billions of dollars in annual revenue.

“Sales are definitely a possible remedy for the latter,” Cohan said. “It could potentially be more significant than it initially appears.”

Google is also facing growing pressure over its ad tech business across the Atlantic. British competition watchdogs last week accused the company of abusing its dominant position in the country’s digital advertising market by favoring its own services. European Union antitrust enforcers, which conducted their own investigation, suggested last year that splitting the company was the only way to address competition concerns over its digital advertising business.

The government’s witnesses in the Virginia trial will include executives from newspaper publishers who the government says were particularly harmed by Google’s practices.

“Google has charged extraordinary fees at the expense of the website publishers who make the open internet vibrant and valuable,” government lawyers wrote in court papers.

The government’s first witness was Tim Wolfe, an executive at Gannett Co., the newspaper chain that publishes USA Today as its flagship. Wolfe said Gannett felt it had no choice but to continue using Google’s advertising products, even though the company keeps 20 cents on the dollar of every ad purchase, not even counting what it takes from advertisers. He said Gannett simply couldn’t give up access to the vast stable of advertisers that Google brings to its ad exchange.

Under cross-examination, Wolfe acknowledged that despite Google’s alleged monopoly, Gannett was able to partner with other competitors to sell available advertising inventory.

The government’s case also seeks to use the words of Google employees against them. In their opening, Justice Department lawyers cited an email sent by a Google employee who wondered whether Google’s control of the technology across all three sides posed a “deeper issue” to consider.

“The analogy would be if Goldman or Citibank owned the NYSE (New York Stock Exchange),” wrote employee Jonathan Bellack.

Google ensures that the integration of its technologies on the buyer, seller and intermediary sides ensures fast loading of ads and web pages and increases the level of security.

Google says the government’s argument unfairly focuses on display ads and banner ads that load on websites visited via a desktop computer, and fails to take into account the migration of consumers to mobile apps or the explosive growth in ads placed on social media sites over the past 15 years.

As Google’s lawyers wrote in a pre-trial brief, the government’s case “focuses on a limited type of advertising that was displayed on a narrow group of websites when users’ attention shifted elsewhere many years ago.”

The process is expected to take several weeks.

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AP Business Journal writer Kelvin Chan in London contributed to this report.