The U.S. Department of Justice and eight states today filed an antitrust lawsuit against Google LLC that seeks to break up the search giant’s advertising technology business.

The states participating in the litigation are Virginia, California, Colorado, Connecticut, New Jersey, New York, Rhode Island and Tennessee. The lawsuit follows months of reports that Google could face antitrust scrutiny over its advertising technology business. 

Google said in a statement today that “DOJ is doubling down on a flawed argument that would slow innovation, raise advertising fees, and make it harder for thousands of small businesses and publishers to grow.”

The search and ad giant provides a cloud service that enables publishers to sell ad space on their websites. Additionally, the Alphabet Inc. unit offers a second service that brands can use to purchase publishers’ ad space. Such ad transactions often also go through a third Google platform called AdX, which is an online auction that enables brands to compete for advertising space by placing bids.

The Justice Department charges that Google used its position as a major provider of both sell-side and buy-side advertising tools to harm market competition. According to today’s antitrust lawsuit, it has raised the barriers to entry in the market to “artificially high levels.” The lawsuit argues that the company’s practices led rivals to exit the advertising technology industry and in some cases dissuaded them from joining.

The Justice Department also charges that Google’s business practices hurt publishers and advertisers in the process. “The harm is clear: website creators earn less, and advertisers pay more, than they would in a market where unfettered competitive pressure could discipline prices and lead to more innovative ad tech tools,” the lawsuit states. 

The suit follows years of reports that Google could face antitrust scrutiny over its ad business. Last June, it was reported that the company had offered to address antitrust concerns by moving parts of its sell-side advertising technology tools to a separate Alphabet Inc. unit. A few weeks later, sources told Bloomberg that the Justice Department was expected to reject the offer and press on with a lawsuit. 

Google’s sell-side tools, which publishers use to sell ad space, are based partly on technology that it obtained through purchase of DoubleClick Inc. in 2008. DoubleClick was an early provider of ad delivery software that went public in 1998 and was later acquired by two private equity firms, Hellman & Friedman and JMI Equity, for $1.1 billion. Google paid $3.1 billion to buy the company.

“Google’s plan has been simple but effective: neutralize or eliminate ad tech competitors, actual or potential, through a series of acquisitions; and wield its dominance across digital advertising markets to force more publishers and advertisers to use its products while disrupting their ability to use competing products effectively,” the lawsuit states.

The lawsuit calls for Google to spin off its sell-side advertising platform, which is known as Google Ad Manager. The Justice Department is also seeking the divestiture of AdX, the Google auction platform through which brands bid for publishers’ ad space. Furthermore, the lawsuit requests “any additional structural relief as needed to cure any anticompetitive harm” in the advertising technology market.

Previously, the Justice Department brought another antitrust lawsuit against Google over its business practices in the search market. The lawsuit charges that it harmed market competition by signing deals with mobile device makers to preinstall its search engines on their devices. That case will to go to trial in September.

Photo: Google

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