Whoa, Nelly. The feds finally dropped the big one on Google—and they’ve got the cavalry on their side.
Justice Department officials and eight state attorneys general unveiled a huge, anticipated lawsuit Tuesday against Google, alleging the Alphabet unit unlawfully used its dominance over the ad-tech market to punish rivals and drive up costs for marketers, publishers, and consumers. As punishment, federal prosecutors want to force Google to split up its ad business, which would include divesting its ad manager suite and ad exchange.
The lawsuit stems from Google’s sprawling power over the digital ad ecosystem, which revolves in large part around the division’s technology. Google essentially acts as the supplier, broker, and auctioneer of digital ads. In the process, Alphabet takes various fees, directs ads onto its company-owned content platforms, and gathers valuable data on consumer habits—all of which contribute to a significant chunk of its ad revenue, which hit $147 billion in 2021.
“One industry behemoth, Google, has corrupted legitimate competition in the ad tech industry by engaging in a systematic campaign to seize control of the wide swath of high-tech tools used by publishers, advertisers, and brokers, to facilitate digital advertising,” federal prosecutors wrote in their complaint. “Having inserted itself into all aspects of the digital advertising marketplace, Google has used anticompetitive, exclusionary, and unlawful means to eliminate or severely diminish any threat to its dominance over digital advertising technologies.”
Google, for its part, responded Tuesday that the DOJ’s lawsuit underestimates the competitive nature of the digital ad ecosystem, while its efforts to force divestiture would “reverse years of innovation” and make the ad market less efficient. Google executives also noted that the DOJ is trying to unwind two Google acquisitions—which cost the company about $3.5 billion—that the Federal Trade Commission approved more than a decade ago.
The DOJ’s 149-page lawsuit appears deeply researched, chock-full of juicy details about Google’s business and internal communications that reflect poorly on the organization.
The case, should it reach trial, could ultimately come down to the vagaries of antitrust law and the digital ad market—topics that are, frankly, outside my expertise. I would note that Google’s long-standing critics seem downright cheery about the merits of the case, while its defenders aren’t quite as vociferous as usual. The Chamber of Progress, a pro–Big Tech advocacy outfit, issued a desultory statement Tuesday that only touched on Google’s shrinking market share and recent layoffs by Alphabet (which are tenuously related at best).
There will be plenty of time to parse the particulars of the DOJ’s case. But at a minimum, the lawsuit speaks to the unprecedented nature of the governmental pressure on Google.
In years past, Big Tech titans have rather comfortably weathered the antitrust storm thanks to an aloof FTC, disorganized DOJ, and feckless federal legislature.
Today, there’s finally a (mostly) unified, bipartisan front willing to take on the industry.
The Federal Trade Commission and the DOJ’s antitrust division are led by staunch Big Tech critics with a presidential mandate to rein in Big Tech. Numerous Republicans are on board with the lawsuit, and a separate case targeting Google’s ad dominance brought by more than a dozen state attorneys general is a decent sign that the GOP won’t drop the latest lawsuit if it retakes the White House in 2025. And Congress is, well, still Congress—but there are at least signs of bipartisan interest in tackling Google’s ad dominance, illustrated by last year’s introduction of the Competition and Transparency in Digital Advertising Act by two Republican and two Democratic senators.
The collective appetite means Alphabet will struggle to run out the clock in court by bleeding lower-funded government agencies dry or waiting for political winds to shift.
That leaves Alphabet with two primary options: fight or negotiate. And early signs on both fronts aren’t optimal for Google. A federal judge in September rejected most of Google’s motion to dismiss the related lawsuit filed by state attorneys general, while the Wall Street Journal reported that the DOJ batted away Google’s offer to split off some of its ad-tech business in a bid to stave off Tuesday’s filing.
It all adds up to quite an impending battle for Alphabet, a company with few friends in government left on its side.
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Jacob Carpenter
