Google Antitrust Redux: The Ad Tech Case

Yet another DOJ v. Google antitrust trial has ended. This case, brought by the Biden administration, focuses on three products in Google’s Ad Manager suite of ad tech solutions. First, there is the ad exchange market and the company's AdX product, where advertisers and publishers respectively buy and sell advertising in real-time auctions. Second, there is the ad server market and Google's Double Click for Publishers (DFP) offering, which allows publishers to place and manage bids. Finally, there is the ad network market and the Google Ads tool, which advertisers use to help them buy ad space. DOJ alleges that Google has unlawfully maintained monopolies in these markets for “open-web display advertising” through a wide-ranging course of allegedly anticompetitive conduct. But, when breaking it down, DOJ's case will have to overcome a number of legal and factual hurdles.

#1: Market Definition

The first problem with DOJ’s case is its “open web display advertising” market definition. These ads are, first, “open” in that they are sold through exchanges that offer inventory from multiple websites, as distinct from the “closed” model of publishers selling directly to advertisers with their own tools. Second, “web” ads are restricted to those published on a website, as opposed to ads that reach users through channels like a mobile app or connected TV. Third, “display” ads are graphical ads meant to catch a user’s eye through images or other multimedia and exclude other forms of advertising like instream video ads or native ads. To be sure, defending any one of these exclusions is going to be difficult for DOJ—let alone all three—and especially so for advertisers, who as Google highlighted, have for years allocated over half their display ad spend to mobile in-app ads alone.

#2: Monopoly Power

Even if one were to assume that DOJ’s market definitions hold up, courts have made clear that monopoly power usually only exists at market shares above 70 percent. And yet, Google’s share in the ad exchange market, for example, seems to fall well below this threshold. In fact, this is consistent not only with the scores of alternative ad exchanges that exist, but Google’s statements that its ad tech fees are lower than industry averages, with advertisers keeping around 70 percent of their revenue when using Google’s products. Indeed, this lack of monopoly power in ad exchanges explains the DOJ's decision to bring an attempted monopolization claim for this market, which requires a lesser showing of a dangerous probability of achieving monopoly power. However, this claim also forces DOJ to prove that Google acted with anticompetitive animus—typically a very difficult burden for plaintiffs to overcome.

#3: A Dynamic and Expanding Market

A second problem with DOJ’s case is that there are plenty of alternatives to Google’s ad tech stack. For example, with respect to publishers specifically, not only do many engage in direct distribution with advertisers, but, as Google made clear at trial, Ad Manager is not the only game in town. Amazon, Meta, Microsoft, and others offer broad, integrated suites of ad tech solutions that can serve their needs. Moreover, publishers are increasingly developing their own ad tech tools and bypassing Google. For example, even relatively small publishers like Vox Media testified how they developed their own publisher-focused ad tech tools not just for themselves but also for use by other publishers.

#4: Refusals to Deal

DOJ’s theories as to how Google engaged in anticompetitive conduct are also suspect. First, DOJ argues that Google engaged in several refusals to deal, such as restricting Google Ads’ advertiser demand to AdX, restricting real-time access to AdX to DFP—which the government misconstrues as a “tying claim”—and restricting dynamic allocation bidding to AdX only. However, under well-established Supreme Court precedents like Trinko, there needs to be a prior course of dealing for this behavior to be unlawful, which DOJ seems to be wholly unable to show. As such, DOJ's refusal to deal claims may very well be premised on the hope courts will ignore the law, with AAG Kanter himself suggesting that Trinko wasa “judicial error.” Notwithstanding the problems with that view on the merits, for purposes of finding that Google’s refusals to deal were illegal, DOJ’s theories may thus prove to be, at best, a Hail Mary attempt and, at worst, a waste of taxpayers’ money.

#5: Product Design Decisions

DOJ further alleges that Google acted anticompetitively by engaging in several predatory product design decisions in the form of instating “last look” bidding, preventing the multi-calling of bids for the same impression (Project Bell), dynamic revenue sharing, allegedly shifting advertisers away from header bidding (Project Poirot), and instituting unified pricing rules that made publishers using DFP have a single price floor across exchanges. But as courts like the Ninth Circuit in Allied Orthopedic v. Tyco have made clear, product design changes like these should only be unlawful if there is no legitimate benefit from the design. And, as Google explained at trial, all of these features have resulted in benefits to either publishers (i.e., last look bidding), advertisers (i.e., Project Bell, Project Poirot, and unified pricing rules), or both (i.e., dynamic revenue sharing).

#6: M&A

Lastly, DOJ takes issue with Google’s once upon a time acquisitions of DoubleClick and AdMeld. But, of course, these are deals that the antitrust agencies reviewed and declined to challenge when they were proposed. Specifically, in 2007, the Federal Trade Commission determined that Google and DoubleClick were neither “direct competitors in any relevant antitrust market” nor significant potential competitive constraints for the other in the ad server or ad exchange markets respectively. Similarly, in 2011, DOJ itself reviewed Google’s acquisition of AdMeld and concluded that “the transaction is not likely to substantially lessen competition in the sale of display advertising.” To be sure, while DOJ can challenge consummated deals after the fact, it must satisfy the difficult burden of effectively proving the counterfactual that without the merger—and the billions Google invested in its ad tech tools—DoubleClick and AdMeld would still have blossomed and additionally became threats to Google.

A final point on remedy: at the same time as DOJ is trying to break up Google following Judge Mehta’s flawed ruling in the search case—specifically, by forcing Google to divest Android and/or Chrome, despite the fact that there is no accusation of Google using any market power in either product to benefit its search engine—DOJ similarly seeks to force Google to divest its Ad Manager solutions. And yet, here again, a structural remedy is clearly not necessary to address DOJ’s concerns should it win in court. As we have seen, the conduct that is the overwhelming focus of DOJ’s case is on a series of alleged refusals to deal and product design decisions, which can be remedied by simple behavioral provisions requiring Google to respectively deal and modify its offerings. In sum, even if DOJ manages to achieve another unlikely victory against Google in the ad tech case, breaking up the company would evince a desire to punish Google rather than remedy anticompetitive behavior.