What the Tech is the Google antitrust trial all about?

The American public is about to get a crash course in the esoteric world of advertising technology this week as Google goes on trial for allegedly monopolizing the digital advertising industry.

The trial, which starts on Sept. 9, is the culmination of years of complaints that Google holds too much power in the digital ad space and engages in an array of anticompetitive practices, such as self-dealing, operating a biased advertising exchange, and short-changing both advertisers and publishers in the name of capturing more market share. Now the Department of Justice is going to make that case against Google in federal court.

The trial has tremendous implications not just for Google but for the industry at large. If the DOJ wins, Google’s grip on the advertising market could loosen, to the benefit of its competitors, publishers and advertisers. If Google wins, it will further empower tech behemoths, likely to the detriment of the open, independent web, according to Google critics.

This is obviously, huge news, but as mentioned before, the case itself is highly complex. To break it down, we’ve assembled this handy explainer.

What is Google accused of, exactly?

The Justice Department, along with the Attorneys General of California, Colorado, Connecticut, New Jersey, New York, Rhode Island, Tennessee and Virginia, filed a civil antitrust suit in January 2023 against Google, claiming the company has monopolized the digital advertising industry “through serial acquisitions and anticompetitive manipulation” — according to the DOJ — thus violating Sections 1 and 2 of the Sherman Act. (Passed in 1890, the Sherman Act was originally designed to rein in the robber barons behind Standard Oil, the American Sugar Refining Company and other late-19th-century American monopoly businesses. The Act gives the government the ability to seek the break up of monopolistic businesses to preserve free, competitive markets, and it laid the foundation for the establishment of the Federal Trade Commission in 1914.)

How did the antitrust trial come about?

The genesis for this antitrust case actually hearkens back to 2008 when Google acquired the ad server company DoubleClick. 

An ad server is the decision-maker in the ad delivery process — it determines which ads show to which audiences and ensures the placement of those as in a timely fashion (a tenth of a second, to be exact). At the time, DoubleClick was the dominant ad server in the industry and Google, though not even double digits in age, had already become one of the most powerful tech companies in the world.

When the DoubleClick acquisition was announced, it raised concerns that the merged companies could have too much control over the burgeoning digital advertising industry. By owning both an ad server and an advertising exchange, Google could control both sides of the market, using its supposedly independent ad serving technology to direct purchases to its ad exchange and its owned-and-operated advertising inventory. This would be a case of self-dealing and, according to the DOJ, constitute an anticompetitive business practice.

The FTC investigated the Google-DoubleClick acquisition but eventually decided, in December 2007, to not block the merger. The Commission did warn Google about bundling its different ad products together, an industry practice generally referred to as “tying,” to edge out competition, however.

So why is this suit happening now?

The DOJ alleges that Google engaged in the exact conduct the FTC had warned against.

Since 2007, Google has acquired other ad tech companies — AdMob, a mobile ad network, in 2009; Invite Media, a real-time bidding exchange, in 2010; and Admeld, a supply-side platform, in 2011. Google also owns YouTube, which it bought in 2006, giving it access to one of the biggest video advertising platforms in the world. These acquisitions have given Google a presence at every stage of the ad-delivery supply chain, further consolidating its hold on the digital advertising market.

For a while, the DOJ said there was nothing to see here about Google gobbling up more of the online ad market. Regulators briefly looked into the AdMeld acquisition, for instance, before concluding the deal was not likely to “substantially lessen competition in the sale of display advertising.”

But then Google started to bundle its products together, according to brands and agencies, raising the suspicions of federal regulators. Google would incentivize, and in some cases demand, ad buyers use its various ad tech tools in conjunction with one another, according to a 2014 investigative report into Google’s ad tech business. According to the DOJ, this violates the anti-tying guidance and constitutes anticompetitive behavior.

How is bundling anticompetitive?

According to the DOJ, Google’s control over both the buy and sell sides of the market, affords it control over the entire industry and allowing it to squeeze competitors.

Google’s ad exchange, AdX, provides an auction marketplace for brands and agencies to buy ads. An exchange is supposed to be impartial, providing an unbiased platform for buyers and sellers to connect. But Google, through YouTube and its various ad exchanges acquisitions, also controls the advertising space being sold. The DOJ argues Google has no incentive to provide an unbiased marketplace and every incentive to direct buyers to its inventory, collecting fees for both the purchase and sale of any ad deal — hence, self-dealing.

This has a potentially negative impact on the industry at large. Google’s alleged anticompetitive practices are “increasing costs for advertisers and cutting revenue for publishers,” according to the American Economic Liberties Project, a non-partisan non-profit organization aimed at breaking up modern monopolies.

How Google responded to the rise of header bidding is a good example of this.

What happened with Google and header bidding?

As publishers grew concerned about Google’s hold on the advertising market, they developed header bidding. Also called “pre-bidding” and “holistic yield management” (yikes), header bidding allows publishers to offer their ad inventory to buyers and receive bids before making those impressions available in Google’s ad exchange. The thought being that Google’s exchange was exerting downward pressure on their ad prices, preventing them from receiving the best possible price.

Google responded with a series of tools that (Google said) would address publishers’ worries about using Google’s ad exchange and ensure they were receiving top prices for their inventory. But in reality, the tools prevent publishers from referencing other ad exchanges, according to internal Google documents made public in the antitrust case.

Shifting regulatory landscape?

For years, the DOJ was reluctant to pursue antitrust cases, taking a decidedly laissez faire approach to market regulation. But the political calculus has shifted against Big Tech in recent years, with politicians and voters growing concerned about the outsize power large tech companies have over our information and commerce ecosystems.

When a company controls too much of the advertising market, it can hinder publishers’ ability to earn revenue. If publishers can’t earn enough revenue to operate, then our information ecosystem suffers, and so does our democracy. (Many governments, including Canada, Australia and the state of California, are trying to force Google, through legislation, to share more of its revenue with news publishers for this very reason.) On a grand scale, the Google antitrust case is about the health of the marketplace of ideas as much as it is about the digital advertising marketplace.

The Current is owned and operated by The Trade Desk Inc. An individual from The Trade Desk is among the 68 people included on the trial witness list.