The Biden administration launches its second big attack on Google

The Biden administration launches its second big attack on Google

The Biden administration launches its second big attack on Google

The Biden administration is launching the next round of Washington’s most ambitious fight against an American company in a generation: a possible wholesale reordering of the tech giant Google.

In a federal courtroom in Alexandria, Virginia, on Monday, the Justice Department and a group of state attorneys general will try to prove that Google illegally monopolizes the nearly $300 billion U.S. market for digital ads. The DOJ is expressly seeking to break up the company, a feat not attempted since its case against Microsoft in the early 2000s, and not successful since the historic dismantling of AT&T in the early 1980s.

“An attack on this scale hasn’t been attempted in decades,” said Bill Baer, a fellow with the Brookings Institute and former DOJ antitrust head in the Obama administration.

The case against Google — a company synonymous around the world with the internet and Silicon Valley dominance — marks a kind of policy capstone for the Biden administration, which has made antitrust enforcement a pillar of its economic policy. A ruling, however, isn’t likely until well after the election, and depending on the length of the trial, possibly not until the next president’s term.

Google is already on the defensive both in the U.S. and overseas.

After a 10-week trial last year, a different federal judge in Washington, D.C., ruled in August that it illegally monopolized the online search market. The DOJ has not publicly offered a solution, but all options are on the table, including the forced sale of its Android operating system and Chrome browser, according to people with knowledge of the matter.

At a hearing Friday in that case, U.S. District Judge Amit Mehta said he would rule by August next year on what changes Google needs to make. He said he would account for the rapidly evolving technology landscape, including how online search incorporates artificial intelligence, which did not factor into the trial.

Google has said it would appeal.

At the same time, Google is under fire from regulators in several other countries. Google’s ad business is the subject of a European enforcement action that could yield a breakup and billions in fines. Countries including Japan South Korea Australia and South Africa are also accusing the company of anticompetitive conduct in search and app stores. On Friday, the U.K. joined the fray , accusing Google of anticompetitive conduct in its ad business.

“The general view is that Google is in real trouble,” said Cristina Caffarra, an economist and ardent foe of the company, citing the 100-odd global antitrust cases against the company documented by a Danish law professor . And while it is a company with vast resources to wage court fights and absorb big fines, “it is a series of very serious cases,” Caffarra said.

Paul Gallant, an analyst with TD Securities who covers regulatory risk, sees the U.S. and EU “probably reinforcing each other, in an unwelcome direction for Google.”

“Between the public and private US lawsuits, Google is facing its first truly serious regulatory threat ever,” he said.

The company over the years has acknowledged its overwhelming dominance in internet search, but says that is simply because it has the best product — arguing that it faces healthy competition in most lines of the tech business from other giants like Microsoft, Apple and Amazon. And even its search dominance is eroding, it says, given the plethora of information now available online.

The search and ad tech cases reflect the government’s stepped-up focus on the way tech giants use myriad business lines as platforms to muscle out competitors. But to some degree its actions against Google are also a clean-up job. Central to the ad tech case is a series of acquisitions dating back to 2008 which were investigated by antitrust regulators but ultimately allowed. And the FTC investigated Google’s search business at the start of the last decade but declined to act .

https://img.particlenews.com/image.php?url=1lOnNg_0vPblU5Z00
Google CEO Sundar Pichai speaks at Stanford University on April 3, 2024, in Stanford, California. | Justin Sullivan/Getty Images

In the trial starting Monday, Google stands accused of controlling the plumbing that funds much of the web: the ads that pop up when people view web pages. It owns software used by websites and advertisers, including the stock exchange-like product where such ads are sold in millisecond auctions.

While the stakes are high for both sides, the case is not expected to be quite as flashy as the search trial last year. Google CEO Sundar Pichai, for example, is not expected to take the stand, but there will be dozens of executives lower down at Google as well as media companies like The New York Times and Disney.

The convoluted nature of the online ad market could create a challenge for the government, said Rebecca Haw Allensworth, a Vanderbilt University law professor. “The market is so complicated and not intuitive. [The DOJ] needs to help the judge wrap her mind around it,” Allensworth said. “[Online] search is different. We all use it.”

The DOJ-led lawsuit contends that Google’s dominance in all facets of online advertising, which it achieved in part through a pattern of acquisitions and business conduct dating back nearly 15 years, gives the company too much control over tools used to buy, sell and display ads.

One of the largest companies in the world, Google generates the overwhelming bulk of its profits, some $74 billion in 2023, from advertising.

There are other trouble spots for Google in the U.S. Last December, a federal jury in San Francisco found the company violated antitrust law with how it operates its Google Play App store, and is expected to issue a final order shortly which could level the playing field for rival app stores and developers.

Last week in the ad tech case, U.S. District Judge Leonie Brinkema in Virginia admonished Google for a yearslong pattern of deleting allegedly incriminating messages, saying it's something she “will take into consideration in evaluating the credibility of [a] witness.”

Similar allegations in a case led by the Texas attorney general are set for trial next year.

Google’s dominance allows the company to collect 30 cents for every dollar advertisers spend through its tools that place ads across the web, according to the DOJ’s case, which cites internal Google documents.

Google’s online advertising operations were largely pieced together through a series of acquisitions, which is a key focus of the case. The DOJ’s complaint goes into more exhaustive detail about Google’s acquisition history, calling out specific businesses it wants sold off, including Google’s advertising exchange, which matches publishers and advertisers in real time for the billions of ads across the web.

Google maintains the online ad market is intensely competitive, and pointed to a number of startups and tech giants like Amazon, Meta and Microsoft that all compete in the sector.

In a blog post Sunday, Google said “In court, we will show that ad buyers and sellers have many options, and when they choose Google they do so because our ad tech is simple, affordable, and effective. In short — it works.” The DOJ did not have a comment on the record in advance of the trial.

The trial will ultimately boil down to which is more convincing in their version of the commercial reality of the online ad market. Google argues that the most fundamental flaw in the DOJ’s case is that it ignores competition from a host of other digital advertising methods, including companies like TikTok and Amazon. It says the market for ad dollars is wildly competitive. But the DOJ is expected to introduce testimony that advertisers view display ads as separate and that they are not always replaceable with ads on Facebook.

Google is also crying foul over accusations that it has unfairly disadvantaged its rivals, saying it has no legal duty to help them.

The Virginia federal court where Brinkema sits is known for speedy resolutions, with a trial starting less than two years after the ad tech case was filed. The DOJ’s search case against Google took four years to get to trial. But as in the search case, Brinkema will first decide whether Google violated the law, before holding separate proceedings on what to do about it.

The DOJ’s two Google cases are separate, and the DOJ insists that they can each be resolved independently. There is some truth to that, Allensworth said. “At this point if you make changes to Google’s search business it’s going to have very little effect on the market power that it has in ad tech” and vice versa, she said.

Still, it can be “tricky to synchronize and harmonize the remedies,” Baer said. The government has been thinking about this a long time and I’m confident they can see the relationship between the two and avoid inconsistencies.”