Court is back in session.
And the fate of the open internet is in the balance.
US District Court Judge Leonie Brinkema ruled in April that Google operates an illegal monopoly in two markets where competition has been “anemic” and “stifled,” according to the Department of Justice (DOJ): the display publisher ad server market and the display ad exchange market.
On Monday, the two sides returned to court for the remedies phase. Each side made their opening remarks to Judge Brinkema, who will make the decision.
If Google gets its way, it will make policy changes. If the DOJ gets its way, expect Google to sell off parts of the business, like divesting AdX and making rule changes that reach across the exchange to AdWords.
The ad tech antitrust case is unfolding the same month as the DOJ’s Google Search antitrust lawsuit made its remedy announcements. Those rooting for a hard line on Google were disappointed. Which makes it unsurprising that the decision issued by District Court Judge Amit Mehta was cited relentlessly by Google’s counsel throughout the day.
The DOJ cited it only once, practically spitting out that the Google Search decision had “no connection” to this case; Chrome was not considered a monopoly in that case, said the one of the DOJ attorneys, and thus was not similarly in play for divestiture.
DOJ Opening
The DOJ opened proceedings Monday on a grandiose foot, calling upon the old Winston Churchill line that those who don’t learn from history are doomed to repeat it.
We stand at “a critical inflection point” in the evolution of digital advertising and the open web, said Morgan Feder, assistant NY attorney general and head of antitrust investigations for the DOJ.
The DOJ is seeking a complete divestiture of AdX and a potential forced divestiture of parts of DFP.
The DOJ’s case for its ambitious remedies proposal is built on two pillars.
First, that the court will find it appropriate to seek remedies on Google that go beyond just open web display inventory in the exchange and ad server.
One of the DOJ’s arguments is that Google must be restructured to avoid even potential future mis-incentives.
Which is why the DOJ maintains that any remedy “must deal with AdWords,” although Google’s demand-side business wasn’t specified as a monopoly. But the demand side was the “leverage” that created the monopoly, Feder said. One reason publishers were tied to Google’s sell-side ad tech was because they relied on AdWords demand available exclusively through its products.
The second pillar comes down to, as Google’s counsel summed it up later on, “You just don’t trust Google.”
The DOJ’s team repeatedly called on Google’s “recidivist tendencies” and behavior as a “recidivist monopolist.”
“Especially in an industry like this,” Feder said, where “the means to cheat are buried in computer code and algorithms.”
Google’s opening
In US antitrust law, “caution is key,” began Google’s counsel, criticizing the DOJ’s request as a “swing for the fences.”
Google is proposing more behavioral remedies. As in, not structural.
The tech giant would agree to get rid of Unified Pricing Rules, a set of auction management rules that publishers despise, and to drop its self-imposed first look and last look bidding advantages for open web display inventory.
However, Google is narrowly limiting its would-be remedies to open web display, and in particular only impressions bid on equally by all programmatic vendors.
In other words, as the DOJ would elaborate later, inventory that falls under programmatic guaranteed deals, private marketplaces (PMPs) and other private auctions would not fall under the same rules. Neither would CTV, mobile in-app, native or video inventory.
As Google’s counsel noted, the DOJ is seeking to force a divestiture of a customer base, many of whom may not even touch open web display ads.
Google would no longer tie AdX inventory to the DFP ad server and would drop its advantageous rules for that slice of open web display, like Google’s first look and last look auction policies.
But US courts have never before required a divestiture as a remedy when a company tied one portion of its business to another, said Google’s counsel.
A spinoff would be technically unfeasible, they noted throughout, and would result in lower CPMs and big hassles in the short term for advertisers and publishers.
The DOJ is “trying to shoe a horse that’s about to be sent to pasture,” he said, alluding to the sequential decline of open web display ads and growth of AI-based advertising.
If Google has an ace up its sleeve, it’s probably the timeline put forward by the DOJ, which extends out to 14 years from now for potential remedies follow-ups. Google’s proposal, in contrast, makes it relatively simple for the government.
The US District Court for the Eastern District of Virginia, where Justice Brinkema sits, is known as “the rocket docket,” Google’s counsel noted (apparently, it’s a thing). Google could commit to its proposal being neatly tied within a year.
Otherwise, the government will be “supervising the ensuing mess for a decade,” Google’s legal team said.
Expert Witnesses
The court only got through two of the DOJ’s expert witnesses, Advance Local VP of ad tech and programmatic Grant Whitmore and Index Exchange Co-Founder and CEO Andrew Casale. Both concurred with the DOJ’s allegation that only a divestiture of AdX would alleviate the monopoly issues.
Whitmore:
In regards to Google’s proposed remedies, Whitmore was embittered at the notion of unified pricing rules’ removal as a concession, when it’s a feature that “should not have been in the system at all.”
Also, Whitmore said Google’s proposed remedies, which exclude PMPs, programmatic guaranteed and anything non-display, are quarantined to only the least interesting, non-growing parts of the publisher’s monetization.
Also, while Google would take bids from Prebid, it would continue to maintain a direct pipeline between AdX and DFP. There would remain an “inherent” conflict of interest and non-transparency.
Google has “demonstrated a remarkable ability to adapt,” he said.
And Google is also the only ad tech vendor that refuses to negotiate with publishers on contract “redlines,” or terms and requirements that one customer requests on a basic contract term. The practice is standard for every vendor except Google.
Advance Local and other publishers, he said, “agree to things we never would have with another provider.”
Casale:
Casale was on the stand during an extended conversation centering on Google’s first look and last look bidding rules.
When Casale was asked to speculate on potential antitrust issues with Google’s proposal, he joked the company “could be working on a third look and fourth look right now. We don’t know.”
He was also grilled by Google’s counsel because, a few weeks ago, when being questioned by the DOJ team, he said that Index Exchange would “do due diligence” and consider an acquisition of AdX if Google’s exchange was forced out.
And now here he is, pushing for a breakup.
Google’s counsel also cited marketing content – a company blog post – from shortly after the trial stage, when Casale didn’t specifically call for a divestiture.
Also, she added, Index Exchange is piddling, having only acquired two small companies, and thus wouldn’t even be a viable potential acquirer of AdX.
