Ready, set … sue.
Although new antitrust legislation is all but dead in Congress, the antitrust division of the Department of Justice, along with a group of states, formally sued Google on Tuesday over its alleged (ahem) monopolization of the digital advertising market.
The lawsuit, which was filed in the US District Court for the Eastern District of Virginia, is the second federal antitrust lawsuit against Google. Read the full complaint here.
The first suit, which dropped in October 2020 under the Trump administration, zeroed in on the Google search business, with scant reference to the ad tech side of Google’s house.
But ad tech is the main focus of this latest suit, and the DOJ doesn’t mince its words:
“ … Competition in the ad tech space is broken, for reasons that were neither accidental nor inevitable. 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. 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.”
Well then.
Specifically, the government accuses Google of illegally monopolizing the publisher ad server, ad exchange and ad network markets in the US and of unlawfully tying Google AdX (formerly DoubleClick) with DFP, Google’s publisher ad server.
The desired remedy? At minimum, the DOJ is pursuing a divestiture of Google ad tech, including Google AdX and DFP.
Violations (alleged)
Google could theoretically offer to spin off parts of its ad tech stack as a concession to the government to avoid a jury trial.
But Google reportedly tried that tactic earlier this year in an attempt to deter the suit … and, apparently, the idea didn’t fly. (It also could be that whatever Google offered to spin off wasn’t enough to satisfy federal enforcers.)
The DOJ is making a multipronged argument for why Google ought to be broken up:
- Google has spent the better part of the last two decades acquiring and maintaining tools that control both sides of the market (buy side and sell side).
- Google has wielded its market power to undermine attempts by publishers, advertisers and rival ad tech companies to compete for digital ad impressions.
- Google has used its dominant position to prevent publishers – who, as the DOJ points out, just so happen to be Google’s own customers – from offering their inventory across multiple exchanges.
- And, rather than choosing to compete with its rivals, Google made moves to quash technologies that could pose a potential competitive threat to its business.
Cutting HB off at the head
One salient example in the DOJ’s complaint is Google’s response to the “threat of header bidding,” which the government points to as evidence of Google excluding rivals and reinforcing its dominance in the digital ad market.
Fun-ish fact: A word search for “header bidding” in the DOJ’s complaint comes back with 199 hits. (!!)
When header bidding first came on the scene in 2014, it was seen primarily as a way for publishers to get around Google and allow other partners to bid on inventory before AdX had its first look.
Alarm bells immediately started going off at Google.
As the complaint notes, “Google executives described header bidding as an ‘existential threat’” and “worried that wider adoption of header bidding practices could lead to Google’s ad exchanges having to compete with other ad exchanges on a level playing field, where Google could no longer set the rules in its own favor.”
So Google went to work mitigating the threat. In fact, Google put its little gray cells to work.
Meet: “Project Poirot,” part of an alleged effort by Google, according to the DOJ, to “dry out” header bidding.
Project Poirot
Much ink has already been spilled about Project Bernanke, whereby Google allegedly used bidding data collected from buyers using AdX to benefit Google’s own ad tech, as well as on Jedi Blue, a secret program to partner with Facebook in an effort to snuff out header bidding.
Project Poirot (named after Agatha Christie’s iconic Belgian detective character) is cut from the same cloth as Bernanke and Jedi Blue.
The complaint notes that the purpose of Project Poirot was “straightforward.” Google would divert scale away from rival ad exchanges that used header bidding and manipulate bids sent to rival ad exchanges so Google’s AdX could win those transactions more often.
By the summer of 2017, according to the DOJ, Google had changed the settings of DV360 so all advertising campaigns were opted into Project Poirot by default. A mere 1% opted out.
The following year, Google launched a new version of the program, “Poirot 2.0,” which allegedly reduced DV360 bids to header bidding ad exchanges even further – by as much as 90% in some cases.
Google, the government argues, knew what it was doing. The company estimated what Poirot 2.0 would do to some of header bidding’s most vocal advocates, and the results would be bloody.
AppNexus/Xander would lose 31% of DV360 advertiser spend, Rubicon would lose 22%, PubMatic 26% and OpenX 42%. Immediately after the launch of Poirot 2.0, the DOJ claims that OpenX experienced a 30% YoY decline in DV360 ad spend, leading to a lay off of roughly 100 people.
Meanwhile, Poirot increased revenue, publisher payouts and win rates for Google’s ad exchange.
According to the lawsuit, Poirot’s success enabled Google to maintain the 20% revenue share fee it has charged on its ad exchange since 2009.
Next steps
The DOJ’s 149-page lawsuit against Google is a wild ride and well worth a read in full.
But it could, and likely will, be years before the case sees the inside of a courtroom.
Consider the DOJ’s civil antitrust trial against Google for monopolizing search and search advertising, which isn’t scheduled to start until September – just under three years after the lawsuit was first filed.
Regardless, popcorn (or champagne) can be popped.
Jonathan Kanter, assistant attorney general for the DOJ’s antitrust division, will be involved with the litigation. Kanter was recently cleared to work on Google cases after previously being barred from Google-related monopoly suits while the Department of Justice evaluated whether he should be recused due to his past work representing Google’s critics, including Microsoft and Yelp.
In addition to the DOJ’s search-related antitrust case against Google and this new suit focused on its ad tech business, Google also faces an ongoing ad-tech-focused antitrust lawsuit brought by a coalition of state attorneys general in late 2020 led by Texas, as well as numerous actions in Europe.
