Google Goes On Trial (Again) Today

Democrats' aggressive antitrust agenda threatens to upend Google's ad tech business—and make U.S. markets less free.

Google goes on trial today in the second of two antitrust cases brought by the federal government. This time around, the Department of Justice (DOJ) is accusing the tech giant of illegally maintaining a monopoly on digital advertising technologies.

"Google has used anticompetitive, exclusionary, and unlawful means to eliminate or severely diminish any threat to its dominance over digital advertising technologies," the DOJ alleges in a civil lawsuit joined by eight states. It wants to force Google to divest parts of its ad tech stack, a suite of products that helps broker ad sales between website publishers and digital advertisers.

Google contends that the government is making a mistake that will harm not just Google but website publishers and digital advertisers. "Ad buyers and sellers have a huge range of choices among ad tech providers, and they exercise those choices daily," wrote Google's Vice President of Regulatory Affairs Lee-Anne Mulholland in a September 8 blog post. "The average advertiser uses three platforms to buy ads—and can choose from hundreds of options. And the average large publisher uses six platforms to sell ads—and can choose from over 80 options."

Regulatory Revision and implicit threats

The case will get a bench trial, not a jury trial, and be decided by U.S. District Judge Leonie Brinkema.

The DOJ says Google illegally maintained dominance in the digital ad tech market, in part by acquiring competitors.

The acquisitions in question—of something called AdMeld and something called DoubleClick—took place 13 and 16 years ago, respectively, and were approved by U.S. regulators at the time.

These sort of acquisitions aren't unusual. Tech companies routinely buy up smaller companies that have developed innovative or valuable technologies.

But revisiting acquisitions that were deemed fine when they took place has been a theme in President Joe Biden's antitrust agenda. It's part of the administration's larger hostility to businesses it deems too big.

It also creates an absolutely baffling situation for U.S. companies, who could—like Google in this case—get approval to acquire a product, spend more than a decade developing that product and building business systems and services around it, and then be told that maybe it has to give that product up.

The potential for government overreach and abuse in such a system is substantial. After all, if nothing was wrong when an acquisition occurred, what could retroactively make it against the law? The answer certainly appears to be that a company fell out of political favor.

If allowed to stand, this makes any acquisition precarious, as the federal government may decide more than a decade later that your conduct it previously approved was actually illegal. And fewer acquisitions can mean less innovation and fewer economies of scale, meaning it's consumers who ultimately lose out.

This also seems like a weapon the government can use to strong-arm tech companies into doing what the authorities want. Follow our "suggestions" on how to moderate content, who to ban from your services, and so on—we'd hate to have to have revisit that decades-old acquisition of yours…

The bulk of the DOJ's case seems similarly misguided. For instance, it accuses Google of having a monopoly when it has only about a quarter share of the digital ad market—and this share has been decreasing, along with Google ad revenue.

"In recent years, Google Networks, the division of the Mountain View, California-based tech giant that includes such services as AdSense and Google Ad Manager that are at the heart of the case, actually have seen declining revenue," notes ABC. According to Google's annual reports, these revenues decreased from $31.7 billion in 2021 to $31.3 billion last year.

Google has been facing increasing competition for advertising spending from social media platforms such as TikTok and from the booming array of streaming platforms. But the DOJ has conveniently defined the relevant market to exclude such competitors.

An Ongoing Crusade

The DOJ's first antitrust case against Google, filed in 2020, concerned the company's practice of pre-loading Google search engines on Android phones and striking deals with other companies, such as Apple, to have Google search set as the default. A trial in that case was held last fall, with a decision issued last month.

In a somewhat nonsensical ruling, the court admitted that Google put out "the best" search engine and had reached a dominant position in the search engine and search advertising markets by being superior. But because Google's "distribution agreements are exclusive and have anticompetitive effects," the court ruled that it was guilty of violating the Sherman Antitrust Act of 1890.

The decision showcased the odd (and some might say capricious) nature of federal antitrust law, which can render the same behavior legal or illegal depending on the size and market position of a company. A search company striking deals with larger tech entities to secure placement isn't de facto prohibited. It might even be a shrewd business move for a small or medium-sized company. But when a large company with market dominance does it, that shrewd business move could become an antitrust violation.

It also showcased how antitrust law can be unfair to parties beyond the company with charged with violations. Presumably, Apple and other companies wouldn't set Google as the default search engine if they thought it was bad for their users. Now they no longer can receive incentives from Google to set it as the default, so they can instead choose something that basically everyone agrees is an inferior product (such as Bing) or can continue to set Google as the default without getting compensated for it.

Apple et al. lose and, if a non-Google preset is chosen, consumers lose too—they have to use a lesser product or switch the default themselves. Switching your default search engine on a phone or computer isn't a big hassle. But it's made more aggravating by the fact that the government is forcing folks to take on this minor inconvenience in the name of "helping" ensure a fair marketplace.

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• It's that time of year again where cops give cutesy names like "Operation Pumpkin Spice" to their efforts to put people in handcuffs for trying to have consensual sex with another adult.

• A federal appeals court has blocked part of a California law that would have required social media companies to disclose certain content moderation policies.

Today's Image

Brooklyn, NY | 2015 (ENB/Reason)