A federal judge in Virginia has accused Google of engaging in monopolistic practices for the second time in less than a year. The verdict from U.S. District Judge Leonie Brinkema this past Thursday alleges that Google unlawfully used its online marketing technology to bolster the profits of its $1.8 trillion internet business. This decision follows a prior August ruling that Google’s search engine has been unlawfully using its dominance to suppress competition and innovation.
The ongoing scrutiny of Google’s business practices stems from initiatives by the U.S. Justice Department, which first targeted its search engine power during the Trump administration. Under the Biden administration, the department has shifted focus to Google’s profitable digital advertising network, which emerged from the company’s early days in a Silicon Valley garage in 1998. Although regulators have secured victories in both cases, Google plans to appeal these monopoly decisions while actively pursuing advancements in artificial intelligence, a burgeoning technology sector.
The recent ruling paves the way for a penalty phase expected to start later this year or early next. Remedy hearings for the search monopoly case are set to commence on Monday in Washington, D.C., where Justice Department attorneys will seek a comprehensive penalty. Their proposal includes compelling Google to divest from its Chrome web browser.
Brinkema’s detailed 115-page ruling highlights the expansive marketing system Google has cultivated around its flagship search engine and other popular services like YouTube, Chrome, and its digital map offerings. A significant portion of this system evolved following Google’s acquisition of DoubleClick, an online ad specialist, for $3.2 billion in 2008. Although initially approved by U.S. regulators, these deals eventually permitted Google to influence prices within a digital ecosystem critical to numerous websites for revenue and consumer engagement.
According to the Justice Department’s legal team, Google established dominant positions in three key technological areas crucial for selling online ad space: website publisher tools, advertiser services for consumer-targeted ads, and ad auctions that rapidly link buyers and sellers.
Judge Brinkema, after a trial that ended last Thanksgiving, concluded that while Google hasn’t been mistreating advertisers, it has been misusing its power to disadvantage online publishers reliant on its network. “For over a decade, Google has tied its publisher ad server and ad exchange together through contractual policies and technological integration, which enabled the company to establish and protect its monopoly power in these two markets,” she wrote. However, she did not find Google in violation of the law regarding its acquisitions of DoubleClick and Admeld, citing insufficient evidence of anticompetitive behavior.
Following these conclusions, the ruling could assist Google in resisting measures that would require it to sell its advertising technology to curb its monopoly. U.S. Attorney General Pamela Bondi labeled it a landmark victory against Google’s dominance of the digital sphere. In response, Google announced its intention to appeal, with Lee-Anne Mulholland, its vice president of regulatory affairs, defending their ad tech tools as simple, affordable, and effective.
Market analysts, like Brian Pitz of BMO Markets, had anticipated Google might lose the case, with Google’s parent company, Alphabet Inc., experiencing a modest 1% stock decrease, closing at $151.22 on Thursday. So far this year, Alphabet’s share value has fallen by 20%. Moreover, Google is also contesting a 2023 federal jury verdict classifying its Play Store as part of an illegal monopoly.
Throughout the proceedings, Google contested the Justice Department’s accusations, arguing the government relied on outdated concepts of the advertising market, ignoring competitors like Facebook, Amazon, Microsoft, and Comcast. Karen Dunn, a Google lawyer, even likened the government’s market outline to a relic containing a BlackBerry, iPod, and Blockbuster video card.
During the trial, the impact on news publishers was a focal point, with testimonies from entities like Gannett and News Corp., highlighting their struggles and limited alternatives to Google’s ad tech, which significantly funds their operations. As a result of these developments, the government is positioned to attempt dismantling this intricate ad network. The Justice Department asserts that Google should, at a minimum, divest its Ad Manager product, encompassing tools utilized by website publishers and for executing ad exchanges.