The latest U.S. lawsuit against Google adds to the legal problems the company faces worldwide, and expands the scope of the government’s allegations against the tech giant’s online advertising business.
The suit comes as Google faces increasing competition for its core business from apps like TikTok and emerging artificial-intelligence programs. Last week, Google completed its largest layoffs in company history, signaling that it feels pressure to cut costs.
Google is now in battle mode. It has hired high-powered lawyers to build a defense as it tries to protect its position in the search, mobile-software, online-video and ad-tech businesses that helped make it a $1.2 trillion company.
The four self-reinforcing pillars of Google's advertising business have helped it become the largest digital-ad business in the world, bigger than that of its rivals Meta Platforms Inc. and Microsoft Corp.
The Justice Department has filed a lawsuit against Google, claiming that the company has engaged in anticompetitive practices in digital-ad brokering. The government is seeking remedies including a breakup of the business, which it called an "illegal monopoly."
Google said Tuesday that the latest lawsuit against the company "attempts to pick winners and losers in the highly competitive advertising-technology sector."
In September 2020, the Justice Department will go to trial over allegations that Google has maintained a monopoly in online search and related advertising. This case marks a new high point in antitrust actions targeted at the tech sector.
Google is facing another lawsuit, this time brought by state attorneys general, over similar issues to those raised in the latest Justice Department suit.
The Department of Justice is doubling down on a flawed argument that would slow innovation, raise advertising fees, and make it harder for thousands of small businesses and publishers to grow, according to a Google spokesman.
Google has long maintained that its ad-tech tools help fund the open web, which in turn creates more content for its search engine to index. That connection makes the business a key part of its larger $209 billion ad operations, even though Google executives have at times played down the significance of the revenue it generates.
In an effort to avoid a lawsuit, Google proposed last year that parts of its ad-tech business be split off into a new company under the umbrella of parent Alphabet Inc.
The company's willingness to offer concessions reflects its evolving strategy for handling growing legal and regulatory pressure.
Google believed that a settlement could resolve ongoing investigations across multiple jurisdictions, and positioned it as an opportunity for the Justice Department to take the lead on the issue, according to people familiar with the discussions at the time. Antitrust enforcers in the European Union and the UK are also investigating Google's ad-tech business.
The Justice Department has filed a new lawsuit against Google, calling for the divestiture of specific parts of the company's business. This includes the tools that online publishers use to sell advertising, such as an ad server and an exchange used to transact with buyers.
The Justice Department has accused Google of using anticompetitive and exclusionary practices to maintain its dominance in the digital advertising marketplace. In a complaint filed against the company, government lawyers allege that Google has used a variety of unlawful means to eliminate or severely diminish any competition it faces.
Google will continue to compete against new challengers such as ByteDance Ltd.'s TikTok and ChatGPT, an artificial intelligence chatbot. Both of these competitors have been identified by analysts as potential threats to Google's search business.
Dan Taylor, a vice president of global ads at Google, said in an online post on Tuesday that competition in the online advertising industry is increasing. He said that Microsoft's acquisition of the ad-tech company Xandr last year allowed it to win a landmark deal to work on Netflix Inc.'s new advertising business.
According to research firm Insider Intelligence, Google controlled 28.8% of the online advertising market last year, making it the largest player in the industry. Advertising accounted for more than 80% of Alphabet's $257.6 billion in revenue in 2021.
The lawsuit filed on Tuesday alleges that Google's dominance of the online advertising market is anticompetitive and harmful to consumers. The suit specifically focuses on Google's ad server for publishers, which has a market share of more than 90%. The Justice Department alleges that this gives Google an unfair advantage in the online advertising market.
Competition lawyers and historians say there are few historical precedents for the Justice Department bringing a second antitrust case against a company amid an existing complaint. However, they noted that the latest lawsuit is rooted in the fundamentals of U.S. antitrust law and will be difficult to fight.
Herbert Hovenkamp, a professor at the University of Pennsylvania Carey Law School and Wharton School, said that this is a very solid, traditional antitrust case, and that there are no Hail Marys being thrown.
The Justice Department's recent lawsuit against Google alleging monopolistic practices is a notable exception, according to Laura Phillips-Sawyer, an associate professor at the University of Georgia School of Law who has written about the history of competition law.
Ms. Phillips-Sawyer said that the aggressive pursuit of structural relief is a watershed moment, citing the high bar to clear as one of the reasons.
Jonathan Kanter, the head of the DOJ's antitrust division, has been a longtime proponent of more aggressive antitrust enforcement against big companies. In recent weeks, he has taken a lead in shaping the new Google lawsuit, according to people familiar with the matter.
Google asked the Justice Department to investigate whether Mr. Kanter should recuse himself from cases against the company, citing federal rules and an executive order by the Biden administration around possible conflicts. The Justice Department recently cleared him to work on the Google cases.
Google has hired an army of lawyers to defend itself in both antitrust lawsuits. These attorneys come from Freshfields Bruckhaus Deringer and Wilson Sonsini Goodrich & Rosati, both of which are longstanding outside corporate counsel for the company.
Eric Mahr, a lawyer at Freshfields who is advising Google on the ad-tech case, previously served as director of litigation for the DOJ's antitrust division from 2015 to 2017.
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