It’s easy to see the US government’s latest legal challenge to Big Tech’s power as a case of too little, too late. Years of almost ignoring the trustbusters have allowed some companies to tap into the booming digital market. But as other lawsuits from the land of Washington, there is a sense that there is an important change, and even a relatively small victory can go a long way.
A new case from the Department of Justice accuses Google of playing all sides of the market for its own benefit when it manages ad sales on behalf of other websites. Google provides software used by many publishers and advertisers, while also having an exchange in the middle where orders to buy and sell ad inventory are matched.
It uses that power to direct orders to exchanges and influence prices, according to the DoJ. In the words of a Google executive quoted in the lawsuit, it’s as if “Goldman or Citibank owns the NYSE”. The US government has asked a court to force the company to divest itself of parts of its advertising technology, including DoubleClick, a company it bought 15 years ago.
This week’s lawsuit may have shaken Google — and indeed the entire digital advertising industry — to its foundations. Never.
When it bought DoubleClick, selling ads on behalf of other websites was a big deal for Google, accounting for about 40 percent of its annual revenue. It has now dropped to less than 12 percent. Google’s own search business is finally outgrowing other forms of advertising.
At the same time, the digital advertising landscape has undergone dramatic changes. Before long, Google and Meta, Facebook’s parent, looked like an undisputed duopoly. But by showing ads when people search for products on its own site, Amazon has grown rapidly. Now earn a third of Meta’s ad revenue and grow faster.
The rest of Big Tech is waiting in the wings. Apple has made it more difficult for services such as Facebook to collect data on devices, gain advertising value and create ground for its own attack on the mobile advertising business. Meanwhile, Microsoft last year won a bid to sell advertising on behalf of Netflix, the industry’s most important digital deal this year.
Even if the justice department wins before the judge, the trial is still years away. The first DoJ lawsuit against Google, claiming that the company negotiated an exclusive distribution deal for the search engine in order to kill its competitors, will take almost three years if, as expected, it finally comes to court in September.
Legal appeals and potential changes in political leadership in Washington add to the unpredictability.
When they take a late swing at a group like Google, US trustbusters only have to blame for taking so long for the cost level. But they are not the only ones who fail. Although many political parties have raised the technology leader before Congress for several confrontational hearings in 2020 and 2021, legislation to curb the power of Big Tech has stalled.
One issue, in particular, has hindered the progress of technology regulation in Washington, and shows all signs of remaining a serious obstacle. Republicans are seeking to turn the new law into a vehicle to prevent what they claim is censorship of conservative viewpoints by the left-leaning tech establishment.
The most promising antitrust bill, sponsored by Democratic senator Amy Klobuchar and Republican senator Chuck Grassley, would prevent the largest platforms from discriminating against other companies by giving special treatment to their own services. Republicans, though, wanted to use anti-discrimination provisions to prevent internet platforms from suppressing competing viewpoints – a backdoor method to weaken online moderate content, and a deal-breaker for Democrats.
It is difficult to see this divide will be bridged in the future. The radical right-wing minority-controlled Republican Party now controls one arm of Congress and the presidential campaign is about to begin, deepening the partisan divide.
But it’s worth noting that the DoJ has smartly navigated legal challenges, and still managed to score some victories. Selling ads to other websites may be a relatively small – and falling – part of Google’s overall operations, but it was still worth more than $30bn last year. For many publishers, the case will be important if they pay lower fees to “ad technology” providers who handle advertising sales, although this is not always the case.
As a result, the DoJ cases are at least likely to put more dents in Google’s armor than the European Commission’s long-running legal battle with the company. Brussels has paid three fines totaling €8.25bn but has not forced any significant changes in Google’s business practices. If it ultimately succeeds in separating parts of Google’s ad tech operations and limiting the company’s ability to reach search distribution deals, the DoJ will be able to prosecute more directly.
Google still has plenty of time to find ways to mitigate the damage. But a legal victory for the US government would prove that Big Tech’s legal defenses are invincible and could shift public opinion in favor of greater control. Maybe then Congress will summon the will to act. But it won’t be able to hold its breath.
richard.waters@ft.com