U.S. Justice Department, 8 states sue Google over digital ad dominance

The U.S. Department of Justice and eight states, including California, filed suit against Google in a Virginia federal court on Tuesday, claiming that the company illegally used its market powers to dominate Internet advertising.

In a court filing originally reported on by CNN, the DOJ and the states asked the court to, “at minimum,” force Google to divest itself of its Google Ad Manager suite—including both Google’s publisher ad server, DFP, and Google’s ad exchange, AdX—plus any additional structural relief that the court deemed necessary.

Google called the suit “an attempt to pick winners and losers” by the DOJ.

The 149-page suit accuses Google of using its influence to remove competition from the ad tech market. The DOJ claimed, for example, that Google keeps about 30 cents of each ad tech dollar that flows through from an advertiser to a publisher.

“The harm is clear: website creators earn less, and advertisers pay more, than they would in a market where unfettered competitive pressure could discipline prices and lead to more innovative ad tech tools that would ultimately result in higher quality and lower cost transactions for market participants,” the suit claims. “And this conduct hurts all of us because, as publishers make less money from advertisements, fewer publishers are able to offer internet content without subscriptions, paywalls, or alternative forms of monetization.”

The suit alleges that Google essentially bought itself control over Web advertising from both a publisher and advetiser perspective via its 2008 purchase of DoubleClick, which gave it both access to an ad exchange (AdX), as well as a publisher ad server, known as a DFP. “In effect, Google positioned itself to function simultaneously as buyer, seller, and auctioneer of digital display advertising,” the suit alleges.

Though the suit dives deep into the intracacies of the ad business, the suit claims that on one hand Google was artificially inflating the prices of the ads to the benefit of publishers. But the suit also harmed publishers as well, as Google Ads drove out other competition. If they had remained in the market, the additional competition may have benefited the market. The suit claims that by 2015, Google owned 90 percent of the online advertising market.

Other attempts by advertisers to wrest back control, such as yield managers and header bidding, were also foiled, the suit says.

Google’s statement called the suit a “flawed argument.”

“Today’s lawsuit from the DOJ attempts to pick winners and losers in the highly competitive advertising technology sector,” the company said in a statement. “It largely duplicates an unfounded lawsuit by the Texas Attorney General, much of which was recently dismissed by a federal court. DOJ 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.”