Google Proposes To Split Ad-tech Biz To Avoid Antitrust Lawsuits: Report

Alphabet’s Google has offered concessions to try to avoid a possible U.S. antitrust lawsuit targeting its huge ad tech business, according to people familiar with the matter, a sign that legal and regulatory pressures on the tech giant are reaching their climax.

As part of a bid, Google has offered to spin off part of its business that auctions and places ads on websites and apps into a separate company under the Alphabet umbrella, they said. certain people. This entity could potentially be valued at tens of billions of dollars, depending on the assets it contained.

It could not be determined whether an offer for less asset sales would satisfy the US Department of Justice, where antitrust officials have signaled a preference for deep structural changes to Google’s ad tech business, rather only promises to change business practices, the people said.

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The Department of Justice is conducting a long-running investigation into allegations that Google is abusing its role as a broker and auctioneer of digital ads to drive off rivals. The department is preparing a lawsuit alleging that Google’s ad-tech practices are anti-competitive, a lawsuit that could be filed as early as this summer, the people said.

“We have engaged constructively with regulators to address their concerns,” a Google spokesperson said in a statement. “As we have said before, we have no intention of selling or exiting this business. He added, “Strong competition in ad technology has made online ads more relevant, lowered costs, and expanded options for publishers and advertisers. »

A Justice Department spokeswoman declined to comment.

In the European Union, where Google is facing another ad tech investigation, Google has made an offer to settle another allegation of anti-competitive behavior related to YouTube, some of the people familiar with the matter said.

As part of the offer, Google would allow competitors to negotiate the sale of ads directly on the video service, the people added. Currently, the only way to buy ads on YouTube, the world’s largest video-sharing platform, is through Google’s ad buying tools.

A spokeswoman for the European Commission, the EU’s top antitrust enforcer, declined to comment on its investigation into Google’s ad tech activities, which it said was ongoing. “As always, in our investigations, we cooperate with other authorities,” including the Ministry of Justice, she said. Reuters previously reported Google’s offer tied to YouTube in Europe.

Antitrust watchers have long awaited a second U.S. case against Google following the Justice Department lawsuit nearly two years ago, alleging the company used anticompetitive tactics to maintain its dominant position in online search. Google has denied the allegations and the case is ongoing.

Google’s willingness to offer concessions to avoid a US lawsuit is an evolution of the company’s strategy to deal with mounting legal and regulatory pressure.

In addition to investigations by the Department of Justice, the EU and the UK, Google is preparing for a trial in a US states lawsuit led by Texas that claims the company operates a monopoly that has harmed competitors and publishers in the advertising industry.

Google is awaiting a judge’s decision on a motion to dismiss the case and said the suit was “full of inaccuracies and lacking in legal merit”.

Meanwhile, US senators have proposed a new antitrust bill that could force Google to divest some of its ad tech business. And the EU agreed this spring on two major new tech regulations, including one called the Digital Markets Act, which imposes new fairness obligations on companies like Google.

Any move by Google to restructure parts of its ad tech business could rock the digital advertising industry. Advertisers are expected to spend more than $600 billion on digital ads worldwide this year, according to eMarketer, and Google plays a major role as a middleman in such sales. Last year, Google’s business of brokering the sale of ads on other websites and apps accounted for $31.7 billion in revenue, or about 12% of Alphabet’s total.

Publishing executives have long complained that Google’s market power has allowed the company to charge higher commissions, reducing its revenue from digital ads. Rival ad tech companies have also complained that Google is using its market power to drive businesses away from them.

Many critics say antitrust officials should have tried to block Google’s 2007 deal to buy DoubleClick, at the time a leading ad serving company for web publishers. which also operated an exchange where these ads were auctioned off to advertisers.

Some rivals claim that this deal – which was then worth just $3.1 billion – and several others over the following years helped Google gain significant power as an ad broker responsible for a significant portion of the market capitalization. of nearly $1.6 trillion from Alphabet.

Today, Google tools can handle every step of buying and selling digital ads, effectively representing both advertisers and publishers, as the former bid on ads for the latter, using an exchange online auctions that Google itself also operates. Regulators have been investigating whether Google is abusing its role along these stages of every transaction. Google denied taking an unfair advantage.

“We are concerned that Google has made it more difficult for rival online advertising services to compete in the so-called ad tech stack,” Margrethe Vestager, EU competition chief, said when announcing the announcement. the bloc survey last year.

Another point of contention among rivals and regulators was Google’s decision more than half a decade ago to require advertisers to buy ads on YouTube using Google’s advertising tools rather than third-party tools. Google’s ad-tech rivals at the time say the move ended competition because YouTube is by far the largest online video site, pushing advertisers to work more with Google than with their rivals when buying ads.

Google has navigated a number of antitrust investigations over the past decade. In early 2013, the company resolved a U.S. Federal Trade Commission investigation by agreeing to voluntary changes to its practices, despite recommendations from some agency staff to take legal action, a reported the Wall Street Journal. Google tried to settle a similar dispute in the EU, but EU officials ultimately rejected three separate Google offers to settle before filing the first of three sets of antitrust charges in 2015.

EU officials eventually found that Google violated the bloc’s antitrust laws in each of its separate cases, fining the company about $8.4 billion and ordering changes to its business practices. Google fought all three rulings in EU courts, but in the meantime had to comply. Google search results in Europe show ads for products from Google competitors, and Android phones activated in Europe prompt users to select their default search engine from a list of options that include Google’s competitors.

What’s the catch?

  • It could not be determined whether an offer other than the sale of assets would satisfy the US Department of Justice, where antitrust officials have signaled a preference for deep structural changes to Google’s ad tech business, rather only promises to change business practices
  • It will be the second U.S. case against Google after the Justice Department lawsuit nearly two years ago alleging the company used anti-competitive tactics to maintain its dominance in online search. Google has denied the allegations, and the case is ongoing

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