EU regulators lay antitrust charges on Google, threaten to break up its ads business

EU regulators lay antitrust charges on Google, threaten to break up its ads business

European Commission regulators have sent a Statement of Objections to Google over practices in online advertising technology. The tech giant is accused of exploiting its dominant position in the online advertising market, through Google AdX, in order to gain unfair advantages deemed against EU antitrust rules. The complaint puts pressure on Alphabet to sell off parts of the lucrative Google Ads business.

Google AdX is an online advertising marketplace that enables the buying and selling of display ads. The European Commission, the executive body of the 27-nation European Union, argues that Google unfairly leverages its position to give preferential treatment to its own ads.

The European Commission preliminary asserts that Google has abused its dominant position by favouring its own online display advertising technology services — distorting competition and placing rivals at disadvantage.

The European Commission has informed Google of its preliminary view that the company breached EU antitrust rules by distorting competition in the advertising technology industry (‘adtech’). The Commission takes issue with Google favouring its own online display advertising technology services to the detriment of competing providers of advertising technology services, advertisers and online publishers.

European Commission press release: ‘Commission sends Statement of Objections to Google over abusive practices in online advertising technology’, 14 June 2023

This ruling is based on an official inquiry first initiated back in June 2021. The tech giant has found itself under increasing scrutiny in recent years, facing numerous allegations of antitrust violations and unfair market control within its ads business. The extraordinary measures signify an escalation in the EU’s efforts to regulate Silicon Valley’s tech giants.

The Commission preliminarily states that Google has “abused its position” in two main ways since 2014. Firstly, by favouring its own ad exchange AdX in the ad selection auction run by its dominant publisher ad server, as well as by “informing AdX in advance of the value of the best bid from competitors which it had to beat to win the auction.”

Secondly, it accuses Google of preferring its own AdX ads exchange because of the way its ad-buying utilities, Google Ads and DV360, have been used to bid on exchanges. Google avoids rival ad exchanges and places bids on AdX instead in a way that monopolises how ads are purchased.

“Google has a very strong market position in the online advertising technology sector. It collects users’ data, it sells advertising space, and it acts as an online advertising intermediary. So Google is present at almost all levels of the so-called adtech supply chain. Our preliminary concern is that Google may have used its market position to favour its own intermediation services. Not only did this possibly harm Google’s competitors but also publishers’ interests, while also increasing advertisers’ costs. If confirmed, Google’s practices would be illegal under our competition rules.”

Margrethe Vestager, Executive Vice-President in Charge of Competition Policy

This quote is direct from the Statement of Objections itself. In a personal post on the EU Commision Twitter feed, Margrethe Vestager added: “Google controls both sides of the adtech market: sell & buy. We are concerned that it may have abused its dominance to favour its own AdX platform. If confirmed, this is illegal.” 

For Alphabet, the parent company of Google, advertising accounted for the majority of its $60 billion profit last year. Any official lawsuit going forward is likely to result in huge fines or penalties that could force Google to sell a sizable chunk of its ad tech business. Google’s ad tools and platforms underpin a significant portion of its parent company Alphabet’s profits, making it a critical component of its business model. By leveraging its dominance in online search, Google has extended its reach into various other advertising channels.

This is the fourth time the European Commission has formally accused Google of breaching European antitrust laws. Back in June 2017, it fined Google €2.42 billion for favouring its own comparison shopping service in search results. In July 2018, it fined Google €2.42 billion for favouring its own comparison shopping service in search results. And, in March 2019, Google was fined €1.49 billion for breaching EU antitrust rules. 

Google, for its part, has always tended to highlight that advertisers are given freedom to choose alternative platforms. Advertising in this way serves as the foundation for nearly all of Google’s widely-used services, such as search, email, maps — allowing the company to provide them to users free of charge.

Predictably, the tech giant has formally and publicly disagreed with the European Commission on this occasion, fighting its corner:

“Our advertising technology tools help websites and apps fund their content, and enable businesses of all sizes to effectively reach new customers … Google remains committed to creating value for our publisher and advertiser partners in this highly competitive sector. The Commission’s investigation focuses on a narrow aspect of our advertising business and is not new. We disagree with the EC’s view and we will respond accordingly.” 

Dan Taylor, Google’s vice president of Global Ads

Regulatory investigations have manifested on the other side of the Atlantic. US authorities have also questioned this alleged monopoly in the online advertising ecosystem. In January of this year, the US government filed a lawsuit against Google in relation to its ad tech. The US Justice Department demanded that Google sell its ad manager suite, claiming that the company had abused its dominant position in online advertising. 

Google had acquired ad-tech pioneer DoubleClick in 2007 for $3.1 billion. These services later evolved into Google Ad Manager. Both the US and EU governments seem to want the company divest of this in the interest of fair competition.

The decisions made in these cases could set important precedents for the regulation of tech giants and the digital advertising industry as a whole. Balancing the need to foster competition and innovation while preventing market abuses remains a complex challenge for regulators worldwide.

As the legal battles continue, it remains to be seen how these accusations against Google will ultimately shape the future of the digital advertising landscape and the broader tech industry. The hope is that the regulatory decisions could bring about greater competition and a more level playing field in the online advertising space. Google would no doubt argue it operates within the bounds of fair competition — that its search advertising practices offer the best user experience and most relevant results.