There are few institutions worldwide capable of standing up a greater legal team than Google.
But the U.S. federal government might be one of them. And on Monday (Sept. 9), the U.S. Department of Justice (DOJ) and Alphabet’s lawyers will square off again, just weeks after a federal U.S. judge ruled in August that Google illegally held a monopoly in search and text advertising.
This time, Google is facing an antitrust suit that alleges the search and technology giant’s advertising business has acted as a monopoly that ultimately led to higher ad prices for customers.
The DOJ lawsuit, which is joined by a coalition of eight U.S. states including California, Colorado, Connecticut, New Jersey, New York, Rhode Island and Tennessee, accuses Google of having “corrupted legitimate competition in the ad tech industry by engaging in a systematic campaign to seize control of the wide swath of high-tech tools used by publishers, advertisers and brokers to facilitate digital advertising.”
If Google loses, the suit requests that the court force Google to sell the bulk of its ad technology products, which include software for buying and selling ads, a marketplace to complete the transactions and a service for showcasing the ads across the internet.
Google has denied the Justice Department’s claims, writing in a Sunday (Sept. 8) public statement that, “we are one of hundreds of companies who actively compete to enable the placement of ads across the internet. Media companies like Comcast and Disney, retailers like Walmart and Target, and specialized ad tech companies like Criteo, Index Exchange and the Trade Desk all invest in building their online ads services. In the last few months alone, Paypal, Costco and United Airlines introduced new ad tech services.”
The trial, which is being held in Alexandria, Virginia, is likely to run for weeks, with a ruling from the judge expected to take additional weeks or even months.
Google did not immediately reply to PYMNTS’ request for comment.
Read more: Governments Confront the Challenge of Taxing Digital Advertising
Google’s Advertising Empire Comes Under Federal Fire
Despite a relatively strong showing in court throughout its history, Alphabet and its Google subsidiary have lost two of their latest — and biggest — showdowns, its app store battle against Epic Games and search battle against the DOJ.
But a loss in Monday’s antitrust advertising suit could lead to dramatic changes across Alphabet’s core business — advertising — as it fights against incumbents and upstarts alike for leadership in the artificial intelligence (AI) era.
According to the DOJ lawsuit, which was filed last year, Google keeps about $36 out of every $100 in advertising spent through its tools. Per Alphabet’s 2023 financials, its advertising suite accounted for 78% of total revenue.
“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 DOJ suit alleges.
Read more: Google Antitrust Ruling Sparks Debate Among Online Publishers and SEO Experts
Implications for Big Tech Business Models
“By picking winners and losers in a highly competitive industry, the DOJ risks making it more expensive for small businesses to grow and for websites and apps to make money,” Alphabet wrote. The tech giant added that the plaintiffs’ “narrow focus” on website ads ignores the competition it faces in the growing advertising categories of social media, streaming TV and apps.
Sixty-nine percent of U.S. small and medium-sized businesses (SMBs) currently use digital ads to find new customers, according to Google.
Alphabet’s advertising product vertical is also facing scrutiny abroad. The United Kingdom’s Competition and Markets Authority (CMA) said Friday (Sept. 6) that it has found that Google may have harmed competition by using its dominance in online display advertising to favor its own ad technology services. Should the U.S. successfully dismantle parts of Google’s ad empire, European regulators may intensify their efforts to curb Big Tech’s dominance.
Beyond Google, the DOJ lawsuit could set a precedent for how the U.S. approaches other tech giants with similarly expansive reach. Companies like Amazon, Apple and Meta, which also operate in multiple layers of the digital economy, could face heightened scrutiny. For instance, if the lawsuit succeeds, regulators might be emboldened to examine how these firms’ dominance in areas like eCommerce, app ecosystems or social media advertising affects competition.
The potential breakup of Google’s ad business may also prompt Big Tech companies to rethink their integration strategies, especially in markets where they exert control over both the infrastructure and the marketplace. Companies may pursue mergers and acquisitions with greater caution, knowing that regulatory bodies are increasingly willing to intervene.
While the outcome remains uncertain, one thing about the DOJ case is clear: it will likely serve as a bellwether for the future of antitrust enforcement in the U.S.