Google’s ad tech empire rests on how well it can make these key arguments

First, let’s summarize the developments in last week’s antitrust raid case. Following a federal ruling declaring Google’s search operations a monopoly, the Justice Department has proposed measures (see below) to curb its dominance and promote competition.

• Ditch the Chrome browser
• Set behavioral restrictions for the Android operating system
• Set up an action to share Google search data with competitors
• Ban agreements to make Google the default search provider
• Enforcing limits on its AI development developments

It’s perhaps also worth noting that Google’s search lawyers have stated that the company doesn’t make money from Chrome because it’s unlicensed, but it also provides some support to competitors like Mozilla’s Firefox.

Google has expressed its intention to appeal this ruling, although the decision will most likely take years. But more immediately, the online advertising giant’s legal team will be busy making closing arguments in a Virginia courtroom.

In this case, the DOJ alleges that Google exploited its ad exchange and publisher ad server to dominate programmatic advertising and thereby disadvantage competitors (see video).

As of September 9, 2024, and during a three-week test period, the industry was equal parts entertained and horrified by revelations highlighting Google’s less visible ruthless streak and under-the-counter dealings, with some wondering whether Google could never be contained given the evidence presented become.

In response to the Justice Department’s allegations, Google’s defense team has pursued a strategy based on several key pillars. The final terms of the contract are expected to be presented by Karen Dunn. This includes:

• Sophisticated market definition: The DOJ’s focus on display advertising is outdated and overlooks the presence of other Big Tech players
• Justify acquisitions: Acquiring companies like DoubleClick and AdMeld, improving monetization opportunities for publishers and improving competition
• Highlighting ecosystem efficiency: Google’s market share is based on its ability to achieve greater efficiency and is not obliged to share it with competitors
• Support for SMEs: The extensive use of Google’s ad tech tools by SMBs (due to their extensive utility) makes it a linchpin of the US economy

More specifically, the Google team will likely argue that the DOJ’s request for an injunction, such as allowing its ad exchange to participate in header bidding ad auctions outside of its own pipes, violates legal standards.

Written arguments filed by both parties this month provide a glimpse of what could come before the court. The more than 1,000 pages of documents provide a summary of the evidence from the trial as well as legal arguments for each case.

DOJ Preview

To establish Google’s liability for monopolization, the DOJ must establish two key elements: That Google has monopoly power in the relevant market and has attempted to obtain or maintain its power through anticompetitive actions.

The Justice Department is expected to present evidence and testimony related to how Google used tying agreements with DFP and AdX, making it difficult for publishers to use one without the other. It must also be demonstrated that there are two separate markets controlled by Google and that Google can control prices or exclude competition in a defined market for a particular product or service.

In its revised findings of fact and legal conclusions, the DOJ argues that Google planned to dominate the ad tech market from the start. While the DOJ cites acquisitions like DoubleClick and AdMeld, it also adds court evidence related to Google’s actions like First Look, Last Look and Unified Pricing Rules.

Examples of DOJ court testimony include former Facebook executive Brian Boland, who called First Look a “cherry-picking operation,” and PubMatic co-founder Rajeev Goel, who said First Look “stifled competition.” The DOJ also cited internal Google documents submitted as evidence, including an employee warning against making some improvements to DoubleClick for Publishers because it could “destroy First Look’s competitive advantage” and result in ” access to overall queries is lost”. The DOJ is likely to mention Google’s efforts to hide evidence by turning off history in chats or using attorney-client privilege in emails.

Another expected argument is the existence of separate product markets for open web display advertising – for publisher ad servers, advertiser ad networks and ad exchanges – with the tools being less interchangeable, as Google suspects. The DOJ could also bring up the quality of Google’s products to undermine its defense that denying competitors access is about preventing ad fraud and improving brand safety. The DOJ will also likely argue that the previous Supreme Court cases that Google uses in its defense do not hold up. For example, government lawyers argue that the Trinko rules do not apply to Google’s conduct in the ad tech market. They argue that Google’s actions, such as tying agreements, go beyond a simple refusal to do business and are not protected by Trinko.

Preview Google Arguments

Google’s closing arguments argue that antitrust case law negates some of the DOJ’s claims. To counter the DOJ’s claims that Google has refused to deal fairly with competitors, corporate lawyers will argue the U.S. Supreme Court’s decision in Verizon v. Trinko, which supports Google’s freedom to choose its partners. To argue against how the DOJ defines the market in question, Google will rely on a decision in Ohio v. American Express, arguing that the court should view Google’s two-sided transaction platform as a single market, rather than publishers and advertisers as separate ones to look at markets.

In their revised legal conclusions filed this month, Google lawyers cite the 1977 Supreme Court ruling that certain antitrust laws are not intended to protect competitors, only competition. “In the display advertising market, competition remains, even in the words of Google’s competitors, ‘intense,'” Google’s lawyers wrote. However, Digiday recalls witnesses in the ad tech trial describing healthy competition with other ad tech firms, rather than in the context of competition with Google.

Even if the court agrees with the DOJ’s market definition and classifies Google as a monopolist, Google lawyers want to argue that the DOJ has not demonstrated how Google used its monopoly status to harm publishers, advertisers or rival ad tech companies. Google’s lawyers will also likely argue that competition in the ad tech market is still dynamic, with numerous options for advertisers, continued innovation from Google and its competitors, and continued growth among ad tech companies and online platforms like Meta and Amazon.

Google’s defense involves the use of a legal tactic called “but-for-test,” a legal tactic that examines whether the defendant’s actions directly caused harm in the advertising market, as the DOJ alleges. Google argues that the DOJ has not convincingly demonstrated how the market would function without the alleged anticompetitive behavior, making it harder to prove harm. However, the DOJ’s revised findings state that it does not have to prove that Google’s conduct was the sole cause of harm, only that it could materially contribute to the maintenance of monopoly power.

Defense attorneys will also likely argue parts of the DOJ’s case that aspects such as “first look” and “last look” no longer exist and are not relevant to the industry’s current and future prospects. And with no damages on the table, Google could also be asking the question: What does the DOJ want as a result of the trial?