Google offers concessions to fend off US antitrust case

Alphabet Inc.’s Google offered concessions in an attempt to stave off a possible US antitrust lawsuit against its massive ad-tech business, according to people familiar with the matter, a sign that legal and regulatory pressure on the tech giant is coming to a head.

As part of one offer, Google has proposed spinning off the parts of its business that market and place ads on websites and apps into a separate company under the Alphabet umbrella, some of the people said. This enterprise could potentially be valued at tens of billions of dollars, depending on what assets it contains.

It could not be determined whether any offer other than an asset sale would satisfy the U.S. Justice Department, where antitrust officials have signaled a preference for deep structural changes in Google’s ad tech business over promises to change business practices, the people said .

The Justice Department has been conducting a long-running investigation into allegations that Google abused its role as both a broker and auctioneer of digital ads to drive its business at the expense of competitors. The department is preparing a lawsuit alleging Google’s ad tech practices are anticompetitive, a suit that could be filed as early as this summer, the people said.

REPUBLICANS CONTINUE TO BRUSH GOOGLE FOR ALLEGED EMAIL FILTER FAILURES DESPITE CLAIMED FIX EFFORTS

“We are engaging constructively with regulators to address their concerns,” a Google spokesperson said in a statement. “As we’ve said before, we have no plans to sell or exit this business.” He added: “Fierce competition in ad technology has made online advertising more relevant, reduced fees and expanded opportunities for publishers and advertisers.”

A spokeswoman for the Department of Justice declined to comment.

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

MOUNTAIN VIEW, CA – OCTOBER 28: The Google headquarters is seen in Mountain View, California, United States on October 28, 2021. (Photo by Tayfun Coskun/Anadolu Agency via Getty Images) (Tayfun Coskun/Anadolu Agency via Getty Images/Getty Images)

As part of that offer, Google will allow competitors to broker the sale of ads directly on the video service, these people added. Currently, the only way to buy ads on YouTube, the world’s largest video sharing platform, is to use Google’s ad buying tools.

A spokeswoman for the European Commission, the EU’s top antitrust body, declined to comment on the investigation into Google’s ad technology business, which she said was ongoing. “As always, in our investigations, we are cooperating with other authorities,” including the Department of Justice, she said. Reuters previously reported on Google’s offer related to YouTube in Europe.

FCC COMMISSIONER URGES TIKTOK TO BE REMOVED FROM APPLE, GOOGLE STORES DUE TO ‘UNACCEPTABLE RISKS TO NATIONAL SECURITY’

Antitrust watchers have long awaited a second US case against Google following a Justice Department case nearly two years ago that alleged the company used anti-competitive 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.

Insignia of the Department of Justice

Seal of the U.S. Department of Justice at a podium in Washington, D.C., on Thursday, Aug. 5, 2021. (Samuel Corum/Bloomberg via Getty Images/Getty Images)

In addition to investigations by the Department of Justice, the EU and the UK, Google is bracing for a lawsuit by US states led by Texas that claims the company operates a monopoly that has harmed competitors and publishers in the ad industry. Google is awaiting a judge’s decision on the motion to dismiss the lawsuit and said the lawsuit is “full of inaccuracies and has no legal basis.”

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

AMAZON CEO JASSY URGES LAWMAKERS TO OPPOSE ANTITRUST LAWS: REPORT

Any moves by Google to restructure parts of its ad tech business could shake up the digital ad industry. Advertisers are projected to spend more than $600 billion on digital ads globally this year, according to eMarketer, and Google plays an important role as an intermediary in such sales. Last year, Google’s business of brokering the sale of ads to other websites and apps reported $31.7 billion in revenue, roughly 12% of Alphabet’s total revenue.

Publisher executives have long complained that Google’s market power has allowed the company to charge higher commissions, eroding their digital ad revenue. Rival ad tech firms also complain that Google is using its market power to take business away from them.

Eric Schmidt Google Alphabet

WASHINGTON, DC – NOVEMBER 05: Alphabet Inc., the parent company of Google, Eric Schmidt speaks during a National Security Commission on Artificial Intelligence (NSCAI) conference on November 5, 2019 in Washington, DC . Commission on (Photo by Alex Wong/Getty Images/Getty Images)

Many detractors say that antitrust enforcement agencies should have tried to block Google’s 2007 deal to buy DoubleClick, then a prominent online publisher ad serving company that also ran the exchange where those ads were auctioned to advertisers. Some rivals say that deal — then worth just $3.1 billion — plus several others in subsequent years helped Google build significant power as an advertising intermediary, responsible for a significant portion of Alphabet’s market capitalization of nearly 1.6 trillion dollars.

GOOGLE ANTITRUST: BIPIPARTIC CONGRESS BILL JUST THE LATEST IN THE TECH FIRM. LEGAL ISSUES ON ADVERTISING PRACTICES

Today, Google’s tools can handle every step of buying and selling digital ads, effectively representing both advertisers and publishers, with the former bidding on ads for the latter using an online auction exchange that Google itself also operates. Regulators investigate whether Google abuses its role during these steps of each transaction. Google denied taking an unfair advantage.

“We are concerned that Google has made it harder for rival online ad services to compete in the so-called ad tech stack,” said Margrethe Vestager, the EU’s competition chief, when she announced the probe into the block last year.

REPUBLICAN-LED LEGISLATION WILL FORCE GOOGLE’S AD BUSINESS TO DISSOLVE

Another point of contention from rivals and regulators is Google’s move more than half a decade ago to require advertisers to buy ads on YouTube using Google’s ad tools rather than third-party tools. Opponents of Google’s ad tech at the time said the decision hindered competition because YouTube was the largest online video site, causing advertisers to work more with Google than competitors when buying ads.

That’s partly why some Google detractors argue that spinning off some of Google’s ad tech businesses may be the only way to restore competition.

The Federal Trade Commission building

A huge increase in the number of mergers being reviewed by the U.S. Federal Trade Commission for antitrust reviews is limiting its ability to investigate deals in a timely manner, the FTC said Tuesday. (REUTERS/Andrew Kelly/File Photo)

Over the past decade, Google has navigated a number of antitrust investigations. In early 2013, the company settled an investigation by the U.S. Federal Trade Commission by agreeing to some voluntary changes to its practices, despite the objections of some of the agency’s employees, The Wall Street Journal reported. Google tried to settle a similar dispute in the EU, but EU officials ultimately rejected three separate settlement offers from Google before filing the first of three sets of antitrust charges in 2015.

GET FOX BUSINESS ON THE GO BY CLICKING HERE

EU officials eventually found that Google violated the bloc’s antitrust laws in each of its separate cases, fining the company roughly $8.4 billion and ordering changes to its business practices. Google challenged all three decisions in the EU courts, but has since had to comply with them. Google search results in Europe show product ads from Google competitors, and European-enabled Android phones prompt users to select their default search engine from a list of options that includes Google competitors.

Leave a Comment

Your email address will not be published.