EU hits Google with antitrust charges over ad tech
The European Union hit Google with a formal antitrust complaint Wednesday, two years after regulators first opened an investigation into whether Google abused its market dominance to favor its own ad tech.
Why it matters: The complaint puts even more pressure on Google parent Alphabet to possibly divest parts of its lucrative ad business.
- In the complaint, regulators said a "behavioural remedy," or a solution in which the subject to an antitrust complaint commits to change its practices, "is likely to be ineffective to prevent the risk that Google continues such self-preferencing conducts or engages in new ones."
- That assessment suggests the Commission instead will likely pursue a "structural remedy," or an antitrust solution that could force Google to divest part of its business.
- In the U.S., regulators are also suing Google for abuses of its dominance in ad tech, and are calling for the divestiture of key parts of its business.
Details: In delivering a formal "statement of objections," EU lawmakers have signaled that they found evidence of illegal anticompetitive behavior in an initial investigation of Google's ad tech practices.
- An official lawsuit is likely to result in huge fines or penalties that could force Google to divest part of its ad tech business.
- Specifically, the Commission has accused Google of abusing its dominant position in the ad market by favoring its own ad exchange, called AdX, in automated online auctions that are run by its own ad server, called DFP.
- It also alleged that Google's ad buying tools, Google Ads and DV360, favored AdX as the preferred exchange when publishers placed automated bids on ads.
- In favoring its own ad exchange, the Commission said Google may have foreclosed rivals.
What they're saying: "Our preliminary concern is that Google may have used its market position to favour its own intermediation services," said Margrethe Vestager, the Commission's competition regulator.
- "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."
The other side: “Our advertising technology tools help websites and apps fund their content, and enable businesses of all sizes to effectively reach new customers," said Dan Taylor, Google's vice president of Global Ads, in a statement.
- "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.”
Be smart: Advertising makes up the great majority, or 80%, of Alphabet's $280 billion annual revenues (for 2022). Forcing the firm to divest parts of its ad tech could have a significant impact on its business.
Flashback: The EU has a track record of fining Alphabet billions of dollars related to antitrust lawsuits, Axios has reported.
- 2017: European antitrust officials charged Google $2.7 billion fine for abusing its search practices, more than double what was expected.
- 2018: European antitrust officials again charged Google $5 billion for abusing the dominance of Android. The penalty was upheld, although slightly reduced, last year after Google tried to appeal the ruling.
- 2019: European antitrust officials charged Google $1.7 billion for abusing its advertising dominance.