Google, owned by Alphabet Inc., has made concessions in a bid to head off a possible U.S. antitrust suit against its large ad tech business, according to people familiar with the matter, in a sign that legal and regulatory pressure on the tech the giant is approaching. to the head.
According to some people, in one proposal, Google offered to spin off part of its auction and ad placement business on websites and apps into a separate company under the Alphabet umbrella. This organization could potentially be valued at tens of billions of dollars, depending on what assets it contains.
It’s impossible to determine whether any offer other than an asset sale will satisfy the US Justice Department, where antitrust officials have made it clear they prefer deep structural changes to Google’s advertising business over promises to change business practices. .
The Justice Department is conducting a lengthy investigation into allegations that Google is abusing its role as a digital ad broker and auctioneer to drive its business at the expense of competitors. The department is preparing a lawsuit alleging Google’s ad tech practices are anti-competitive, and the lawsuit could be filed as early as this summer, sources say.
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“We are engaging constructively with regulators to address their concerns,” a Google spokesperson said in a statement. “As we said before, we have no plans to sell or exit this business.” He added: “Fierce competition in ad tech has made online advertising more relevant, lowering fees, and expanding opportunities for publishers and advertisers.”
A Justice Department spokesman declined to comment.
In the European Union, where Google is facing yet another ad tech investigation, Google has offered to settle another YouTube-related anticompetitive conduct charge, some people familiar with the matter said.
As part of the proposal, Google will allow competitors to sell ads directly on the video service, the 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 main antitrust body, declined to comment on the investigation into Google’s advertising business, which she said is ongoing. “As always, we are cooperating with other authorities in our investigations,” including the Department of Justice, she said. Reuters previously reported on Google’s proposal for YouTube in Europe.
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Antitrust watchdogs have long been anticipating a second legal case against Google in the US, following a Justice Department lawsuit nearly two years ago alleging 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 make concessions to avoid legal action in the US is an evolution of the company’s strategy to deal with growing legal and regulatory pressure.
In addition to investigations by the Justice Department, the EU and the UK, Google is preparing for legal action in a lawsuit from US states led by Texas alleging that the company operates a monopoly that harms ad industry competitors and publishers. Google is awaiting a judge’s decision on the motion to dismiss and said the lawsuit is “full of inaccuracies and has no legal force.”
Meanwhile, US senators have proposed a new antitrust law that could force Google to divest some of its advertising business. This spring, the EU agreed on two major new technical regulations, including one called the Digital Markets Act, which imposes new fairness obligations on companies like Google.
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Any move by Google to restructure part of its advertising business could shake up the digital advertising industry. Advertisers around the world will spend more than $600 billion on digital advertising this year, according to eMarketer, and Google plays an important role as an intermediary in those sales. Last year, Google’s business of brokering the sale of ads on other websites and apps generated $31.7 billion in revenue, roughly 12% of Alphabet’s total.
Publishing executives have long complained that Google’s bargaining power is allowing the company to charge higher commissions, cutting into their digital ad revenue. Rival advertising companies have also complained that Google is using its market power to distract them from business.
Many detractors say antitrust authorities should have tried to block Google’s 2007 deal to buy DoubleClick, then a well-known online publisher advertising company that also operated an exchange where those ads were auctioned off to advertisers. Some competitors say the deal — then worth just $3.1 billion — plus several others in later years helped Google amass considerable power as an ad broker, responsible for a large chunk of Alphabet’s nearly $1.6 trillion market capitalization.
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Today, Google’s tools can handle every step of buying and selling digital ads, effectively representing both advertisers and publishers as the former bid on ads for the latter using the online auction exchange that Google itself also uses. Regulators are investigating whether Google is abusing its role in these stages of every transaction. Google denies receiving any unfair advantage.
“We are concerned that Google is making it harder for competing online advertising services to compete in the so-called ad technology stack,” Margrethe Vestager, head of EU competition, said when she announced the block investigation last year.
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Another point of contention from competitors and regulators was a move by Google more than fifty years ago to require advertisers to buy ads on YouTube using Google’s advertising tools rather than third-party tools. Google’s ad tech competitors of the time say the decision eroded competition because YouTube is by far the largest online video site, encouraging advertisers to work more with Google than competitors when buying ads.
This is partly why some Google detractors say that splitting some of Google’s advertising technologies may be the only way to restore competition.
Over the past decade, Google has conducted a number of antitrust investigations. In early 2013, the company completed an investigation by the US Federal Trade Commission, agreeing to some voluntary changes to its practices, despite objections from some of the agency’s employees, according to The Wall Street Journal. Google tried to settle a similar dispute in the EU, but EU officials ended up rejecting three separate settlement proposals from Google before bringing the first of three antitrust charges in 2015.
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EU officials eventually found that Google had violated the bloc’s antitrust laws on a case-by-case basis, fining the company about $8.4 billion and ordering it to change its business practices. Google challenged all three of these decisions in the EU courts, but in the meantime was forced to comply with them. Google search results in Europe show ads for products from Google’s competitors, and Android phones activated in Europe prompt users to select their default search engine from a list of options that includes Google’s competitors.
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