Google offers concessions to fend off US antitrust lawsuit

Alphabet Inc.’s Google has offered concessions to try to avoid a potential U.S. antitrust lawsuit targeting its huge ad tech business, people familiar with the matter say, a sign that legal and regulatory pressures on the tech giant are coming to an end. a head.

As part of a bid, Google has offered to spin off part of its business that auctions and places ads on websites and apps into a separate company under the Alphabet umbrella, some people said. This entity could potentially be valued at tens of billions of dollars, depending on the assets it contained.

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

The Department of Justice is conducting a long-running investigation into allegations that Google is abusing its role as both broker and auctioneer of digital ads to run its business at the expense of rivals. The department is preparing a lawsuit alleging that Google’s ad tech practices are anti-competitive, a lawsuit that could be filed as early as this summer, the sources said.

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“We have engaged constructively with regulators to address their concerns,” a Google spokesperson said in a statement. “As we have said before, we have no intention of selling or exiting this business.” He added, “Strong competition in ad technology has made online ads more relevant, lowered costs, and expanded options for publishers and advertisers.”

A Justice Department spokeswoman declined to comment.

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

MOUNTAIN VIEW, CA – OCTOBER 28: 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 the offer, Google would allow competitors to negotiate the sale of 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 through Google’s ad buying tools.

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

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Antitrust watchers have long awaited a second U.S. case against Google following the Justice Department’s 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 offer concessions to avoid a US lawsuit is an evolution of the company’s strategy to manage growing legal and regulatory pressure.

Badge of the Department of Justice

The seal of the United States Department of Justice on a podium in Washington, DC, Thursday, August 5, 2021. (Samuel Corum/Bloomberg via Getty Images/Getty Images)

In addition to Justice Department, EU and UK investigations, Google is preparing for a lawsuit in a Texas-led US states lawsuit that claims the company operates a monopoly that harmed competitors and publishers in the advertising industry. Google is awaiting a judge’s decision on a motion to dismiss the case and said the lawsuit is “full of inaccuracies and lacking in legal merit.”

Meanwhile, US senators have proposed a new antitrust bill that could force Google to divest some of its ad tech business. And the EU this spring agreed to two major new tech 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 parts of its ad tech business could rock the digital ad industry. Advertisers are expected to spend more than $600 billion on digital ads globally this year, according to eMarketer, and Google plays a major role as a middleman in those sales. Last year, Google’s business of brokering the sale of ads on other websites and apps accounted for $31.7 billion in revenue, or about 12% of Alphabet’s total.

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

Eric Schmidt's Google Alphabet

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

Many critics say antitrust authorities should have tried to block Google’s 2007 deal to buy DoubleClick, at the time a major web-based publisher ad serving company that also operated an exchange where these ads were auctioned off to advertisers. Some rivals say this deal – which was then worth just $3.1 billion – and several others over the following years helped Google gain significant power as an ad broker responsible for a large chunk of market capitalization. of Alphabet, which amounts to nearly $1.6 trillion.

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Today, Google tools can manage every step of buying and selling digital ads, effectively representing both advertisers and publishers, the former bidding on ads for the latter, using an exchange of online auctions that Google itself also operates. Regulators have investigated whether Google is abusing its role during these stages of every transaction. Google denied taking unfair advantage.

“We are concerned that Google has made it harder for competing online advertising services to compete in the so-called ad tech stack,” EU competition chief Margrethe Vestager said when announcing the announcement. survey of the bloc last year.

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Another point of contention among rivals and regulators was Google’s decision more than half a decade ago to require advertisers to buy ads on YouTube using Google’s advertising tools rather than third-party tools. Google’s ad-tech rivals at the time say the move hampered competition, as YouTube is by far the largest online video site, pushing advertisers to work more with Google than their rivals when buying ads.

That’s part of why some Google critics say a spinoff of some of Google’s ad tech businesses might be the only way to help restore competition.

The Federal Trade Commission building

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

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

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EU officials eventually found that Google violated the bloc’s antitrust laws in each of its separate cases, fining the company about $8.4 billion and ordering changes to its business practices. Google fought all three rulings in EU courts, but in the meantime had to comply. Google search results in Europe display product ads 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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