European Commission sends formal accusations over Google’s advertising business, and states it should be broken up
The European Commission (EC) has warned Alphabet’s Google division of antitrust violations in its ad tech business.
The EC on Wednesday sent Google a ‘Statement of Objections’ over its alleged abusive practices in online advertising technology.
And the EC stated that it has preliminary found that a “behavioural remedy is likely to be ineffective to prevent the risk,” and therefore Google’s advertising business should be broken up.
Statement of objections
The news that Google is once again in trouble with European Union officials comes as no surprise, considering the firm has already been fined billion of dollars over a number of separate business operations.
However it was in June 2021 when the European Commission began its probe into whether “Google violated EU competition rules by favouring its own online display advertising technology services in the so called ‘ad tech’ supply chain, to the detriment of competing providers of advertising technology services, advertisers and online publishers.”
Then in August 2022 the EC broadened its ad tech investigation of Google when it took over a Portuguese probe into Google’s digital advertising business.
Now on Wednesday European Union officials have called for Google’s advertising business to be broken up, alleging that the tech giant’s involvement in multiple parts of the digital advertising supply chain creates “inherent conflicts of interest” that risk harming competition.
“The Commission takes issue with Google favouring its own online display advertising technology services to the detriment of competing providers of advertising technology services, advertisers and online publishers,” it said.
“The Commission preliminarily finds that Google is dominant in the European Economic Area-wide markets,” it said. “The Commission preliminarily finds that, since at least 2014, Google abused its dominant positions by:
- Favouring its own ad exchange AdX in the ad selection auction run by its dominant publisher ad server DFP by, for example, informing AdX in advance of the value of the best bid from competitors which it had to beat to win the auction;
- Favouring its ad exchange AdX in the way its ad buying tools Google Ads and DV360 place bids on ad exchanges. For example, Google Ads was avoiding competing ad exchanges and mainly placing bids on AdX, thus making it the most attractive ad exchange.
And it said it currently believes that the only solution is a breakup of Google’s Ad tech business.
“The Commission preliminarily finds that, in this particular case, a behavioural remedy is likely to be ineffective to prevent the risk that Google continues such self-preferencing conducts or engages in new ones,” it stated.
“Google is active on both sides of the market with its publisher ad server and with its ad buying tools and holds a dominant position on both ends. Furthermore, it operates the largest ad exchange. This leads to a situation of inherent conflicts of interest for Google,” the EU said. “The Commission’s preliminary view is therefore that only the mandatory divestment by Google of part of its services would address its competition concerns.”
The European Commission has submitted its allegations to Google in writing, which will now begin a legal process that could potentially end in billions of dollars in fines, in addition to a possible breakup of its core advertising business.
“Today, the Commission has sent a Statement of Objections to Google,” said executive VP Margrethe Vestager in separate remarks. “We are concerned that Google may have illegally distorted competition in the online advertising technology industry, also known as ‘Adtech’.”
“We found that Google may have abused its dominant position by favouring its own adtech services,” added Vestager. “Our investigation has shown that Google may hold a dominant position on both ends of the adtech supply chain. On the buy-side with Google Ads and DV 360. On the sell-side with DFP.”
“At this stage of the investigation, we believe that Google’s conducts may amount to an abuse of a dominant position,” said Vestager. “If proven, these conducts would be illegal under our rules.”
“Google is dominant on both sides of the market, with its buy-side tools and its sell-side tools. Google has a strong market position with AdX, the exchange in between,” said Vestager. “Google is representing the interests of both buyers and sellers. At the same time, Google is setting the rules on how demand and supply should meet. This gives rise to inherent and pervasive conflicts of interest.”
“A remedy requiring Google just to change its behaviour would allow Google to continue doing what it has been doing so far, just under a different disguise,” said Vestager, and she also alleged that in the past “each time a practice was detected by the industry, Google subtly modified its behaviour so as to make it more difficult to detect, but with the same objectives, with the same effects.”
“Should the Commission conclude that Google acted in an illegal manner, it might require Google to divest part of its services,” said Vestager. “For instance, Google could divest its sell-side tools, DFP and AdX. By doing so, we would put an end to the conflicts of interest.”
Perhaps it comes as no surprise after Google said it disagreed with the Commission’s charge.
“The Commission’s investigation focuses on a narrow aspect of our advertising business and is not new. We disagree with the EC’s view,” Dan Taylor, Google’s vice-president of global ads, was quoted by CNN as saying in a statement.
“Our advertising technology tools help websites and apps fund their content, and enable businesses of all sizes to effectively reach new customers,” Taylor reportedly said. “Google remains committed to creating value for our publisher and advertiser partners in this highly competitive sector.”
A Google spokesperson told CNN Wednesday that the company has only just received the commission’s complaint and that it will take time to review the commission’s claims.
Google also added that it will oppose calls for a breakup.
Google is facing a number of similar ad-tech business investigations in other jurisdictions.
The US Department for Justice for example sued Google in October 2020, alleging that Google abuses its position to maintain an illegal monopoly over search and search advertising.
The DoJ went after Google using the Sherman Act from 1890, in much the same way it pursued Microsoft in the late 1990s (Redmond survived intact) and AT&T in 1974 (which led to the breakup of the Bell System).
Google hit back hard against the DoJ in 2020, calling the DoJ lawsuit “deeply flawed”.
Then January 2023 the US Justice Department and eight states filed a lawsuit against Google alleging the company has “thwarted meaningful competition and deterred innovation” in the adtech market, something Google denies.
The UK’s Competition and Markets Authority (CMA) meanwhile in May 2022 also announced it was investigating Google’s dominance in advertising technology.
Then in April 2023 Google was hit by a second major collective lawsuit in the UK over its advertising practices.
The £3.4 billion lawsuit, brought by former Guardian technology editor Charles Arthur, claimed Google’s dominance of the adtech industry had illegally reduced publishers’ income from ad revenues.
Google said it would fight that “speculative and opportunistic” action.