Google Must Face DOJ’s Ad Tech Case
Google Must Face DOJ’s Ad Tech Case
Written By Matthew Perlman
Re-posted from Law360 (April 28, 2023, 11:17 AM EDT) — A Virginia federal judge refused Friday to toss the U.S. Department of Justice‘s case accusing Google of monopolizing the digital advertising ecosystem.
U.S. District Judge Leonie M. Brinkema denied Google’s motion to dismiss from the bench during a hearing Friday.
The judge said the government’s allegations appear to be specific and detailed enough to move ahead and that questions surrounding the markets at issue and acquisitions completed years ago deal with facts that will have to be further developed.
“At this point I’ll deny the motion to dismiss,” Judge Brinkema said. “The allegations are sufficiently specific to support all five claims.”
Google’s vice president for global ads, Dan Taylor, reiterated a core company argument in a statement Friday reacting to the ruling, saying the lawsuit ignores the reality of today’s “dynamic digital advertising space.” That space includes hundreds of competitors, he said, including Amazon, Apple, Meta, Microsoft and TikTok.
“This lawsuit would slow innovation, raise advertising fees, and make it harder for thousands of small businesses and publishers to grow,” Taylor said. “This case is wrong on the facts and the law, and we’ll now set the record straight in court.”
The DOJ filed the suit in January, alongside the attorneys general of Virginia, California and several other states, accusing Google of violating antitrust law through its control over the technology used to sell and place ads on third-party websites, known as display ads.
Enforcers allege Google used acquisitions, starting with DoubleClick in 2009, to gain a foothold in the space and then used a number of anti-competitive practices to exert control over the display advertising ecosystem. The case focuses on the mechanisms needed to sell and place ads through instantaneous auctions that connect website publishers, advertisers and consumers each time a website is loaded.
The allegations are similar to claims being brought by a separate contingent of state-level enforcers led by the Texas Attorney General’s Office that’s been included in multidistrict litigation centralized in the Southern District of New York since August 2021, along with cases from advertisers, publishers and others. The allegations from state-enforcers there largely survived a motion to dismiss in September.
An attorney for Google, Eric Mahr of Freshfields Bruckhaus Deringer LLP, noted during the hearing Friday that the DOJ chose to file its case in the Eastern District of Virginia because of its “rocket docket” reputation and said the agency clearly wants to get ahead of the other cases.
“We think they should be held to a higher standard,” Mahr said.
Judge Brinkema said, however, that she has looked closely at the DOJ’s allegations and found that they include enough detail to survive Google’s dismissal bid, noting quotes from Google executives in the complaint saying that competitors posed an “existential threat” to parts of its advertising business.
The judge said Google has the right to defend its commercial interests under our economic system but that there has to be a balance struck between rewarding innovation and acknowledging that some activity can become problematic over time because of the way things have evolved. A program that starts off just trying to generate profit, the judge said, could end up so successful that it “basically suffocates” competition.
“We’re trying to keep the system working,” Judge Brinkema said.
A primary contention in Google’s motion to dismiss was that the DOJ did not properly define the markets that Google allegedly monopolizes, arguing that the government improperly excludes advertising competitors such as social media platforms like Facebook, Snapchat and Twitter, and advertising that appears in mobile apps.
Mahr said Friday the DOJ does not explain why those other services are not included in the markets and that the government has to detail why they aren’t substitutes for Google’s display advertising services.
Arguing for the government, DOJ attorney Daniel S. Guarnera said the markets outlined in the complaint come from Google’s own documents and said it reflects how Google itself views the industry. The case targets Google’s alleged control of the markets for publisher ad servers that manage the available advertising slots on a web page, ad exchanges that handle auctions and advertiser ad networks that provide the display ads.
Guarnera argued that other types of advertising online are not interchangeable with display ads, saying that social media services, for example, allow publishers to advertise directly to users of those platforms specifically while display ads appear in a “broad range of settings.” At best, he said, the arguments Google makes about markets all raise factual questions that shouldn’t be addressed on a motion to dismiss.
The judge agreed, saying the market definition issues are “fact-specific.”
Google’s attorney Mahr also argued during Friday’s hearing that the DOJ only alleges Google’s AdX ad exchange has grown its share of the market to 50% since it was acquired in the DoubleClick deal in 2008. He said precedent shows this is not a high enough share for Google to have monopoly power over the ad exchange market.
Judge Brinkema interrupted to say she acknowledges the precedent but that arguments about market share alone are not enough to overcome the allegations because courts also have to look at other factors, like if there was some sort of “rapacious conduct.”
Google’s dismissal bid also argued that the DOJ has not shown that the company’s acquisitions of DoubleClick in 2008 and Admeld in 2011 were themselves anti-competitive, noting that the deals were reviewed and not challenged by federal antitrust authorities at the time they were made.
But the judge said during Friday’s hearing that the DOJ admits enforcers made mistakes when reviewing those deals and that the evidence used to evaluate the transactions has since changed.
Mahr contended that condemning decade-old deals through allegations that they “set the stage” for a future violation is wrong and likened the situation to the purchase of a sports car “setting the stage” for reckless driving in the future.
The DOJ’s Guarnera said the government does not view the decisions by enforcers at the time not to challenge the deals as “approvals” and said it should not serve as a “get out of jail free card.” He also said the deals were part of what the government alleges was a course of anti-competitive conduct that helped allow Google to gain and reinforce its monopoly power.
“We can look back at what Google has done with the assets since,” Guarnera said.
The DOJ’s case also includes a claim for damages, alleging that the government overpaid as a purchaser of display advertising due to Google’s monopolization of the industry, including through ads purchased by the Army. But Mahr argued that online advertising is complex and that the DOJ does not specifically say from whom it purchased the advertising services or how, only that Google and non-Google ad tech tools were used.
“That’s a mystery,” Mahr said.
This is a key issue because of the U.S. Supreme Court‘s Illinois Brick rule that bars anyone but the direct buyer of a good or service impacted by an antitrust violation from seeking damages in federal court. Mahr also noted it would narrow the case significantly if the court tossed the damages claim.
Judge Brinkema said the markets at issue are much different than those addressed by the brick manufacturing and municipal infrastructure industries addressed in Illinois Brick itself, but said it should not be hard for the government to show it’s a direct buyer from Google under the rule.
A representative for the DOJ declined to comment Friday.
The federal government is represented by Jessica D. Aber and Gerard Mene of the U.S. Attorney’s Office for the Eastern District of Virginia and Aaron M. Teitelbaum, Jeffrey G. Vernon, Nicholas S. Cheolas, Kelly D. Garcia, David A. Geiger, Jacklin Chou Lem, Arshia Najafi, Brent K. Nakamura, G. Charles Nierlich, Chase E. Pritchett, Andrew Schupanitz, David M. Teslicko, Michael E. Wolin and Daniel S. Guarnera of the U.S. Department of Justice’s Antitrust Division.
The states are represented by their respective attorneys general.
Google is represented by Eric Mahr, Andrew Ewalt, Julie Elmer and Tyler Garrett of Freshfields Bruckhaus Deringer LLP; Daniel Bitton, Bradley Justus and Koren Wong-Ervin of Axinn Veltrop & Harkrider LLP; and Craig C. Reilly.
The case is U.S. et al. v. Google LLC, case number 1:23-cv-00108, in the U.S. District Court for the Eastern District of Virginia.
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