New Antitrust Trial Puts Google Back In the Crosshairs

"ALEXANDRIA, Va. -- It is a rare day when a company faces a federal-government lawsuit alleging it is illegally monopolizing the marketplace. Google is facing the second such case in less than a year, placing unprecedented U.S. legal pressure on the search giant.

U.S. District Judge Leonie Brinkema heard opening statements Monday in the Justice Department's case alleging Google has an unlawful grip on the market for software used to buy and sell digital ads, known as ad-tech.

The trial, expected to last four weeks, is taking place in Northern Virginia, across the Potomac River from where a federal judge in Washington ruled last month that the Justice Department proved its claims that Google was using illegal tactics to preserve its dominance in search.

The judge in the search case now must decide how to remedy Google's antitrust violations, which could mean limiting its ability to pay web browsers and phone manufacturers to be their default search engine. If the company also loses in Virginia, the back-to-back blows could crimp some of the company's revenue streams at a time when it is pouring money into artificial intelligence to compete with Microsoft and a host of well-funded startups to build increasingly powerful computer systems.

The cases also could spark changes in how the company reaches consumers and how advertisers promote their businesses online.

The Virginia case targets Google's omnipresence in the ad-tech industry, where it facilitates much of the buying and selling of digital ads that help fund online publishers. Google offers a platform for publishers to offer and manage ad space, tools for ad buyers and a marketplace where buyers and sellers transact.

The Justice Department, joined by a bipartisan coalition of 17 states, alleges Google has used unlawful tactics to prevent the rise of rival technologies and lock advertisers and publishers into its tools. The government is seeking to force the company to shed its Ad Manager product, which in 2020 made an operating profit of $368 million from booked revenue of $7.4 billion, according to a financial statement the company provided to the court. Google pays out a portion of the total revenue to web publishers.

"Google's conduct comes straight out of the classic monopolist playbook," Justice Department lawyer Julia Tarver Wood said in her opening remarks.

"Google's isn't here because they are big," Wood said. "They are here because they use that size to crush competition."

The government's first witness was Tim Wolfe, an executive at newspaper publisher Gannett. The company has its own antitrust case pending against Google, which overlaps with the government's lawsuit.

Google has said its success is due to a long record of innovation, criticizing the Justice Department as being out of touch with market realities. The case focuses on display ads on websites, but "user attention migrated elsewhere years ago -- to apps, social media and Connected TV," Google said in a recent court filing.

Google lawyer Karen Dunn said in her opening statement that the digital-advertising market is more competitive than ever. Companies like Microsoft and TikTok are ascendant, while Google's market share is declining, she said.

"What plaintiffs seek could do real damage," said Dunn, a partner at law firm Paul Weiss who has advised Vice President Kamala Harris on her presidential campaign.

Google's overall advertising business is a cash cow, accounting for more than three-quarters of parent company Alphabet's $307.4 billion of revenue last year. Though the Justice Department lawsuit challenges only some parts of it, a government win could have ripple effects because Google's advertising technology has been so interwoven into its operations.

Google's ad-tech business gives the company insights into the internet browsing habits of millions and the businesses of widely visited online publishers, such as news outlets.

In 2016, Google reversed a longstanding policy and began merging information it collected from visitors to its own sites with data gleaned from their activity elsewhere on the internet, according to the Justice Department.

The Justice Department in court papers alleged this change, known inside Google as "Project Narnia," allowed it to target ads "in ways no one else in the industry could." Google has denied the allegations.

The case before Brinkema, an appointee of former President Bill Clinton, will proceed without a jury, which is typical for how government antitrust cases are managed. The Justice Department made an unusual attempt to get the ligation before a jury by including a claim for monetary damages, alleging the government itself overpaid for online ads. Google in turn wrote the government a check for the $2.3 million, paying the damages request and ensuring a nonjury trial.

The company is on the back foot as the trial begins, over the deletion of internal messages that could have been relevant to the case.

Last month, Brinkema criticized Google over an earlier company policy of automatically deleting employee chat records, saying that "an awful lot of evidence has already been destroyed."

The judge declined to impose a formal sanction on Google, but said the issue would factor into her determinations of which trial witnesses are credible." [1]

1. New Antitrust Trial Puts Google Back In the Crosshairs. Wolfe, Jan; Kruppa, Miles.  Wall Street Journal, Eastern edition; New York, N.Y.. 10 Sep 2024: A.1.