Google Could be Forced to Sell Part of Its Online Advertising Business by the European Commission
Google, the ubiquitous search engine giant, has allegedly distorted competition in the ad tech sector, according to a preliminary finding by the European Commission. The company may now be forced to sell part of its online advertising business to address the issue. The EU executive is accusing the company of exploiting its dominant position in online advertising markets, including tools that place banner ads on newspaper sites. Brussels is concerned that Google’s conduct was intended to give its own ads exchange an advantage, thereby hindering competing advertising exchanges.
The European Commission’s finding may reportedly be the first time a tech company is asked to break up its business after years of antitrust enforcement. Margrethe Vestager, the EU’s executive vice president in charge of competition policy, says that, “‘It’s quite rare that we ask for a divestment, and we might do so if we find out that Google has abused its dominant position.”
The Commission maintains that Google is active on both sides of the market with its ad server for publishers and its ad buying tools, thus leading to dominance on both sides. The antitrust authorities suggest that Google’s alleged wrongful conduct strengthened its role in the ad tech supply chain, allowing the company to charge a higher price for the service.
Details of the European Commission’s Investigation
The European Commission’s investigation dates back to June 2021, and it is based on allegations that Google has been making it harder for its rivals to compete in the online advertising market. Specifically, the Commission says that Google has been bidding with ADX, its ad exchange, rather than opting for other competing exchanges. Such action has allowed ADX to gain a competitive edge while foreclosing rival advertising exchanges.
As a result, the Commission maintains that selling off part of Google’s services would solve the competition problem. The move comes as Google continues to face scrutiny of its approach to the ad tech industry, which is experiencing rapid growth.
Google’s Response to the EU Investigation
Dan Taylor, the Vice President of Global Ads at Google, has defended the company by stating that its ad technology tools help websites and apps fund their content while enabling businesses to reach new customers. He added that the company is committed to adding value to its publisher and advertiser partners in the highly competitive industry. Taylor also stated that the investigation focuses on a narrow aspect of Google’s advertising business and is not new. Finally, he maintained that Google doesn’t agree with the EU’s point of view and promised an appropriate response.
The US Justice Department’s Lawsuit against Google over Ad Tech Market Control
Google’s legal headaches are far from over, as the US Justice Department also announced that it was suing the company in January 2021 over allegations of waging a “systematic campaign” to control the digital ad technology market. Despite “widespread conflicts of interest,” Google attempted to take over high-tech tools that would help it gain monopoly control of the ad tech sector.
The EU investigation is, therefore, a continuation of the various lawsuits Google is facing over allegations of its monopolistic practices. For example, Yelp submitted a complaint to the European Commission back in 2014, accusing Google of manipulating search results for its own benefit. In 2017, the EU fined Google $2.7 billion for allegedly favoring its comparison shopping service over others, while in 2018, it was fined $5 billion for its policy of forcing smartphone manufacturers to pre-install Google search and browser apps on their devices.
What Does This Mean for the Ad Tech Industry?
The European Commission’s investigation into Google’s ad tech business is expected to have far-reaching implications for other companies operating in the industry. The structure and mechanics of the industry have been the subject of ongoing debate, with privacy and competition concerns topping the list of issues that need addressing.
Ironically, for Google, which is a member of the Privacy Sandbox, a group collaborating on privacy-enhancing technologies for online advertising, the investigation could trigger a broader discussion on how the industry operates and the need for regulation.
Conclusion
The EU’s preliminary finding requiring Google to sell part of its advertising business is a significant development in the ad tech industry, and its implications could be far-reaching. The EU has accused Google of exploiting its dominant position in online advertising markets, hindering advertisers and the websites and apps that display its ads. Google has denied the allegations, but its legal woes continue to pile up as the US Justice Department also filed a lawsuit against it in January 2021 over similar allegations. For the industry, this could trigger deeper scrutiny and discussions on privacy concerns, competition issues, and the need for regulation.
Summary
The European Commission has accused Google of exploiting its dominant position in online advertising markets, hindering advertisers and the websites and apps that display its ads. The Commission’s preliminary findings indicate that selling part of Google’s advertising business may be the only solution to the problem. This marks the first time a tech giant may be required to dismantle part of its operations after years of antitrust enforcement. The move could trigger much-needed discussions on privacy concerns, competition issues, and the need for regulation in the ad tech industry. Google denies the allegations, but its legal woes have been piling up, with the US Justice Department also filing a lawsuit in January 2021 over similar allegations.
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Brussels has accused Google of allegedly distorting competition in the ad tech sector by the tech giant and could force it to sell part of its online advertising business.
The European Commission said so Google it wrongfully exploits its dominant position in online advertising markets, such as tools that place banner ads on newspaper sites, affecting the businesses of both advertisers and the websites and apps on which the ads are displayed.
“Only Google’s compulsory sale of part of its services would solve” competition problems, the commission said Wednesday in its formal but preliminary findings.
Such a move would be the first time the commission has ordered a tech giant to dismantle part of its business after years of antitrust enforcement in which Google has been fined billions of euros.
“It’s quite rare that we ask for a divestment and we might do so if we find out that Google has abused its dominant position,” said Margrethe Vestager, the EU’s executive vice president in charge of competition policy.
“Google is active on both sides of the market with its ad server for publishers and with its ad buying tools,” the commission said, adding that it “has dominance on both sides.”
The commission said it was “concerned that Google’s alleged intentional conduct was aimed at giving [its own ads exchange] a competitive advantage and may have foreclosed rival advertising exchanges”.
THE the probe dates back to June 2021 when the commission said it feared Google was making it harder for rivals to compete in the online advertising market.
Specifically, the commission said that, since at least 2014, Google has preferred to bid with its own ad exchange, ADX, during the auction process. Giving ADX a “competitive edge,” the commission said Google strengthened the exchange’s role in the ad-tech supply chain, in turn allowing the Silicon Valley group to charge a higher price for the service.
The move comes as Google faces increasing scrutiny of its approach to the rapidly growing “ad tech” space. In January, the US Justice Department announced that it was sue Google over similar allegations that he waged a “systematic campaign” to gain monopoly control of the digital ad technology market by attempting to seize control of high-tech tools, despite “pervasive conflicts of interest”.
Dan Taylor, vice president of Global Ads at Google, said: “Our ad technology tools help websites and apps fund their content and enable businesses of all sizes to effectively reach new customers.
“Google remains committed to creating value for our publisher and advertiser partners in this highly competitive industry. The Commission’s investigation focuses on a narrow aspect of our advertising business and is not new. We do not agree with the point of view of the European Commission and will respond accordingly”.
https://www.ft.com/content/35cd16a6-e5e3-41de-ad43-e6ce13abfd1f
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