The European Commission last week joined the Department of Justice in touting a breakup as a viable remedy for the California-based tech giant’s alleged monopoly abuses.
“Divestiture is the only way,” Margrethe Vestager, the EU’s antitrust commissioner, told reporters after firing off a charge sheet accusing Alphabet Inc.’s Google of favoring its own services to the detriment of ad tech rivals, advertisers and online publishers. The EU complaint is the latest escalation in a long-running saga that’s already led to a trio of penalties totaling more than €8 billion ($8.8 billion) for abuses across other Google services.
A selloff order would strike at the heart of one of Google’s biggest money spinners, although it could still be years away due to the legal processes being played out. While most of its revenue comes from ads on search results, the EU and US antitrust cases focus on a lucrative segment of its business that involves facilitating the placement of ads on other websites.
The EU’s competition chief argued that since 2014, Google has favored its own advertising exchange platforms by abusing access to information on rival bids for ad space, and also harmed other ad exchanges by placing bids for advertising on its own platforms.
In its probe, the EU said a divestment is needed because a behavioral remedy wouldn’t stop Google from “self-preferencing.”
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It said 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.” It also “operates the largest ad exchange. This leads to a situation of inherent conflicts of interest for Google.”One option for a split down the middle of Google’s ad tech services would be to force the firm to separate its ad-purchasing platforms Google Ads and DV360 from DoubleClick — its service for publishers to find advertisers — and its advertising marketplace AdX, according to the EU commission.
The EU’s view echoes the January lawsuit by the DOJ, which called for a company breakup for the first time since the late 1990s when it unsuccessfully sought to force Microsoft Corp. to sell off some of its computer software operations. The department’s last major breakup came when the Bell telecoms systems was dismantled in the 1980s. But under the leadership of DOJ Assistant Attorney General Jonathan Kanter — who in a previous legal career represented Google rivals — breakups are back on the cards.
The US agency alleges that Google’s dominance over advertising technology allows it to keep at least $0.30 out of every dollar advertisers spend through its online advertising tools.
It claims Google engaged in 15 years of anticompetitive conduct, including a pattern of acquisitions to dominate the market including the 2007 acquisition of online advertising giant DoubleClick for $3.1 billion.
Vestager last week heralded “close and fruitful” cooperation with the DOJ. But following on its coat tails could come at a risk for the EU commission and Vestager, with a potential legal battle in the EU courts.
“The commission may feel emboldened by the fact that the DOJ is pursuing virtually the same lawsuit, but some might say this is more a case of folie à deux than a healthy working relationship,” said Dirk Auer, Director of Competition Policy at the International Center for Law & Economics.
“The legal obstacles to breaking up Google are tremendous,” he said. “The commission will have to show there was really no other way to solve the issues.”
Unlike in the US, the EU’s move to issue a statement of objections is an interim step that doesn’t mean a court fight is inevitable. The Brussels-based commission could still be swayed by Google’s arguments at a formal hearing or accept a settlement.
Google has already hit back, with Dan Taylor, vice president for global ads, warning last week that breaking up Google’s ad tech suite would “diminish the availability of free, ad-supported content that benefits everyone.”
The company may also lean on an agreement that was brokered with the French competition regulator in order to convince regulators in Washington and Brussels of a less-intrusive remedy to the alleged abusive behavior.
In 2021, Google was hit with a €220 million ($240 million) fine by France’s antitrust watchdog for favoring its AdX sales platform, and pledged to implement greater interoperability for third-party ad servers.
The country’s competition chief Benoit Coeure said that his authority had “blazed the trail” in curtailing Google’s market dominance in ads.
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