The Weak Link In DOJ’s Antitrust Case Against Google’s Ad Tech Dominance

The case that the Department of Justice announced on January 24 is similar to the ad tech case brought by the Texas Attorney General in 2021. Both focused on the monopoly Google seems to possess through its control of the largest ad exchange, with 50% of the market, and the largest publisher side ad server, DoubleClick, which it acquired in 2008 and which has a 90% market share. Controlling buyer, seller and market-maker is a recipe for anticompetitive conduct and DOJ and the state attorneys general think they have found lots of it. The remedy they propose is divestiture.

The weak link in the case is the proposed remedy. It is always harder to find effective antitrust remedies than to obtain convictions. But the real innovation in the complaint is its embrace of divestiture as a remedy.

Oddly, the DOJ press release doesn’t even mention seeking to break up the company. All it talks about is “equitable relief.” But the complaint itself is quite specific. It asks the court to order “the divestiture of, at minimum, the Google Ad Manager suite, including both Google’s publisher ad server, DFP, and Google’s ad exchange, AdX, along with any additional structural relief as needed to cure any anticompetitive harm.”

This proposed remedy would effectively unwind the DoubleClick purchase from 2008, and also spin off the ad platform that links publishers and advertisers. The result would be that the ad exchange, the publisher ad server and the company serving the marketers would have to operate at arm’s length. The thought is that this would allow greater ability of competitors to engage with the separated companies, and presumably this would lower prices for advertisers.

No rationale is given for seeking this relief, as is perhaps appropriate at this early stage. But DOJ reportedly rejected a Google proposal to house the separate ad tech functions in separate subsidiaries, a remedy the Federal Communications Commission used in the 1980s to allow regulated telcos to engage in competitive services like information processing. But supervising intercompany activities must have seemed to DOJ to be a nightmare to enforce. Compete separation must have seemed a safer and more effective remedy.

The rationale for separation as opposed to the behavioral remedies that have failed so often in the past is not hard to find. Even if DOJ does succeed in getting an injunction preventing Google from “continuing to engage in the anticompetitive practices” at issue in the case, it will then have to enforce this and the chances of undetected abuse are extremely high, especially after the first few years, when the Department’s attention and resources have drifted to other issues.

But even a breakup is hard to enforce. An enforcing agency would have to ensure that the abusive conduct does not reappear in the form of contractual arrangements between the separated entities. Separation makes it harder to join forces to exclude competitors, but not impossible.

A dominant publisher-side ad server could say, for instance, that it works exclusively with one of the ad exchanges, but not with the others. Or a dominant exchange could say it works exclusively with a certain publisher ad server. Separation, in other words, doesn’t change or cure dominance. DOJ could accompany its separation order with a non-discrimination requirement, but then it would have to supervise that, and then the agency is back to hard-to-enforce behavioral regulation.

It will take heroic regulatory efforts to supervise the boundaries among the spun off companies, just as it took Judge Harold Green, the Antitrust Division of the DOJ, the Federal Communications Commission and state regulatory commissions to supervise the spun off Baby Bells after the Bell system breakup in the 1980s. The 40-year old Bell system breakup was the last time divestiture was tried as an antitrust remedy, and the resources it took may have convinced antitrust enforcers to look elsewhere.

Maybe it is time to admit that the progressive antitrust leader Louis Brandeis was right. If policymakers want competitive markets, they will have to regulate companies, full time, to make sure their conduct is fair competition. Antitrust cannot be in the business of bringing a big case, and then, win or lose, walk away from the market and go on to something else. At the end of the day, to make sure pro-competitive measures are effective in digital markets prone to domination would require a dedicated industry regulator.

Given the ad tech industry’s centrality in funding online services which have become essential in today’s economy and its tendency to generate dominant companies, such a digital regulatory agency would make perfect sense. In today’s fractured Washington politics such a measure might not be on the agenda. But it is worth recognizing the need for ad tech regulation and seeking opportunities to push for it when the occasion arises.