Former Obama Antitrust Official Lays Out Possible Case Against Google
May 18 2020 - 7:29PM
Dow Jones News
By Brent Kendall and Keach Hagey
A former top antitrust economist in the Obama administration
argued Monday that Alphabet Inc.'s Google has used its powerful
position in the digital advertising space to stifle competition,
outlining a possible case against the search giant at the same time
federal and state enforcers are making preparations to go to
court.
"There is significant reason for concern that Google has
violated U.S. antitrust law," Yale University economics professor
Fiona Scott Morton, the chief economist in the Justice Department's
antitrust division from 2011-2012, wrote in a new academic paper
entitled "Roadmap for a Digital Advertising Monopolization Case
Against Google."
The paper argues Google is using its dominance in search as a
springboard to dominate the adjacent market of display advertising,
harming publishers, advertisers and consumers in the $130 billion
digital advertising market.
Google's tactics in the online advertising ecosystem are a focus
of Justice Department antitrust officials and state attorneys
general who are investigating whether the company has engaged in
unlawful monopolization. The Wall Street Journal reported Friday
that the Justice Department and the states are likely to sue Google
later this year.
A Google spokeswoman on Monday cited a company blog post from
last year that described the ad-tech sector as "famously crowded"
with competitors. The company in that post said it was helping
publishers earn money to fund their work, as well as making it
easier for businesses to reach consumers.
Ms. Scott Morton co-wrote the paper with David Dinielli, a
senior adviser with the Omidyar Network, the philanthropic
investing firm of eBay Inc. founder Pierre Omidyar, which is
advocating for stronger antitrust enforcement to curb the power of
dominant tech platforms. The authors base their analysis on data
uncovered by the U.K.'s Competition and Markets Authority last
December in its preliminary study of the U.K. digital advertising
market, arguing that the U.S. market behaves similarly.
The U.K. report was notable because it gave specific numbers for
Google's market share in each link in the complex chain of software
that advertisers use to buy ads on publishers' websites. It found
that Google had at least 90% market share in the tools publishers
use to serve ads; between 40% and 60% of the market for supply-side
platforms, or SSPs, the tools publishers use to accept bids from
exchanges; and between 50% and 70% of demand-side platforms, or
DSPs, the tools advertisers use to bid for digital ads.
Monday's report argues that this level of dominance over the
marketplace where publishers and advertisers buy and sell ads,
combined with Google's own substantial holdings in "owned and
operated" advertising inventory through search, YouTube and
properties such as Google Maps, give Google the ability and
incentive to steer advertising dollars to its own properties, via
tactics such as a reporting tool for advertisers that makes search
ads appear to be more effective than they really are.
The report went on to detail 20 instances of Google's allegedly
anticompetitive conduct, ranging from refusing to make its tools
work with rivals to using privacy laws as an excuse to hide how
well its ad tools perform.
As a result, advertisers are "likely" paying higher prices than
they should be, while publishers are getting lower prices than they
should be for their ads, the report said. In the middle is Google,
taking a roughly 40% cut -- or possibly higher, the report argues,
given Google's dominance -- of what advertisers are spending.
Consumers are harmed by having to pay higher prices than they
otherwise would if advertisers paid a fair price for their ads, and
by having less quality content to consume, the paper alleged.
Google previously pushed back on many of the findings in the
U.K. report.
Wall Street Journal publisher News Corp is a longtime Google
critic and is among a group of publishers that have been contacted
by antitrust investigators.
Google was viewed largely in a positive light when the Obama
administration was in charge. The Federal Trade Commission in 2013,
after a lengthy investigation, decided the evidence didn't support
bringing an antitrust case against Google based on concerns that
the company was using its search dominance to harm rivals.
Views of the company have evolved in Washington as its
businesses have expanded and matured. In recent years, some
lawmakers, both Democrats and Republicans, have called for
antitrust enforcers to take a tougher stance against Google and
other tech giants.
Write to Brent Kendall at brent.kendall@wsj.com and Keach Hagey
at keach.hagey@wsj.com
(END) Dow Jones Newswires
May 18, 2020 19:14 ET (23:14 GMT)
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