Former Obama Antitrust Official Lays Out Possible Case Against Google

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 [e-mail] and Keach Hagey at [e-mail]

(END) Dow Jones Newswires

May 18, 2020 19:14 ET (23:14 GMT)

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