Google begins its defense in antitrust case alleging monopoly over advertising technology

AP Business Writer

ALEXANDRIA, Va. (AP) — Google opened its defense against allegations that it holds an illegal monopoly on online advertising technology Friday with witness testimony saying the industry is vastly more complex and competitive than portrayed by the federal government.

“The industry has been exceptionally fluid over the last 18 years,” said Scott Sheffer, a vice president for global partnerships at Google, the company’s first witness at its antitrust trial in federal court in Alexandria.

The Justice Department and a coalition of states contend that Google built and maintained an illegal monopoly over the technology that facilitates the buying and selling of online ads seen by consumers.

Google counters that the government’s case improperly focuses on a narrow type of online ads — essentially the rectangular ones that appear on the top and on the right-hand side of a webpage. In its opening statement, Google’s lawyers said the Supreme Court has warned judges against taking action when dealing with rapidly emerging technology like what Sheffer described because of the risk of error or unintended consequences.

Google says defining the market so narrowly ignores the competition it faces from social media companies, Amazon, streaming TV providers and others who offer advertisers the means to reach online consumers.

Justice Department lawyers called witnesses to testify for two weeks before resting their case Friday afternoon, detailing the ways that automated ad exchanges conduct auctions in a matter of milliseconds to determine which ads are placed in front of which consumers and how much they cost.

The department contends the auctions are finessed in subtle ways that benefit Google to the exclusion of would-be competitors and in ways that prevent publishers from making as much money as they otherwise could for selling their ad space.

It also says that Google’s technology, when used on all facets of an ad transaction, allows Google to keep 36 cents on the dollar of any particular ad purchase, billions of which occur every single day.

Executives at media companies like Gannett, which publishes USA Today, and News Corp., which owns the Wall Streel Journal and Fox News, have said that Google dominates the landscape with technology used by publishers to sell ad space as well as by advertisers looking to buy it. The products are tied together so publishers have to use Google’s technology if they want easy access to its large cache of advertisers.

The government said in its complaint filed last year that at a minimum Google should be forced to sell off the portion of its business that caters to publishers, to break up its dominance.

In his testimony Friday, Sheffer explained how Google’s tools have evolved over the years and how it vetted publishers and advertisers to guard against issues like malware and fraud.

The trial began Sept. 9, just a month after a judge in the District of Columbia declared Google’s core business, its ubiquitous search engine, an illegal monopoly. That trial is still ongoing to determine what remedies, if any, the judge may impose.

The ad technology at question in the Virginia case does not generate the same kind of revenue for Google as its search engine does, but is still believed to bring in tens of billions of dollars annually.

Overseas, regulators have also accused Google of anticompetitive conduct. But the company won a victory this week when a an EU court overturned a 1.49 billion euro ($1.66 billion) antitrust fine imposed five years ago that targeted a different segment of the company’s online advertising business.