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States are leaning toward a push to break up Google’s ad tech business

  • June 05, 2020

The state attorneys general investigating Google for potential antitrust violations are leaning toward pushing for a breakup of its ad technology business as part of an expected suit, people familiar with the situation told CNBC.

Fifty attorneys general have been probing Google’s business practices for months, alongside a similar probe being led by the U.S. Department of Justice. Both the states and the DOJ are looking to file a suit against the internet giant as soon as within the next few months, the people told CNBC.  

The states and the Justice Department have not yet officially decided whether to combine their expected suits, the people said, though they have been collaborating closely. Both have been investigating Google’s search, ad technology and android business

The attorneys general investigating Google, which is owned by Alphabet, haven’t yet definitively ruled out pushing for alternatives for its ad technology business, like imposing restrictions on how it runs its business, one of the sources said. A suit may also include a push for both that option and breaking up the ad tech business. 

Should the attorneys general aggressively pursue a break up of Google’s ad technology business, it would be notable. While regulatory enforcement agencies have recently favored “structural remedies” − breakups and divestitures − regulators have less onerous solutions available, like barring certain behaviors through a consent decree.

Once the attorneys general file their expected lawsuit, they have a number of tools at their disposal to signal their intent to push for a breakup of Google’s ad technology business. That includes what they allege, the evidence they introduce, pre-trial briefings and news conferences.  

In Google’s case, pushing for a breakup of its ad technology business may be difficult, some lawyers say, because it does not exist as a stand-alone unit easily hived off. And its two main deals, DoubleClick in 2007 and AdMob in 2009, were years ago. 

“Courts are very concerned that by ripping a company apart, it hurts consumers and make it worse for people that don’t have the expertise to do that,” said Stephen Houck, one of the government lawyers in the Microsoft antitrust case two decades ago.

While Google generates the majority of its roughly $161 billion in revenue from ad sales, the revenue it gets from the software and technology that serve as the backbone of that business is far smaller. Its Network Members business, which includes AdMob, AdSense and Google Ad Manager, generated about $22 billion in sales the last fiscal year. 

Google retired the DoubleClick name in 2018, putting its DoubleClick products for advertisers together with Google Analytics 360 to become the “Google Marketing Platform.” Then it put its DoubleClick products for publishers and the DoubleClick ad exchange into the “Google Ad Manager.” 

While the government has successfully fought for a breakup of corporate giants in the past, including Standard Oil in 1911 and ATT in the 1980s, more recent cases have imposed weaker remedies. Both IBM in the 1980s and Microsoft in 2000 concluded antitrust suits without breaking up the respective companies. 

Still, political winds have more recently seemingly turned against big technology companies.

President Donald Trump has alleged, along with other Republicans, that companies like Google censor conservative content, a claim Google has denied. He earlier this month signed an executive order vowing to crack down on the liability protections internet companies like Google through Section 230 of the Communications Decency Act.

Attending the signing of that executive order was Attorney General William Barr, whose deputy recently took leadership of the Justice Departments’ antitrust investigation into Google, after the country’s top antitrust official, Makan Delrahim, recused himself. 

Presidential candidate Joe Biden served as vice president for Barack Obama, who has been criticized for allowing tech companies to become too powerful on his watch. Biden has said that, as president, he would set up a new department within the Justice Department to go back and look at the megamergers that have occurred and those that are being proposed. 

A spokesperson for Google told CNBC in a statement, “We continue to engage with the ongoing investigations led by the Department of Justice and Attorney General Paxton, and we don’t have any updates or comments on speculation.”

“The facts are clear,” she added, “our digital advertising products compete across a crowded industry with hundreds of rivals and technologies, and have helped lower costs for advertisers and consumers.”

A spokesperson for Texas Attorney General Ken Paxton, who is leading the ad tech part of the probe, declined to comment. A spokesperson for the DOJ did not respond to a request for comment. 

Article source: https://www.cnbc.com/2020/06/05/states-lean-toward-pushing-to-break-up-googles-ad-tech-business.html

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