A legal victory over Google could yet dent Big Tech’s armour

It is easy to view the US government’s latest legal challenge to the power of Big Tech as a case of too little, too late. Years of almost negligent disregard from the trustbusters has allowed a handful of companies to entrench themselves in the booming digital markets. But as another lawsuit from Washington lands, there is a sense that something significant is shifting, and that even relatively small victories could go a long way.

The new case from the Department of Justice accuses Google of playing all sides of the market to its own advantage when it comes to arranging ad sales on behalf of other websites. Google supplies the software used by many publishers and advertisers, while also owning the exchange in the middle where their orders to buy and sell ad inventory are matched.

It used that power to direct orders to its exchange and influence pricing, according to the DoJ. In the words of one Google executive quoted in the lawsuit, it is as if “Goldman or Citibank owned the NYSE”. The US government asked the court to force the company to spin off parts of its advertising technology, including DoubleClick, a company it acquired 15 years ago.

This week’s lawsuit might once have shaken Google — and indeed, the entire digital advertising industry — to its foundations. Not anymore.

When it bought DoubleClick, selling ads on behalf of other websites was a big deal for Google, accounting for about 40 per cent of revenue each year. It has now fallen to less than 12 per cent. Google’s own search business ended up eclipsing the other forms of advertising.

At the same time, the digital advertising landscape has been going through dramatic change. Not long ago, Google and Meta, Facebook’s parent, looked like an unassailable duopoly. But by showing ads when people search for products on its own site, Amazon has grown rapidly. It now earns a third of the advertising income of Meta and is expanding much faster.

The rest of Big Tech is waiting in the wings. Apple has made it harder for services such as Facebook to collect data on its devices, hitting the value of their advertising and laying the ground for an assault of its own on the mobile ads business. Meanwhile, Microsoft last year won the bidding to sell advertising on behalf of Netflix, the industry’s most significant digital deal of the year.

Even if the justice department prevails before a judge, a trial is years away. The DoJ’s first lawsuit against Google, claiming the company negotiated exclusive distribution deals for its search engine in order to shut out rivals, will be nearly three years old if, as expected, it finally gets to court in September.

Legal appeals and potential changes in political leadership in Washington add to the unpredictability.

As they take a belated swing at groups like Google, the US trustbusters only have themselves to blame for taking so long to level charges. But they are not the only ones to have failed. Despite considerable grandstanding from both political parties as they hauled tech leaders before Congress for a series of confrontational hearings in 2020 and 2021, legislation to stem Big Tech’s power has stalled.

A single issue, above all, has blocked the progress of tech regulation in Washington, and shows every sign of remaining a serious obstacle. Republicans have sought to turn any new law into a vehicle to prevent what they claim is censorship of conservative viewpoints by a left-leaning tech establishment.

The most promising of the recent antitrust bills, sponsored by Democratic senator Amy Klobuchar and Republican senator Chuck Grassley, would have barred the biggest platforms from discriminating against other companies by giving preferential treatment to their own services. Republicans, though, wanted to use the anti-discrimination provision to prevent internet platforms suppressing rival viewpoints — a backdoor way to weaken online content moderation, and a deal-breaker for the Democrats.

It’s hard to see this divide being bridged in the near future. A Republican party under the sway of a radical rightwing minority is now in control of one arm of Congress and a presidential campaign is in the offing, deepening the partisan divide.

Yet it is worth noting that the DoJ has aimed its legal challenges astutely, and could still score some victories. Selling ads for other websites may be a relatively small — and falling — part of Google’s overall operations, but it was still worth more than $30bn last year. For many publishers the case would be significant if it left them paying lower fees to the “ad tech” providers who handle their advertising sales, though that is by no means a sure thing.

As a result, the DoJ’s cases may at least end up making more of a dent in Google’s armour than the European Commission’s long-running legal battles with the company. Brussels has levied three fines totalling €8.25bn but not forced any meaningful changes in Google’s business practices. If it eventually succeeds in splitting off part of Google’s ad tech operations and limiting the company’s ability to reach search distribution deals, the DoJ will be able to claim more direct hits.

Google would still have plenty of time to find ways to lessen the damage. But a legal victory for the US government would prove that Big Tech’s legal defences are not impregnable and could shift public opinion in favour of greater controls. Maybe at that point Congress would finally summon the will to act. But it wouldn’t do to hold your breath.

richard.waters@ft.com