While Google has made at least one settlement offer to the Justice Department's antitrust division to address its concerns, the agency is planning to file a lawsuit in the coming weeks, according to two people who spoke on the condition of anonymity to discuss a confidential investigation.
Since 2019, the division has been investigating Google's ad-tech practices, and in 2020 it sued the company over its search operations. According to the people, the investigation into the advertising market has accelerated in recent months under the supervision of the antitrust division's No. 2 official, Doha Mekki.
A Justice Department spokeswoman declined to comment on the Google ad-tech investigation or any settlement offers made by the tech behemoth.
When asked about the Google investigation during a press conference on Tuesday, Assistant Attorney General for Antitrust Jonathan Kanter declined to comment. However, Kanter emphasized that the agency is committed to litigating antitrust cases in court, particularly those involving monopolization.
"We have to bring cases to court," Kanter said, speaking virtually at a Fortune conference in Aspen, Colorado. "We don't have the kind of ground rules that existed when antitrust was enforced consistently," he said, referring to the recent lack of monopolization cases. "If we don't use those muscles, they will begin to deteriorate."
Kanter may be disqualified from the case due to his private practice work for Microsoft Corp., News Corp., Yelp Inc., and other Google opponents, leaving his deputy Mekki in charge of the investigation. Mekki has stated publicly that the division will likely reject settlements more frequently.
"You'll see a lot more litigation from the antitrust division," Mekki predicted at an April event. "The division's position is that we do not intend to enter into settlements." Settlements imply compromise."
The Mountain View, California-based company controls a sizable portion of the online advertising market, which generated $31.7 billion in gross revenue for the company last year. It provides an ad-buying service for marketers and an ad-selling service for publishers, as well as a trading exchange where both parties complete transactions in real-time auctions.
According to a person familiar with the matter who declined to be named discussing confidential matters, Google has proposed splitting a portion of its business that auctions and places ads on websites and apps into a separate company that would remain under the Alphabet umbrella. According to the source, the new unit could be worth tens of billions of dollars depending on the assets it contains. The proposed settlement was first reported by the Wall Street Journal last week.
"We have been engaging constructively with regulators to address their concerns," said Google spokesperson Peter Schottenfels. "As we've previously stated, we have no plans to sell or exit this business, and we're deeply committed to providing value to a diverse set of publisher and advertiser partners in a highly competitive industry."
State attorneys general, led by Republican Texas Attorney General Ken Paxton, have already filed an antitrust lawsuit against Google's advertising business. That lawsuit, filed in December 2020, is still pending in federal court in New York after the search giant successfully petitioned to have it relocated from Texas and consolidated with private antitrust cases relating to its advertising business.
According to two people familiar with the case who asked not to be identified because they were discussing confidential matters, Google did not make a settlement offer to the states.
Restructuring the ad business as a separate unit within Alphabet will not alleviate industry concerns about Google's market role, according to Brian O'Kelley, co-founder of online advertising firm AppNexus.
"What makes us think that this will make a significant difference in how they operate?" "Google and Alphabet are the same thing," said O'Kelley, now CEO of Scope3, a software company focused on emissions data in corporate supply chains.
Former ad agency executive Dina Srinivasan has compared Google to a financial exchange that owns both sell- and buy-side operations. These operations are frequently required in finance to be run with a firewall of separation and distinct ownership. According to Srinivasan, a Google proposal to place its unit under the same parent company, with the same CEO, but without similar remedies, would not eliminate any of its monopoly advantages.
"It's basically an offer of nothing," she explained.
Competitors and publishers have long complained about how Google uses parts of its vast network, such as its ad exchange, to benefit other areas and undercut competitors.
Google denies dominating the ad tech market, claiming that the market is crowded with major players such as Amazon.com Inc., Comcast Corp., and Meta Inc.'s Facebook competing for business.