Google's Transatlantic Display-Ads Battle: EU Fines €2.95B, DOJ Targets Breakup

Google Faces Increased Legal Pressure Over Display-Ads Business

Google, one of the most influential tech companies in the world, is finding itself under intense scrutiny from both European and U.S. regulators over its display-ads business. While the company managed to avoid significant consequences in a recent antitrust lawsuit in the United States, it now faces mounting legal challenges that could force major changes to its operations.

The European Commission recently imposed a hefty fine of €2.95 billion on Google for what it called illegal practices in the market for ads displayed on web pages. The commission stated that these actions led to higher marketing costs for advertisers, which were likely passed on to consumers in the form of higher prices. Additionally, publishers saw reduced revenues, potentially leading to lower service quality and higher subscription costs for users.

This latest penalty comes after several previous violations of EU antitrust rules. In 2017, Google was fined €2.42 billion for favoring its own comparison shopping service. In 2018, it received a €4.34 billion fine for using its control over Android to promote its search engine. And in 2019, the company was penalized €1.49 billion for suppressing competitors in online search advertising.

In June 2023, the European Commission found Google guilty of abusing its power in both the publisher and advertiser sides of the display-ads market. It suggested that only a forced divestiture of some of its business units would end the threat. The EC emphasized that a mere fine was not enough to deliver real solutions for the market and protect consumers. It has given Google 60 days to develop a plan to end its illegal conduct and address its "inherent conflicts of interest," which may involve selling off parts of its display-ads businesses.

DOJ Proposes Breakup of Google’s Display-Ads Business

On the other side of the Atlantic, the U.S. Department of Justice (DOJ) filed its own proposal to force a breakup of Google’s display-ads business. This came after a ruling by Judge Leonie Brinkema in April, which found that Google had engaged in anticompetitive acts to maintain monopoly power in the publisher ad server and ad exchange markets for open-web display advertising.

The 61-page “Proposed Final Judgment” outlines a plan to terminate Google’s illegal practices, restore competition, and prevent future violations. One key step would be the forced sale of AdX, the ad exchange that holds more than half of the market for near-real-time auctions among advertisers. According to the proposal, Google must promptly and fully divest AdX to an approved buyer and cannot return to the ad-exchange market for five years.

Google could retain its business at the other side of the programmatic industry—publisher ad servers—but it would have to publish the auction logic behind its former product, DoubleClick for Publishers (DFP), under an open-source license. The proposal also allows for the potential divestiture of the rest of DFP if necessary to open up the market.

Legal and Financial Consequences

The DOJ proposal also requires Google to refrain from certain self-dealing practices and implement data-portability and interoperability measures to ease competition. Additionally, the company would need to hand over 50% of the profits generated by AdX and DFP until the sale of either. These funds would be used to cover the costs of running open-source auctions, help publishers switch to competing systems, or for any other remedial purposes ordered by the court.

Google Objects to Regulatory Actions

Google has strongly objected to both the EC and DOJ actions. Lee-Anne Mulholland, VP and global head of regulatory affairs, stated that the European Commission's decision was wrong and that the company would appeal. She argued that the fine was unjustified and that the required changes would hurt thousands of European businesses by making it harder for them to make money.

In May, Google proposed its own set of remedies that would not involve selling off ad units but instead aim to make it easier for publishers to use Google Ad Manager with other ad tech providers while minimizing disruption.

Industry Reaction and Broader Implications

A trade association representing news publishers has endorsed the idea of forcing Google out of parts of the industry. Danielle Coffey, president and CEO of the News/Media Alliance, stated that Google must be held accountable for decades of abuse of its market power. She highlighted concerns about how Google’s monopolistic tactics have affected content creators and consumers alike.

As the legal battles continue, the outcome could significantly reshape the digital advertising landscape and impact how companies like Google operate in the future.