A Primer on the Google Adtech Antitrust Case

I. Introduction

The U.S. Justice Department’s (DO) antitrust case against Google’s adtech business moved to trial this week, with proceedings opening Sept. 9.[1] Brought under Sections 1 and 2 of the Sherman Act, the case centers on claims that Google has monopolized critical markets within the digital-advertising ecosystem. Given the complexity of the digital-advertising world, as well as the harms alleged, this brief attempts to shed light on the proceedings by discussing some of the most important facts and legal questions that underpin the case.

A. Digital Advertising Powers the Internet Economy

Digital advertising has evolved into a cornerstone of the internet economy, funding much of the free content and services available online. This ecosystem has grown from simple banner ads in the early days of the internet into a sophisticated, automated marketplace with advanced targeting capabilities.

The digital-advertising process relies on a set of technologies known as the “adtech stack,” which connects advertisers with publishers through a series of intermediaries. Key components of the stack include publisher ad servers that manage ad inventory, supply-side platforms (SSPs) that automate sales, ad exchanges that facilitate real-time bidding, and demand-side platforms (DSPs) that help advertisers purchase ads.

Given the key role this industry plays, as well as its complexity, a key challenge in the case at-hand will to be avoid judicial errors that could otherwise prevent this complex ecosystem from functioning frictionlessly.

B.  Three Key Markets in Dispute

The DOJ’s case against Google focuses on three specific markets within the adtech stack: the publisher ad-server market, the ad-exchange market, and the advertiser ad-network market. The DOJ argues that Google’s dominance in each of these segments allows it to exert undue influence over the digital-advertising process.

Google contends that the DOJ’s proposed market definitions are overly narrow and fail to account for important competitive alternatives and constraints, such as in-app advertising, video, and social-media advertising that compete for the same ad budgets. It also cites other constraints, like direct deals between publishers and advertisers, and demand-side platforms (DSPs).

When these alternatives are considered, Google’s resulting market shares are substantially smaller, weakening the case for alleged monopolization.

C. The Legal Framework Is Complex

The case draws on significant antitrust precedents, including the U.S. Supreme Court’s rulings in Trinko and AmEx. There are, however, important questions concerning the implications of these precedents for the case at-hand.

In Verizon Communications Inc. v. Law Offices of Curtis v. Trinko, the Court emphasized that even monopolists have no general duty to assist competitors or share the sources of their advantage. This principle is directly applicable to many of the allegations against Google, which essentially amount to claims that Google should be forced to share its data, technologies, and platforms with rivals in ways that would undermine its own competitive position. Failing to overcome this significant precedent would severely undermine the DOJ’s chances of success.

The Supreme Court’s opinion in Ohio v. American Express also looms large. There, the Court held that, for two-sided transaction platforms (such as Google’s adtech business), it is necessary to consider the net effect of challenged conduct across all sides of the market. This is critical in the case at-hand. For instance, potentially anticompetitive conduct like restrictive terms for publishers may, in fact, be procompetitive when the benefits to advertisers are also considered.

II. Background on Digital Advertising

Digital advertising has become a cornerstone of the modern internet economy, providing the economic underpinning for much of the free content and services available online. Over the past three decades, the digital-advertising ecosystem has evolved from simple banner ads to a complex, highly automated marketplace involving multiple intermediaries and sophisticated targeting technologies.

To understand the current landscape, it is useful to place digital advertising in the broader context of the overall advertising and marketing industry. Digital advertising now comprises approximately half of all U.S. advertising revenues, while advertising itself accounts for roughly half of total marketing activities.[2]

FIGURE 1: US Advertising Spending Over Time

SOURCE: Benedict Evans, News by the Ton

Within the digital-advertising space, advertisers have several options for how and where to run ads:

• Search ads, in which the ad is displayed as a search-engine result (g., Google, Bing, DuckDuckGo);
• Display ads on a site owned and operated by the firm that sells the ad space (g., Facebook, YouTube, Amazon Marketplace);
• “Open” display ads on a third party’s site (g., The New York Times, Dallas Morning News, Runner’s World); or
• “In-app” display ads served on mobile apps.

Our focus here is primarily on open display advertising, which involves independent publishers like news websites or blogs selling ad space through intermediaries. That is the market in question in this case.

The process of buying and selling digital display ads through open auctions involves multiple steps and several key players:

1. Publishers: Content creators or website owners who have ad space to sell.
2. Advertisers: Businesses or other entities looking to promote products or services.
3. Intermediaries: Various adtech companies that facilitate transactions between publishers and advertisers.

The set of technologies used to automate digital-advertising transactions is known as the “adtech stack.” This stack consists of several components that work together to match advertisers with publishers (Figure 2):

1. Publisher ad servers manage publishers’ ad inventory and determine which ads to serve.
2. Supply-side platforms (SSPs) automate the sale of publishers’ inventory through real-time auctions.
3. Ad exchanges facilitate real-time bidding between SSPs and demand-side platforms.
4. Demand-side platforms (DSPs) automate ad purchases for advertisers.
5. Advertiser ad servers store ads, deliver them to publishers, and track performance.

FIGURE 2: A Simplified View of the Digital-Advertising Stack

SOURCE: OECD, CMA

This process balances the competing interests of advertisers (who want to reach relevant audiences cost-effectively); publishers (who want to maximize ad revenue); and users (who want a good browsing experience with relevant ads). The specific approach used to match ads with inventory reflects an attempt to optimize across these different constituents in a multisided market.

It is important to note that the digital-advertising market has evolved dramatically over time in response to technological changes and shifting market dynamics. What began as a relatively simple process of direct negotiations between advertisers and publishers for the fixed placement of banner ads has become an intricate, automated ecosystem.

Throughout this evolution, intermediaries have had to balance the interests of advertisers, publishers, and users to maximize the total value of the advertising platform. This balancing act is a crucial consideration when evaluating claims about anticompetitive conduct or market power in the digital-advertising industry.

III. Market Definition

Market definition is a critical component of antitrust analysis, as it sets the boundaries within which competitive effects are assessed. In the DOJ’s case against Google’s adtech business, the DOJ and Google are likely to present competing views on the relevant market(s).

The DOJ’s complaint alleges that Google has monopolized or attempted to monopolize three interconnected markets for open-web display advertising, which correspond to different components of the adtech stack shown in Figure 2:

1. Publisher ad-server market (tools that manage publishers’ ad inventory, “Publisher Ad Server” component in Figure 2);[3]
2. Ad-exchange market (platforms that run real-time auctions for ad space, “Ad Exchange” component in Figure 2);[4] and
3. Advertiser ad-network market (tools that help advertisers buy ads, “Advertiser Ad Server” components in Figure 2).[5]

The DOJ argues that these markets are distinct due to their unique functionalities, pricing structures, and customer bases. The DOJ’s market-definition approach narrowly defines these distinct product markets within the broader digital-advertising ecosystem. For each alleged market, the complaint lays out several key elements to justify the market definition.

A. Publisher Ad-Server Market

The DOJ defines this as “publisher ad servers for open web display advertising.”[6] This includes tools such as DoubleClick for Publishers (DFP), which is now part of the Google Ad Manager suite.[7] The DOJ argues that this is a market because:

• Publisher ad servers provide specific functionality for managing display-ad sales on websites, including “ad delivery, reporting, and forecasting.”[8]
• Other adtech products are not reasonable substitutes due to differences in functionality, pricing, and types of inventory monetized.[9]
• A hypothetical monopolist could profitably raise prices or reduce quality.[10]

The complaint alleges that Google has maintained more than 90% market share in this market since at least 2015.[11]

B. Ad-Exchange Market

This is defined as “ad exchanges for indirect open web display advertising.”[12] The Google product in this market is AdX (Google Ad Exchange), now also part of the Google Ad Manager suite.[13] The DOJ’s key points include:

• Ad exchanges provide a specific function of auctioning display-ad inventory between publishers and advertisers.[14]
• Alternative methods of transacting inventory (e.g., direct deals) are not reasonable substitutes due to differences in functionality and use cases.[15]
• Google’s AdX exchange allegedly has more than 50% market share by impressions and revenue.[16]

C. Advertiser Ad-Network Market

This is defined as “advertiser ad networks for open web display advertising.”[17] The Google product in this market is Google Display Network (GDN), which is part of Google’s Google Ads product (formerly known as AdWords).[18] Key elements of the DOJ’s reasoning:

• Advertiser ad networks provide easy-to-use tools for less sophisticated advertisers to place ads.[19]
• They are distinct from demand-side platforms (DSPs), which require more direct management by advertisers.[20]
• Google Ads allegedly has around 80% market share in this market.[21]

 

For each market, the DOJ aims to demonstrate that the products serve distinct needs, lack reasonable substitutes, and that Google has achieved and maintained extremely high market shares. This narrow market-definition approach allows the DOJ to allege monopolization in specific segments of the adtech industry.

D. Google’s Response on Market Definition

Google argues that the DOJ’s proposed market definitions are overly narrow and fail to account for important competitive alternatives and constraints. Specifically:[22]

1. The “advertiser ad-network” market excludes demand-side platforms (“Demand Side Platform (DSP)” in Figure 2) like Amazon, The Trade Desk, Microsoft’s Xandr, Yahoo, Amobee, and Adform, even though DSPs compete directly with Google Ads for advertisers’ business. Many large advertisers use both Google Ads and DSPs interchangeably.[23] When DSPs are included, Google Ads’ market share drops to no more than 20% from 2019-2022.[24]

• The “ad-exchange” market definition ignores direct deals between publishers and advertisers, which account for a significant portion of display-ad spending. When direct deals are included, AdX’s market share falls to no more than 37% from 2019-2022.[25]

2. The “publisher ad-server” market excludes in-house ad servers used by major publishers like Facebook and Amazon. When just a subset of in-house servers is included, Google’s share drops from more than 90% to no more than 45% from 2019-2022.[26]

• All of the proposed markets focus narrowly on “open web display” ads, excluding important alternatives like in-app, video, and social-media advertising that compete for the same ad budgets. When a broader view of display advertising is considered, Google’s share across the adtech stack is much lower.[27]

According to Google, the artificial distinctions the DOJ draws between its proposed markets and these important alternatives ignore the technical reality of how digital advertising functions across channels. Specifically, the backend technology and processes for serving ads on websites versus in apps are fundamentally the same. Adtech tools like Google Ad Manager offer unified solutions for managing and selling inventory across web, app, and other channels.[28] From a technical standpoint, there is little meaningful difference between serving a display ad on a website versus within an app—both use similar programmatic auction processes, targeting capabilities, and measurement tools.

Moreover, advertisers increasingly view web and app inventory as interchangeable, shifting budgets between channels based on performance, rather than treating them as separate markets. Nearly 90% of Google Ads advertisers purchase both web and in-app inventory through the same tool.[29] Publishers also frequently monetize content across both web and app properties, using the same ad-serving tools to manage inventory holistically.[30]

By excluding in-app and other digital ad formats, the DOJ’s market definitions fail to capture the full competitive landscape. When a more comprehensive view of display advertising across channels is considered, Google’s market share across the adtech stack is substantially lower. For example, Google’s share of total U.S. display-ad spending across all channels was no higher than 38% from 2019-2022, and only 30% in 2022.[31]

IV. Legal Framework

The case is being brought under Sections 1 and 2 of the Sherman Act. Section 1 prohibits contracts, combinations, and conspiracies in restraint of trade, while Section 2 prohibits monopolization, attempted monopolization, and conspiracies to monopolize.[32] The DOJ will need to demonstrate that Google’s conduct has harmed competition—not merely competitors—and ultimately harmed consumers.[33] The market-definition dispute above will determine the set of relevant consumers.

Of particular relevance to this case is the Supreme Court’s 2004 decision in Verizon Communications v. Law Offices of Curtis v. Trinko.[34] In Trinko, the Court emphasized that even monopolists have no general duty to assist competitors or share the sources of their advantage:

Firms may acquire monopoly power by establishing an infrastructure that renders them uniquely suited to serve their customers. Compelling such firms to share the source of their advantage is in some tension with the underlying purpose of antitrust law, since it may lessen the incentive for the monopolist, the rival, or both to invest in those economically beneficial facilities.[35]

The Court went on to note that enforced sharing of company assets “may lessen the incentive for the monopolist, the rival, or both to invest in those economically beneficial facilities.”[36] This principle is directly applicable to many of the allegations against Google, which essentially amount to claims that Google should be forced to share its data, technologies, and platforms with rivals in ways that would undermine its own competitive position.[37] Similarly, claims that Google should be required to interoperate with rival ad exchanges or allow rival ad servers to access to YouTube inventory on equal terms run afoul of Trinko’s admonition against forced sharing.[38]

Also relevant is the Supreme Court’s 2018 decision in Ohio v. American Express (AmEx), which emphasized the importance of considering both sides of two-sided platforms when assessing competitive effects. The Court in AmEx held that transactions in two-sided markets must be analyzed “as a whole,” at least for two-sided transaction platforms. Competitive effects might be shown by direct or indirect evidence but, for example, “[e]vidence of a price increase on one side of a two-sided transaction platform cannot by itself demonstrate an anticompetitive exercise of market power.”[39]

In the platform context, understanding whether there is harm to competition at all requires an assessment of the effects of conduct on all sides of the platform. “[N]o economic basis exists for establishing a presumption that ‘harm’ on one side of a two-sided platform is sufficient to demonstrate that market output has been restricted, or that consumer welfare has otherwise been harmed.” In fact, “[s]eparating the two markets allows legitimate competitive activities in the market for general purposes to be penalized no matter how output-enhancing such activities may be.”79F[40]

This principle is critical for evaluating Google’s adtech business, which operates as a two-sided platform connecting publishers and advertisers. Conduct that may appear anticompetitive when looking only at one side of the market—such as restrictive terms for publishers—may, in fact, be procompetitive when the benefits to advertisers are also considered. The two-sided nature of the market also means that pricing on one side cannot be evaluated in isolation, as subsidizing one side through higher prices on the other side may be an efficient way to maximize overall transaction volume.[41] Competitive-effects analysis should consider impacts on both advertisers and publishers, rather than focusing solely on one side of the market.[42]

Importantly, the AmEx decision noted that two-sided platforms often need to overcome “a chicken-and-egg problem” in order to attract sufficient participation on both sides of the market.[43] Conduct aimed at solving this problem and growing the overall market serves a legitimate business objective.[44]

Applying these principles from Trinko and AmEx, the legal argument against Google becomes less straightforward than just proving monopoly power. A balanced approach is necessary to fully understand the competitive dynamics in this two-sided market and to assess whether Google’s conduct ultimately benefits or harms consumers.

[1] Complaint, United States, et al. v. Google LLC, Case No. 1:23-cv-00108 (E.D. Va. Jan. 24, 2023).

[2] Benedict Evans, News by the Ton: 75 Years of US Advertising (Jun. 15, 2020), https://www.ben-evans.com/benedictevans/2020/6/14/75-years-of-us-advertising; Benedict Evans, TV, Merchant Media and the Unbundling of Advertising (Mar. 18, 2022), https://www.ben-evans.com/benedictevans/2022/3/18/unbundling-advertising.

[3] Complaint, supra note 1, at ¶ 282-289.

[4] Id., at ¶ 290-296.

[5] Id., at ¶ 297-303.

[6] Id., at ¶ 282.

[7] Id.

[8] Id.

[9] Id., at ¶ 284.

[10] Id.

[11] Id., at ¶ 285.

[12] Id., at ¶ 290.

[13] Id.

[14] Id., at ¶ 291.

[15] Id.

[16] Id., at ¶ 292.

[17] Id., at ¶ 297.

[18] Id.

[19] Id.

[20] Id., at ¶ 299.

[21] Id., at ¶ 301.

[22] Plaintiffs’ Counterstatement of Material Facts, United States et al. v. Google LLC, Case No. 1:23-cv-00108 (E.D. Va. Mar. 13, 2023), available at https://www.justice.gov/atr/case-document/file/1577986/dl?inline.

[23] Id, at ¶ 394-395.

[24] Id, at ¶ 402.

[25] Id, at ¶ 426.

[26] Id, at ¶ 438.

[27] Id, at ¶ 449-450.

[28] Id, at ¶ 448.

[29] Id, at ¶ 413.

[30] Id, at ¶ 365-368.

[31] Id, at ¶ 450.

[32] 15 U.S.C. §§ 1-2.

[33] See, Brunswick Corp. v. Pueblo Bowl-O-Mat Inc., 429 U.S. 477, 488 (1977) (“The antitrust laws, however, were enacted for ‘the protection of competition not competitors.’”) (quoting Brown Shoe Co. v. United States, 370 U.S. 294, 320 (1962)).

[34] Verizon Commc’ns Inc. v. Law Offices of Curtis v. Trinko, LLP, 540 U.S. 398, 408 (2004).

[35] Id. at 407-08

[36] Id. at 408.

[37] Eric Fruits & Geoffrey A. Manne, The Antitrust Assault on Ad Tech: A Law & Economics Critique (ICLE White Paper 2022-11-03), at 26-27.

[38] Complaint, supra note 1 at 39. (“For example, after the DoubleClick acquisition, Google “hashed” (i.e., masked) the user identifiers that publishers previously were able to share with other ad technology providers to improve internet user identification and tracking, impeding their ability to identify the best matches between advertisers and publisher inventory in the same way that Google Ads can.”)

[39] See, Ohio v. American Express, 138 U.S. 2274, 2287 (2018) (“Due to indirect network effects, two-sided platforms cannot raise prices on one side without risking a feedback loop of declining demand…. Price increases on one side of the platform [] do not suggest anticompetitive effects without some evidence that they have increased the overall cost of the platform’s services.” Id. at 2285).

[40] Geoffrey A. Manne, In Defence of the Supreme Court’s ‘Single Market’ Definition in Ohio v American Express, 7 J. Antitrust Enforcement 104, 111 (2019) (quoting Brief for Amici Curiae Antitrust Law & Economics Scholars in Support of Respondents at 19, Ohio v. American Express, 138 U.S. 2274 (2018) (No. 16-1454) and United States, et al. v. American Express, 838 F.3d 179, 198 (2^nd Cir. 2016)).

[41] Id.

[42] Fruits & Manne, supra note 7, at 24-25; see also Manne, supra note 10, at 111. The Court did recognize that there may be some limited contexts in which one side of a two-side market may be isolable:  “it is not always necessary to consider both sides of a two-sided platform. A market should be treated as one sided when the impacts of indirect network effects and relative pricing in that market are minor…” Ohio v. Am. Express Co., 138 S.Ct. at 2286. But those cases are readily distinguished from the types of two-sided transaction markets at-issue in Amex and in the Google case.

[43] Ohio v. American Express, supra note 9 at 2281. (“In other words, the value of the services that a two-sided platform provides increases as the number of participants on both sides of the platform increases. A credit card, for example, is more valuable to cardholders when more merchants accept it, and is more valuable to merchants when more cardholders use it.”)

[44] Fruits & Manne, supra note 7, at 19-20.