Google faces global scrutiny as UK's CMA & DOJ allege ad tech monopoly

The UK’s Competition and Markets Authority (CMA) has provisionally concluded that Google is engaging in anti-competitive practices in the open-display advertising technology market. According to the CMA, these practices are likely harming thousands of UK publishers and advertisers, potentially disrupting the broader digital ad ecosystem.

The findings, presented in a statement of objections issued to Google on Friday, 6 September, indicate the company's growing dominance in digital advertising, particularly in the open-display ad tech sector, has allowed it to favour its own services over those of competitors. This, the CMA believes, undermines competition and denies publishers and advertisers access to a fair, level playing field.

Global Scrutiny

The CMA’s investigation comes amid growing scrutiny of Google’s ad tech practices worldwide. Both the US Department of Justice and the European Commission have launched similar investigations into the company's dominance in ad tech, with allegations of anti-competitive conduct being a central theme in ongoing proceedings.

The lawsuit is filed by the U.S. Department of Justice (DOJ) and a coalition of states, alleging the company monopolises online advertising technology. Regulators allege the company built and maintains monopolies over both the buy and sell sides of online advertising technology, resulting in its control over the ad exchange market. Allegedly keeping up to 36 cents on every dollar it brokers between publishers and advertisers.DOJ lawyer Julia Tarver Wood stated, “One monopoly is bad enough. But a trifecta of monopolies is what we have here.”

In their defence, the company argued that the government’s case focuses on an outdated internet model when desktop computers were dominant and that advertisers now prefer platforms like social media and streaming services. The company's lawyer Karen Dunn warned that the case is like “a time capsule with a Blackberry, an iPod, and a Blockbuster video card,” highlighting the risk of disrupting emerging technologies.

They claim, despite the monopoly accusation, competition exists from companies like Amazon, Microsoft, TikTok, and others. Google Networks, which includes the services at the centre of the case, has seen revenue drop slightly from $31.7 billion in 2021 to $31.3 billion in 2023. The government plans to present witnesses like Tim Wolfe from Gannett Co., who will testify that the company extracts significant fees from publishers, leaving them little choice but to rely on Google's tech.

DOJ attorneys used internal emails, such as one from employee Jonathan Bellack, to suggest the company's control over all sides of the ad process poses deeper competitive issues.“The analogy would be if Goldman or Citibank owned the NYSE [New York Stock Exchange],” Bellack wrote.

The company claims the government’s case is overly focused on traditional desktop display ads, which no longer represent the bulk of online advertising as user attention has shifted to mobile apps and social media.

The CMA’s findings align with these global concerns, highlighting the company's extensive reach and influence across the digital advertising landscape. As Juliette Enser, Interim Executive Director of Enforcement at the CMA noted, “Many businesses are able to keep their digital content free or cheaper by using online advertising to generate revenue. Adverts on these websites and apps reach millions of people across the UK – assisting the buying and selling of goods and services.” 

Google’s Market Dominance

At the core of the CMA’s investigation is the company's role in facilitating the buying and selling of online ad space, a process critical to the digital advertising ecosystem. Most UK publishers and advertisers rely on Google’s ad tech services to bid for and sell advertising space on websites and apps. According to the CMA’s findings, the company uses this dominant position to give preferential treatment to its own services, preventing rivals from offering more competitive alternatives.

“We’ve provisionally found that Google is using its market power to hinder competition when it comes to the ads people see on websites,” said Enser.

The CMA’s 2019 study into digital advertising revealed that advertisers were spending around £1.8 billion annually on open-display ads, promoting goods and services via apps and websites to UK consumers. Given the size of the market, the CMA is particularly concerned that the company's practices could significantly impact competition, hindering innovation and harming businesses that rely on digital advertising.

The Ad Tech Stack and Google’s Role

The CMA’s investigation has focused on three key components of the company's role as an intermediary in the digital advertising supply chain, commonly known as the 'ad tech stack.' This stack consists of intermediaries that facilitate transactions between sellers (publishers) and buyers (advertisers) for ad space on websites or mobile apps.

The investigation highlights Google’s significant market share in three areas:

1. Google Ads and DV360: Ad buying tools for advertisers.

2. DoubleClick for Publishers (DFP): A publisher ad server for managing ad space.

3. AdX: Google’s ad exchange platform, which facilitates auctions for digital ad space.

AdX is particularly lucrative for Google, as the company charges up to 20% of the bid amount during the ad auction process. The CMA’s provisional findings suggest that Google has been using its market power to strengthen AdX’s position by giving it competitive advantages that prevent other exchanges from offering rival services.

Anti-Competitive Practices

Among the CMA’s key findings is Google’s alleged 'self-preferencing,' where it leverages its control over both ad-buying tools and the DFP ad server to benefit its own AdX platform. According to the CMA, the company has used several practices to solidify AdX’s market position, including:

• Providing AdX with exclusive or preferential access to advertisers that use Google Ads.
• Manipulating advertiser bids to ensure higher values when submitted through AdX compared to rival exchanges.
• Allowing AdX to bid first in auctions run by DFP for advertising space, effectively giving it a ‘right of first refusal,’ which can block competitors from bidding.
• These practices, which the CMA states have been ongoing since at least 2015, have distorted competition in the digital advertising space and harmed advertisers and publishers by limiting their ability to access better and more cost-effective alternatives.

What’s Next?

The CMA has now opened a consultation period, during which Google will have the opportunity to respond to the provisional findings before a final decision is made. The authority will also consider what remedies might be necessary to prevent further anti-competitive behaviour, including potential measures to ensure that Google ceases its self-preferencing practices.