Google feels it is being punished and calls for a collaborative approach.

During this week’s trial in Alexandria, Va., the Department of Justice (DOJ) and state attorneys general have outlined a sweeping set of structural and behavioral remedies to curtail Google’s dominance in digital advertising, diverging sharply from Google’s preferred approach of incremental reforms and self-regulation. While the DOJ prioritizes divestiture and stringent oversight to restore competition, Google contends that these measures are overly punitive and could destabilize the broader ad tech ecosystem. The tech giant argues that the proposed remedies might stifle innovation and burden publishers, maintaining that a collaborative approach with industry stakeholders would yield more balanced outcomes (U.S. v. Google, No. 1:23-cv-00108-LMB-JFA, E.D. Va., Alexandria Div.).

The DOJ’s Proposed Remedies

Structural Remedies. Divestiture of Ad Exchange (AdX): Google must divest its AdX with oversight from a court-appointed divestiture trustee. Interim measures include requiring AdX to bid into header-bidding wrappers and non-Google publisher ad servers. Phased Divestiture of Double Click for Publishers (DFP): Google must divest its DFP publisher ad server in three phases: 1) Provide APIs for DFP to integrate with Prebid header-bidding wrappers and assist publishers in migrating data to other servers; 2) Open-source DFP’s auction logic and allow neutral third parties to host the final auction outside of DFP; 3) Divest the remainder of DFP, ensuring it is not sold to the same entity that acquires AdX.

Behavioral Remedies. Prohibit Google from preferentially routing buyside demand from AdWords and DV360 to AdX or DFP. Google must also refrain from tying products across markets for publisher ad servers, ad exchanges, or advertiser buying tools. Require Google’s buyside tools to deal with third-party ad tech tools on non-discriminatory terms.

Escrow and Technical Assistance. Google must place 50% of net revenues from AdX and DFP into escrow until divestitures are complete. These funds may be used to support the industry organization hosting the open-source auction logic or assist publishers transitioning away from DFP. Google must provide technical assistance to the industry organization hosting the auction logic.

Data and Transparency. Share DFP data that improves auction logic with the industry organization hosting the open-source auction. Prohibit Google from using users’ data from any Google property (e.g., YouTube, Gmail, and Chrome) to inform AdWords or DV360 bidding on third-party tools. Allow publishers to access data generated in DFP or AdX in the same format as Google.

Monitoring and Anti-Retaliation. Appoint a divestiture trustee and a monitoring trustee to oversee compliance with the remedies. Prohibit Google from retaliating against parties that cooperated with the investigation or litigation.

Legal and Ethical Compliance. Require Google to implement mandatory compliance training for employees on document preservation, attorney-client privilege, antitrust laws, and the Court’s judgment. Appoint a compliance monitor to oversee these measures and report progress.

Attorneys’ Fees and Costs. The Plaintiff States intend to seek attorneys’ fees and costs for their investigations and this litigation.

Google’s proposed remedies

Google’s proposed remedies aim to address the anticompetitive conduct found by the Court while avoiding structural remedies like divestiture. The key elements of Google’s proposal include:

Real-Time Bids Access. Google would make AdX real-time bids for open-web display ads available to all rival publisher ad servers and remove restrictions on sharing such bids.

Deprecation of Unified Pricing Rules (UPR). Google would allow publishers to set different price floors for different bidders, including different ad exchanges and buying tools, restoring publishers’ ability to set higher price floors on AdX than on rival exchanges.

Commitment Against Rebuilding Auction Effects. Google will not rebuild the auction programs known as “First Look,” “Last Look,” and “Unified Pricing Rules” for open-web display ads.

Appointment of a Trustee. A trustee agreed upon by the parties would be appointed to monitor compliance with these remedies for a period of three years.

Google argues that these conduct remedies are narrowly tailored to address the violations found by the Court, restore competition, and avoid the disruption and inefficiencies associated with divestiture.

Google: A Case of Government Overreach

Google comments extensively on the government’s proposed remedies, particularly the divestiture remedy. Google argues that the government’s proposal to divest AdX, the “auction logic” of DFP, and eventually the “lump of the publisher ad server” is legally unavailable, unworkable, and harmful. Key points raised by Google include:

Legal Unavailability. Google contends that divestiture is not appropriate under controlling law, emphasizing that divestiture is typically ordered in cases involving unlawful mergers or acquisitions, which is not the case here. Google cites precedent, including the Microsoft case, to argue that divestiture is a “radical structural relief” and should only be imposed with great caution.

Unworkability. Google highlights the logistical challenges of divestiture, stating that AdX and DFP are deeply integrated into Google’s proprietary software and hardware infrastructure. Rebuilding these tools to function outside Google’s systems would require years of effort and significant resources and could disrupt the ad tech market.

Economic and Technological Harm. Google argues that divestiture would cause “economic chaos and technological dysfunction,” harming millions of advertisers and publishers and degrading the experience of internet users. It warns of unintended consequences, especially given the rapidly evolving ad tech landscape influenced by AI.

Overreach. Google asserts that the government’s proposed remedy goes beyond the scope of the Court’s liability findings, targeting markets and tools not previously part of the case. It argues that remedies should be narrowly tailored to address the specific violations found.

Behavioral Remedies as Sufficient. Google maintains that its proposed conduct remedies are sufficient to address the violations and restore competition without resorting to the disruptive and unpredictable structural remedies proposed by the government.

In summary, Google strongly opposes the government’s proposed structural remedies, arguing that they are legally, logistically, and economically flawed, and instead advocates for its own conduct-based remedies.

Commentary

Given Google’s history of non-compliance, behavioral remedies alone simply would be insufficient in this case. Even in the context of this litigation, the court found that Google engaged in a “systematic disregard of the evidentiary rules” and that Google’s conduct “may well be sanctionable.” Enforcing behavioral remedies against a company with such immense resources, technical prowess, and willingness to ignore the rules would be impractical and challenging. And, structural remedies have historically been favored, even if underused, to keep antitrust enforcers out of the business of regulating conduct in a fast moving market relying instead on market forces to re-establish a competitive market.

The court determined that Google’s monopoly power harmed the competitive process (from its publisher customers to advertisers and consumers), strengthening the argument for altering the market structure over merely constraining behavior. As if to say it is too dominant to replace, Google itself argues what a long-term disruption it would be to the market if AdX and DFP systems had to be rebuilt outside its infrastructure.

Further, Google’s advantages and scale of its data stores, gained through programs like UPR and Last Look, would persist under behavioral remedies. Google already has auction data; removing programs now would not alter their market position. The DOJ rightly proposes data and transparency provisions to address these advantages.

Given Google’s ownership of properties across the ad stack and the nature of digital advertising markets, behavioral remedies simply will not work here. Structural remedies are the best anecdote to Google’s dominance in this arena.