Google has claimed a rare legal victory with the European Union General Court’s overturning the €1.49 billion antitrust fine levied on the internet giant in 2019. The verdict was a huge victory in Google’s struggle with the EU, signalling a turning point in the long-running dispute over competition in digital advertising.

The case focused on Google’s AdSense business, which displays contextual ads on third-party websites. The European Commission accused Google of abusing its strong market position by incorporating exclusivity restrictions into contracts with participating websites, essentially prohibiting them from running adverts from Google’s competitors.

What led Google to this juncture? In March 2007, Google acquired DoubleClick, a software company that helped websites sell ads, paying US$1.3 billion. That marked the start of Google’s dominance in online advertising, a position carefully noted by the US Department of Justice.

The US government believed that by controlling DoubleClick, Google could monopolise critical components of the digital advertising supply chain, which generates over US$12 billion in annual revenue for websites and apps in the US alone. The Department of Justice stated Google’s dominance left limited choices for publishers and advertisers, thus reducing competition and innovation in the ad tech industry.

Today, according to court filings, Google controls about 91% of the publisher ad server market, 70% of ad exchanges, and 85% of advertiser tools. At this level of control, the US government argues that Google could extract profit by inflating the price of advertising, with advertisers’ costs passed on to consumers.

Google continues to dispute such accusations. But between 2017 and 2019 alone, the tech giant was hit with fines worth €8.2 billion, all due to antitrust violations. These and similar fines intensified scrutiny of big tech in Europe.

Two weeks ago, Google failed to overturn one of its fines, but on September 18, Europe’s second-highest court ruled that the European Commission – which levied the €1.49 billion fine – “committed errors in its assessment”.

The court stated that the EU regulators failed to demonstrate that Google’s practices had deterred innovation, harmed consumers, or helped the company maintain and strengthen its dominant position in national online search advertising markets.

What could this mean for the digital advertising industry?

On the surface, the decision challenges the EU’s approach to regulating big tech companies. On a deeper level, it may prompt a reassessment of antitrust enforcement strategies.

“We are pleased that the court has recognised errors in the original decision and annulled the fine,” Google said in an email to Reuters. The company stated that it had changed its contracts in 2016 to remove controversial clauses affecting advertisers, well before the Commission came to its decision.

The European Commission said it would “carefully study the judgment and reflect on possible next steps”. It can appeal the decision to the EU’s highest court, the Court of Justice, but constitutionally, can only do so on points of law.

For advertisers and publishers, the court’s decision could mean a continuation of the status quo in the short term. However, it may also spur increased competition in digital advertising as other companies feel emboldened to challenge Google’s market position. Some campaigners and politicians want the tech giant divided into multiple independent companies. Hence, each of Google’s advertising service would better compete on its own merits without the benefit of data sharing and centralised decision making in a single entity. 

In a Stanford Technology Law Review paper on Google’s dominance, Dina Srinivasan, a former ad executive who is now an antitrust scholar, says advertisers would end up paying lower fees in a deliberately more-fragmented market, and advertisers’ savings would be passed on to their customers. That future would mark an end to the spell Google allegedly cast with its DoubleClick deal. 

According to an article in Wired, Adam Heimlich, a longtime digital ad executive who’s extensively researched Google, said it could take years for the ad market to shake out. Over time, fresh competition could lower supply chain fees and increase innovation. That would drive “better monetisation of websites and better quality of websites,” he said.

Tim Vanderhook, CEO of ad-buying software developer Viant Technology, which both competes against and partners with Google, predicted consumers would encounter a greater variety of ads, fewer ‘creepy’ ads, and pages less cluttered by advertising, creating “a substantially improved browsing experience,” he said in the Wired article. 

As the dust settles on this landmark ruling, the digital advertising industry will watch closely to see how it shapes future regulatory approaches and market dynamics. While Google may have won this skirmish, the war over the future of digital advertising and the role of big tech in our society is far from over.

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Tags: Advertising, Google, Google Ads