A US District Court has delivered a verdict in a major antitrust case, finding Google liable for monopolising key segments of the digital advertising technology (ad tech) market.
The ruling, following a three-week bench trial, concluded that Google unlawfully acquired and maintained monopoly power in the markets for publisher ad servers and ad exchanges for open-web display advertising. Furthermore, the court found Google illegally tied its publisher ad server, DoubleClick for Publishers (DFP), and its ad exchange, AdX.
The action was initially brought by the US federal government and eight states in January 2023, with nine more states joining later. Plaintiffs alleged violations of Sections 1 and 2 of the Sherman Act, a cornerstone of US antitrust law designed to protect competition.
While the court upheld the claims regarding the publisher ad server and ad exchange markets and the illegal tying, it dismissed the claim that Google monopolised the market for advertiser ad networks.
The complex world of ad tech
The case delves deep into the intricate ecosystem that powers much of the modern internet.
Digital advertising has become the financial lifeblood for countless websites, enabling publishers – from major news organisations to niche blogs – to offer content freely by selling advertising space. This system relies on a sophisticated “ad tech stack”—a collection of tools facilitating the buying and selling of ad inventory.
Key components include:
- Publisher ad servers: Tools like Google’s DFP (now part of Google Ad Manager) help publishers manage their ad inventory, decide which ads to show, and analyse performance. The court recognised these as “mission-critical” for large publishers.
- Ad exchanges: Platforms like Google’s AdX act as marketplaces, running real-time auctions (often in milliseconds) to match advertisers’ bids with available ad space (impressions) on publisher websites.
- Demand-Side Platforms (DSPs): Tools like Google’s DV360 allow advertisers and agencies to manage campaigns and bid for impressions across various exchanges.
- Ad networks: Services like the Google Content Network (comprising AdWords/Google Ads for advertisers and AdSense for publishers) connect advertisers with a pool of publisher inventory, often used by smaller players.
The lawsuit focused on “open-web” display advertising – ads appearing on the vast majority of websites that use third-party ad tech – as opposed to “walled gardens” like Facebook or Google Search, which control their own ad systems.
Google’s path to dominance
The court detailed Google’s rise in the ad tech space, significantly accelerated by strategic acquisitions.
The $3.1 billion purchase of DoubleClick in 2008 was pivotal, giving Google the leading publisher ad server, DFP, which already had a dominant market share. Internal Google documents revealed a key rationale was preventing rivals like Microsoft from acquiring DoubleClick and gaining control over crucial publisher relationships.
The acquisition of Admeld in 2011, a yield manager competing with Google’s sell-side tools, further consolidated Google’s position. While Google integrated some Admeld features, it also shut down functionalities that could have benefited publishers using non-Google ad servers, removing a “key differentiator for DFP”.
The court found that Google engaged in unlawful tying by conditioning effective access to its powerful AdX exchange (the tying product) on the use of its DFP ad server (the tied product). Specifically, Google restricted the ability of AdX to submit real-time bids – essential for publishers to maximise revenue – only to publishers using DFP.
Given that AdX provides access to the unique and vast pool of advertisers using AdWords (especially small and medium-sized businesses attracted via Google Search), publishers felt compelled to use DFP to avoid losing significant revenue, effectively locking them into Google’s sell-side stack.
This tie, the court ruled, stifled competition in the publisher ad server market, contributing significantly to DFP maintaining over 90% market share and causing rival ad servers to struggle or exit the market. The court stated the tie violated both Section 1 (as a per se illegal tying arrangement) and Section 2 (as conduct maintaining monopoly power) of the Sherman Act.
Beyond the tie, Google allegedly implemented further anticompetitive practices:
- First Look: This DFP feature gave AdX an initial opportunity to buy impressions, often before rival exchanges could bid, even if rivals were willing to pay more, disadvantaging publishers and competing exchanges.
- Last Look: Even after the rise of “header bidding” (an industry workaround allowing publishers to solicit bids from multiple exchanges simultaneously), AdX retained an advantage. Last Look allowed AdX to see the highest bid from competing exchanges before placing its own final bid, enabling it to win auctions by bidding just slightly more, again depressing publisher revenue and hindering competitors.
- Sell-side dynamic revenue share: AdX adjusted its commission (“take rate”) on an impression-by-impression basis, lowering it on competitive bids (to help win auctions it might otherwise lose) and raising it on less competitive ones, using the informational advantage from Last Look to maintain an overall average take rate (around 20%) while disadvantaging rivals who couldn’t match this tactic.
- Unified pricing rules: While ostensibly introduced to create fairness when Last Look was removed, these rules primarily prohibited publishers from setting higher minimum prices (floors) for AdX compared to other exchanges. This removed a key tool publishers used to encourage revenue diversity and counter Google’s dominance, further cementing AdX’s position.
The court rejected Google’s defences, including its reliance on the “refusal to deal” doctrine and claims that its actions were merely procompetitive product design choices improving safety or efficiency. The court found Google’s justifications often pretextual or insufficient, concluding that the primary motivation was to “acquire and maintain market power.”
Internal documents frequently revealed Google employees recognising the anticompetitive nature and impact of these strategies.
Market definitions and monopoly power
Crucially, the court defined distinct relevant markets for (1) publisher ad servers for open-web display advertising and (2) ad exchanges for open-web display advertising, rejecting Google’s argument that the entire ad tech stack constituted a single, two-sided market.
It found these tools were not reasonably interchangeable from the perspective of their primary users (publishers). The geographic market for both was deemed worldwide.
In the publisher ad server market, DFP’s sustained market share of over 90%, combined with extremely high switching costs and barriers to entry, established monopoly power.
In the ad exchange market, AdX’s ability to maintain a durable, supracompetitive take rate (around 20%, often double that of rivals) despite market maturation, coupled with its market share (estimated around 54-65%, roughly nine times its nearest competitor) and high entry barriers, also demonstrated monopoly power.
The court dismissed the claim regarding advertiser ad networks, finding the proposed market definition flawed as it unduly excluded the publisher-facing side and didn’t account for advertiser substitution between open-web display and other ad formats like in-app or walled-garden ads.
Having established Google’s liability on two counts of monopolisation and one count of unlawful tying, the court will now move to determine the appropriate remedies. A briefing schedule and hearing date will be set for arguments on how to address these antitrust violations and potentially “restore competitive conditions.”
Lee-Anne Mulholland, Vice President, Regulatory Affairs at Google, commented: “We won half of this case and we will appeal the other half. The Court found that our advertiser tools and our acquisitions, such as DoubleClick, don’t harm competition.
“We disagree with the Court’s decision regarding our publisher tools. Publishers have many options and they choose Google because our ad tech tools are simple, affordable, and effective.”
(Photo by Christian Wiediger)
See also: Google enhances Android Studio with enterprise Gemini AI tools
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