Feds suggest breakup in looming Google advertising antitrust trial

ALEXANDRIA, Va. (CN) — The Justice Department previewed its proposed remedies for Google’s monopoly over the internet advertising industry during a scheduling conference on Friday, which would include a major breakup of the company’s advertising platform.

On April 17, U.S. District Judge Leonie Brinkema ruled Google held an illegal monopoly with its publisher ad server and ad exchange markets following a bench trial last September.

The Bill Clinton appointee’s ruling set up the second phase of the trial, where Brinkema will hear testimony from experts provided by the Justice Department and Google to determine how to make the advertising industry competitive again.

She scheduled that trial for Sept. 22. The parties will submit official remedy proposals on May 5, but provided an outline of their coming suggestions Friday morning.

Justice Department attorney Julie Wood argued that Brinkema should order the divestiture of Google’s ad server, known as DoubleClick for Publishers, which is the de facto platform for advertisers to manage their ads.

“It’s difficult to imagine a case more requiring a structural divestiture than this case,” Wood said, noting that 90% of advertisers use the product.

Google attorney Karen Dunn, of Paul Weiss, warned Brinkema that ordering a major breakup would be devastating to both the industry and the internet at large.

“The impacts would be seismic and in many cases devastating,” Dunn said.

The divestiture is necessary, Wood argued, to prevent Google from continuing to benefit from the fruits of its illegal monopoly.

She suggested a three-phase remedy that would take place over several years, starting with an order shifting the ad exchange, known as AdX, by allowing advertisers to “pre-bid” on ad impressions on publisher websites, rather than bidding in real time.

Second, Brinkema should begin divesting the ad server by selling off its “auction logic,” the system that determined whether an ad will be direct or indirect — direct ads are bought for specific publishers sites, while indirect ads allow publishers to auction the ad space — and make it open-source, Wood said.

That process would take up to three years, Wood added, but would allow rivals to make their products more competitive and match the level of quality Google was able to achieve via its monopoly.

Third, after Brinkema could assess the resulting market conditions, she could address any additional products that further Google’s advertising monopoly.

Brinkema asked Wood whether she could simply order the divestiture of Google’s ad exchange, as that seemed to be the “golden goose” that has both attracted the overwhelming majority of advertisers and locked them to the product.

Wood said that Google’s ad server is too large and would allow Google to maintain its monopoly. Targeting the ad exchange would only address Google’s past monopolistic conduct, rather than preventing any future conduct.

She said that, because 90% of publishers rely on the ad server, the court would be playing “whack-a-mole” when Google folds those customers into new products.

Dunn argued that Brinkema should, at most, adopt a remedy like the Justice Department’s first phase, specifically by ordering real-time pricing on the ad exchange be made available on rival ad markets.

That tailored remedy would address Brinkema’s concern regarding the tie between the ad exchange and the ad server that entrenched Google’s monopoly, Dunn said, without negatively impacting Google’s data security infrastructure.

She said that a divestiture would “throw into complete chaos” nearly every internet user’s data because of how integrated mobile applications, internet-connected televisions and open-web ads are with Google’s infrastructure.

“It’s not just that it’s not easy, it’s very likely completely impossible,” Dunn said. “It would come with extreme devastation for everyone on the internet.”

Brinkema asked Wood whether she should consider the looming outcome in the ongoing remedy trial in Washington over Google’s internet search monopoly, which she noted could have an impact on the financial feasibility of the proposed breakup.

There, the Justice Department has urged Barack Obama-appointed U.S. District Judge Amit Mehta to break off Google’s Chrome browser, and potentially Android, to remedy the tech giant’s search monopoly.

Wood said there could be a “downstream effect” from the Washington case, where a remedy decision is expected to come in August, but it would not directly impact the Virginia case.

Before adjourning, Brinkema suggested the parties continue discussing their proposed remedies to find some common ground, particularly regarding the bidding on the ad exchange, as they move forward with discovery. She also recommended the parties consider whether a mediator could help them come to an agreement.

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