The Corner Newsletter: March 01 , 2024
Welcome to The Corner. In this issue, we preview Google’s September trial, at which the Department of Justice will lay out its antitrust case against the tech giant for its dominance over the digital advertising, or ad tech, market.
Countdown to the Google Ad Tech Trial: A Guide for Journalists and the Public
Karina Montoya
Last week at a pre-trial hearing, Judge Leonie Brinkema set the terms for the jury trial at which the Department of Justice (DOJ) will present its antitrust case against Google for its control over the core advertising technologies (“ad tech”) that undergird today’s dominant digital business models. The judge’s comments, along with other recent court filings, make clear the Google ad tech trial, to begin in September, will be one of the most complex of the internet era.
The hearing also underscored how this case will likely prove pivotal for the future of journalism and the news media market. Indeed, it took place amidst recent headlines highlighting the extreme and growing crisis in journalism due largely to Google’s monopoly over digital advertising.
In the hearing, which took place in a federal court in Alexandria, Virginia, Judge Brinkema said she will allow the parties to present a tutorial on the ad tech market, given its complexity; that disputes between the parties about posting exhibit trials for the public record will not interrupt the trial’s development – unlike in the Google Search trial in Washington, D.C.; and that she intends to make sure the general public has full access to the trial.
Most jurors and other members of the general public know little if anything about how the online advertising market works, so a detailed introduction to the industry will likely prove key to the DOJ’s ability to make its case. But agreeing with Google on what a “fair” explanation entails will likely prove challenging for the DOJ, especially when Google has demonstrated it wants to keep as much market and business information as possible away from the public eye. In fact, recent filings show that Google is already battling the DOJ on requests to disclose hundreds of documents that Google’s testifying experts used to form opinions about the case.
Some facts are undeniable. Ad tech tools have become the backbone that connects advertisers and news publishers on the web. This market is made up three products: publisher ad servers (for publishers to manage their ad spaces), ad buying tools (for small and large advertisers to buy ads), and ad exchanges, where the first two meet to place a series of bids that ultimately land in ads being shown to users. Today, Google controls most of the market share in the entire supply chain:
DOJ depicts Google’s dominance in each product market of the ad tech stack that connects publishers with advertisers. (Source: DOJ complaint)
This concentration of power and control matters: the ad tech industry is worth $300 billion just in the U.S. But telling the story won’t be easy. It is an industry in which decisions about when and where ads are placed are controlled largely by algorithms, and where there is an almost complete lack of transparency on platforms’ fees and pricing. The DOJ will need to simplify that black box and get to the heart of how Google conquered this market on the backs of news media: by manipulating ad prices in ways that allowed Google to siphon ad revenues away from news and by eliminating ad tech competitors that could have brought more revenues for news rooms.
Drilling down on examples laid out in the complaint will also be key, such as when, in 2017, Google shifted $200 million of ad spend away from news publishers using ad exchanges competing with Google. To put it in perspective, if one the largest philanthropic programs supporting journalism today were to exhaust its $500-million pledge in five years, back then it would have only put back half.
Globally, Google’s monopoly over the ad tech market has recently come under more widespread legal scrutiny. In August 2021, the French Competition Authority hit Google with a fine for anticompetitive practices in this market — the only ruling Google has not disputed in Europe. The head of the regulator said it was the hardest case she had been involved in. In June 2023, the European Commission charged Google with basically the same antitrust violations that the DOJ did for its case. This week, 32 European news publishers sued Google for the same practices, seeking damages of about €2.1 billion.
But the DOJ’s lawsuit is the most comprehensive so far. During six weeks, the DOJ will have to swiftly and effectively cover about 15 years of Google’s anticompetitive practices, try to open the black box of ad tech algorithms, and demonstrate that breaking up Google’s ad business is the right path to redress the harms to fair competition. In addition, there will be the burden of dealing with Google’s contentious attitude toward public access to information — a true acid test for antitrust enforcement in the modern era.
Center for Journalism & Liberty Hosted “Value of News” Webinar with Economists, Scholars
Earlier this week, the Center for Journalism and Liberty at Open Markets Institute hosted “The Value of News,” a webinar that convened experts to discuss the fair value of news content used on digital platforms such as Google and Facebook amid the rapid decline of journalism. CJL Director and moderator Dr. Courtney Radsch kicked off the webinar by pointing out the current method for valuing the news used by lawmakers and promoted by Big Tech platforms “disregards the way news content improves the platforms for users, even if they don’t click on a headline.” Participants said their research show that news content, even without click-through, is far more valuable to online platforms than the companies admit.
Behavioral economics researcher Alexis Johann spoke about his findings that internet users in Switzerland are more satisfied with online search results when those results include news content, indicating users trust Google search results owing to the credible news sources that make up a part of those results. Their study estimates that 40% of the advertising revenue from informational searches on Google should go to news publishers. Media scholar Dr. Anya Schiffrin estimates that fair compensation for publishers “is in the billions, not millions” on an annual basis; this is a figure far larger than the $100 to $200 million news publishers in Australia and Canada have negotiated with tech platforms. Economist Dr. Cristina Caffarra, who was involved in the development of Australia’s bargaining code between publishers and platforms, observed that legally binding bargaining requirements between news publishers and platforms end up giving the platforms too much power. Ermela Hoxha, who leads strategic partnerships at The Guardian, emphasized how the power imbalance is perpetuated because the platforms don’t share their data on how users engage with content. Watch the full webinar here.
Federal Trade Commission Sues to Block Mega-Merger Between Kroger and Albertsons
The Federal Trade Commission this week sued to block the proposed $25 billion merger between Kroger and Albertsons in what would be the country’s largest-ever supermarket merger. Open Markets Institute’s food program manager Claire Kelloway applauded the FTC’s move, which comes in the wake of similar antitrust lawsuits by the Colorado and Washington state attorneys general. “Critically, this case recognizes the harm of grocery mergers on labor markets and organized worker power, particularly highlighting how this deal would undermine unions' ability to negotiate fair collective bargaining agreements,” Kelloway said. “The suit also rightfully calls out the many ways Kroger and Albertsons proposed spin offs to C&S Wholesale would not have preserved fair competition.” Read Kelloway’s research and reporting on food and grocery consolidation and their impact on food quality, prices, jobs, and wages here. Open Markets’ statement was covered by grocery shopping website Coupons in the News.
📝 WHAT WE'VE BEEN UP TO:
Open Markets Institute’s legal director Sandeep Vaheesan and policy counsel Tara Pincock coauthored an article for The New Republic on a case before the Supreme Court that would determine whether the government can regulate Big Tech platforms as common carriers. The Open Markets Institute filed an amicus brief in NetChoice v. Paxton in support of Texas and Florida, which brought the case against NetChoice, a trade association representing platforms such as Google, Facebook, and Twitter. “Stripping government of the authority to enact common carrier rules for digital platforms would further aggrandize judicial and oligarchic power in our country,” the authors wrote.
The New York Times quoted Open Markets’ Europe director Max von Thun on the multiyear partnership between Microsoft and European AI startup Mistral. “If you want a really competitive AI ecosystem, you don’t want a challenger to OpenAI to be reliant on Microsoft infrastructure and investment,” von Thun said. Reuters also quoted von Thun on the deal as saying, "This announcement exposes as a farce Mistral’s efforts to derail the AI Act based on its status as a supposed ‘European champion.’"
Speaking at a panel discussion at the EU parliament in February on Big Tech’s dominance over the emerging AI space, Open Markets Institute’s executive director Barry Lynn called for regulators to focus on harms to democracy and human liberty. Of paramount importance is to limit Big Tech “ability to engage in manipulative, distortive, discriminatory behavior,” Lynn said. Euractiv covered Lynn’s statements on the panel.
OMI senior reporter Karina Montoya published an explainer in Tech Policy Press on Google’s trial, to start in September, over its monopolization of the digital advertising industry. “The Department of Justice, now joined by 17 states, is suing Google for maintaining an illegal monopoly over digital advertising technologies, also known as ‘ad tech,’” Montoya writes. “Such ad tech products make up the backbone that connects advertisers and news publishers on the web, driving an industry worth almost $300 billion in the U.S., where Google controls most of the tools to sell, buy, and load online ads.”
Open Markets’ legal director Sandeep Vaheesan and senior legal analyst Daniel Hanley wrote an article for OnLabor on the status of noncompete clauses around the country. Several states have moved to ban the employment clauses, which prevent workers from leaving employers to work with competitors, in the wake of a proposed ban by the FTC. “The fight against non-compete clauses from the U.S. labor market made huge strides in 2023,” the authors wrote. “Having made targeting non-competes a priority, three federal agencies appear poised to abolish these contracts this year, while many state legislatures are keen to free workers from these contracts too.”
OMI legal director Sandeep Vaheesan released a statement criticizing the proposed merger between two of the U.S.’s largest credit card companies, Capital One and Discover, and calling for regulatory action. “One of the largest credit card issuers buying up another leading card issuer and operator of a major credit card network looks suspicious on both antitrust and public interest grounds.” Vaheesan said. “Instead of freely allowing big banks and financial services companies to get larger — leaving fewer options for consumers and increasing financial fragility — antitrust enforcers and banking regulators need to carefully investigate this merger and, if it is as problematic as it seems to be, move to block it.”
Open Markets’ Europe director Max von Thun was quoted in The Guardian pointing out that a fine levied by EU regulators on Apple for unfair practices in the music streaming market is insufficient. “It’s far too small to give Apple any meaningful incentive to play by the rules — €500m is what it earns in revenue in roughly half a day,” says von Thun.
The American Prospect mentioned Open Markets Institute in an article in support of Beth Baltzan, an adviser to the U.S. Trade Representative’s office and a former senior fellow at OMI, who is being targeted by Big Tech firms and the Wall Street Journal’s editorial page.
🔊 ANTI-MONOPOLY RISING:
The Department of Justice opened an antitrust probe into UnitedHealth, the largest insurer in the United States, focused on the vast and growing network of provider groups it has acquired after merging with Optum in 2011. (Wall Street Journal)
A group of more than 30 media organizations from over a dozen European nations have sued Google in the Netherlands over the giant’s digital advertising monopoly, which plaintiffs say has starved them of billions of dollars in potential revenue. (Politico)
The Securities and Exchange Commission is investigating OpenAI and its CEO Sam Altman over concerns the latter misled investors. Reports indicate the probe is likely related to OpenAI’s turmoil late last year, which saw Altman temporarily dismissed and then reinstated as CEO after the prior board also accused him of making a series of misleading statements. (Wall Street Journal)
News organizations The Intercept, AlterNet, and RawStory filed a lawsuit against OpenAI over allegations the company is violating the Digital Millennium Copyright Act by failing to properly attribute information used to train its products. (Bloomberg Law)
Regulators in the European Commission are investigating whether Microsoft has violated antitrust regulations by suppressing competition in security software and restricting customers’ access to third-party products. (The Information)
📈 VITAL STAT:
$93 Million
The amount of a settlement pharma giant Pfizer has agreed to pay to wholesale drug distributors to address antitrust claims that the company conspired with India's Ranbaxy Laboratories to delay sales of cheaper generics for the cholesterol drug Lipitor. Lipitor, first introduced in 1997, garnered more than $130 billion in sales during its first 14 years on the market. (Reuters)
📚 WHAT WE'RE READING:
The War Below: Lithium, Copper, and the Global Battle to Power Our Lives — Senior Reuters journalist Ernest Scheyder takes a deep dive into the intense geopolitical maneuvering over supplies of critical minerals necessary to fuel the green transition and enable continued technological innovation. His sweeping account examines the role policymakers, environmental activists, and large corporations are set to play in the unfolding battle to control where and how the resources to build the future will be extracted and processed.
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