Welcome to The Corner. In this issue, we report from the Virginia courthouse where the DOJ is laying out its case against Google for monopolization of ad tech. And we look at Europe’s fascinating debate on how to rebuild its economy.

Google ad tech trial reveals trapped publishers, crushed rivals, and self-dealing

Karina Montoya

The Department of Justice and Google met again at a federal court in Virginia on Monday, kicking off a historic trial that challenges Google’s dominance over the market of digital advertising technologies, or ad tech. The case focuses narrowly on how Google intermediates sales of open display ads — sold primarily on news websites.  

For the next four weeks, federal judge Leonie Brinkema will hear testimony from news publishers, ad tech rivals, and industry experts on allegations that Google engaged in systematic anticompetitive practices to tighten its grip on digital advertising, while diverting ad spending away from those who challenged its power. The trial began barely more than a month after the judge in a separate DOJ lawsuit, focused on the search market, found Google to be an “illegal monopoly.”

The DOJ set the tone in Monday’s opening statements, describing Google’s ad tech operations as a “trifecta of monopolies.” The presentation included a graphic that detailed how Google’s market share in each side of the ad sales process is well over 80 percent, including an ad exchange in the middle that clears around 50 percent of ad views transacted in the U.S. and globally.

Google countered saying that open display is not a “real market,” and it claimed that ads on mobile apps, social media, streaming TV, and game consoles are interchangeable and substitutable products. The corporation’s main defense is that its ad tech products make digital ads sales more efficient, and it has not hurt publishers.

The DOJ moved to quickly challenge Google’s overall defense. In the first three days, prosecutors presented a parade of witnesses who detailed how difficult it is to escape their reliance on Google, how rival ad exchanges can’t grow, and how today’s market structure continually reinforces Google’s dominance.

Thus far, the DOJ has focused especially closely on how Google’s practices harm news publishers in the years since it bought DoubleClick in 2008. Former News Corp vice president of data and ad tech, Stephanie Layser, and Gannett’s vice president of revenue operations, Tim Wolfe, told the court similar accounts of their experience: no matter how many rivalsthey connect with to cap their reliance on Google, that corporation’s ad exchange, AdX, ends up clearing most of their ad sales.

Both publishers detailed how AdX — which Google built after its acquisition of DoubleClick — is the only way to access Google’s full network of advertisers in real-time ad auctions. Wolfe revealed that 50 percent of Gannett’s programmatic ad sales come from AdX, for which the publisher pays $10 million in fees a year. Layer said News Corp tried to switch ad servers in 2017, at a time when the publisher earned up to 60 percent of its ad traffic from AdX. NewsCorp ultimately abandoned the plan out of fear that it would not be able to replace the revenue from outside of Google’s system.

One consequence of Google’s AdX clearing most online ad sales is that it prevents other ad exchanges from gaining scale, expert witness Ramamoorthi Ravi explained. Ravi, professor of operations research and computer science at Carnegie Mellon, walked the judge through the different ways Google’s self-preferencing tactics hurt publishers and stifle competition. Google’s ad tech features “are not designed to work for the benefit of the customers and only advantage Google,” he said.

One example Ravi used, which is also in the DOJ complaint, goes back a decade to when Google’s AdX had “first look” privilege on its ad server. This meant AdX was by default the first buyer to bid on an ad auction. At the time, publishers were working with other ad exchanges to get higher prices per auction. But the “first look” feature allowed Google to game the auctions by paying only $0.01 above the floor price for any ad. This allowed Google to win more than half the auctions, and prevented publishers from selling their space in a truly competitive auction to other buyers.

If Google is found liable for breaking antitrust law in this market, Judge Brinkema will also have to rule — perhaps more immediately than in the search antitrust case — about one key remedy the DOJ is proposing: to break up Google’s ad tech business. Alongside other injunctive relief on specific anticompetitive practices, this would likely help to unleash a transformation of a market fundamental for funding journalism.

Karina Montoya, senior reporter at the Center for Journalism & Liberty, has been reporting on the Google ad tech case directly from the courthouse. Follow new developments here and sign up here to receive updates directly in your inbox.

Open Markets Convenes Briefing in EU Parliament to Discuss Competition Policy

Earlier this week, Open Markets helped organize a cross-party briefing in the European Parliament to discuss the next European Commission’s approach to competition policy. Hosted by René Repasi MEP, a leading figure in the European competition policy debate, the meeting brought together experts, advocates, and members of the European Parliament to discuss the recent report on the state of Europe’s competitiveness drafted by former European Central Bank president Mario Draghi; Europe’s role in taking on the tech monopolies; the threat that economic concentration poses to resilience and security; and the revolving door between the private sector and the EU’s competition agency. In his report, Draghi called for several reforms that echoed policies Open Markets Institute has long advocated, such as taking immediate action to address Europe’s dependence on concentrated supply chains, particularly in China; aligning the EU’s competition and industrial policies; and moving beyond a narrow focus on price in competition enforcement to account for factors including innovation and resilience. 

At a separate event on Europe’s digital sovereignty hosted by the European People’s Party, Open Markets senior fellow Johnny Ryan spoke about the need for robust data protection enforcement to rein in dominant tech giants. Ryan explained how these tech firms entrench their dominance by breaking European laws, and argued that effective enforcement will create the space for European innovators to emerge.

OMI Legal Director Sandeep Vaheesan’s Book on Publicly Owned Power Sector Coming Soon

Sandeep Vaheesan, the legal director at the Open Markets Institute, will publish his first book Democracy in Power: A History of Electrification in the United States on December 3. Published by University of Chicago Press, the book narrates the history of how ordinary citizens wrested control of the U.S. power sector from Wall Street, including through institutions like the Tennessee Valley Authority and rural electric cooperatives. Democracy in Power traces the rise of publicly governed utilities in the 20th century electrification of America and offers a blueprint for a decarbonized future. Vaheesan has written extensively about publicly owned power, including for The New Republic, Jacobin, and Democracy Journal. Pre-order Democracy in Power here.

Judge Halts Launch of Venu Sports in Closely Watched Live TV Monopoly Trial

A federal judge has stopped the launch of a sports streaming service called Venu Sports through a preliminary injunction. Open Markets joined partner organizations in filing an amicus brief on behalf of Fubo, which was cited by the judge in her opinion blocking the service’s launch. The joint venture — which is owned by Disney/ESPN, Warner Bros. Discovery, and Fox — would have controlled as much as 80 percent of the national market for live sports broadcasts, which underpin the traditional linear, as opposed to streaming, television industry. OMI reporter Austin Ahlman wrote about the stakes of the hearing, based on a complaint by streaming service Fubo, in the Corner newsletter and Common Dreams, and he live-tweeted the hearing’s major developments on X. “With that market power, these giants could destroy what remains of the cable television market and stifle competition in the market for live programmatic streaming services before it fully gets off the ground,” he wrote. 

📝 WHAT WE'VE BEEN UP TO:

• The New York Times quoted Open Markets Institute’s legal director Sandeep Vaheesan in an article on the DOJ’s antitrust lawsuit against RealPage, the real estate software company using algorithms to help landlords raise rents across the United States. “We’ve had multiple years of high growth in housing prices,” Vaheesan was quoted as saying. “There’s no single factor accounting for the rise in rents, but I think RealPage is an underrated contributor.” OMI also released a statement on the RealPage lawsuit, saying, “This lawsuit is a signal to businesses that they cannot hide behind algorithms or AI when colluding with rivals. Price fixing is price fixing regardless of the tools used.” The statement was picked up by The Register, a global tech publication.
   

• Center for Journalism & Liberty director Courtney Radsch published an article in the Washington Monthly calling on policymakers to enforce must-carry requirements to get Google to pay news outlets for using their content. “The United States and many countries worldwide already have must-carry provisions for other communication platforms, such as local broadcast requirements on cable or local language requirements for media in Canada and many European countries,” Radsch writes.
   

• Open Markets Institute’s policy counsel Tara Pincock wrote an article in Project Syndicate reflecting on last month’s verdict by a federal district court declaring that Google maintains a monopoly in online search. “As a former antitrust enforcer who spent years investigating and litigating against Google, I believe Mehta’s well-reasoned decision has an excellent chance of surviving on appeal,” Pincock wrote. “While simply holding a monopoly is not inherently illegal, wielding that power to stifle competition – as Google did – is.”
   

• Open Markets and CJL senior reporter Karina Montoya appeared on a Tech Policy Press podcast to discuss the importance of the Google ad tech trial and the impact it will have on news publishers and journalism.
   

• Montoya published an article for Common Dreams decrying the $250 million deal Google struck with California to fund local journalism, writing, “Let’s be clear: Google is the sole winner of this deal, and this should be an example of what not to do to redress power and financial imbalances between news media and large digital platforms.” Open Markets Institute and the Center for Journalism and Liberty also released a statement on the deal, calling it a “shameful and dangerous betrayal of the America’s free press by the state of California.”  
   

• Open Markets Institute’s Europe director Max von Thun and research fellow Claire Lavin coauthored an article for antitrust publication Concurrences on the recent decision by the European Court of Justice to significantly curtail the European Commission's "Article 22" powers, which allow it to investigate mergers that fall below the EU Merger Regulation's (EUMR) thresholds upon request by member states. The article explores ways the EUMR could be amended, including a new threshold based on transaction value or following the UK's lead in introducing an "acquirer-focused"threshold.
   

• OMI’s chief economist Brian Callaci coauthored a paper on the nationwide impact of the Washington State attorney general’s 2018-2020 enforcement campaign against no-poach clauses in franchising contracts, which prohibited worker movement across locations within a chain. The paper, which will see final publication in the Review of Economics and Statistics, concluded that franchise workers increased their earnings by an estimated four to six percent when they were not bound by no-poach clauses.
   

• Legal director Sandeep Vaheesan joined the Legal Talk Network podcast to condemn an audacious decision by an activist judge in the Northern District of Texas, Ada Brown, who last month struck down the FTC’s landmark rule banning non-compete clauses in employment contracts. “There are some questions over whether she can issue a nationwide injunction as a district judge, but that is what she aims to do,” Vaheesan explained. Open Markets also released a statement on the ruling, saying, “In a clash between powerful corporations and ordinary people, Judge Brown chose to protect the corporations.” 
   

• Europe director Max von Thun offered his thoughts on the mixed legacy of outgoing EU competition chief Margrethe Vestager to The Register. "While Big Tech and its allies have falsely tried to paint her anti-business, others have criticized her for not going far enough to rein in tech monopolies," he said, noting that while Vestager could have done more to ensure fair competition, she was for many years the only policymaker on the global stage trying to check the dominance of Big Tech.
   

• Wired quoted von Thun on another development in Europe, the launch of a rival to Apple’s app store by Epic Games, which von Thun noted had “a good chance at taking a chunky bite out of Apple’s highly lucrative app store business.”
   

• Reuters quoted Open Markets’ food program manager Claire Kelloway in an article on the impact on labor from the proposed merger between Kroger and Albertsons proposed merger. Commenting on the FTC’s argument that the deal should be blocked because it dampens bargaining for wages and benefits, Kelloway said the case could be decided on grocery prices alone, but a ruling on the FTC's labor claims “would definitely open up a lot of new potential areas for thinking about how mergers harm labor markets," she said.
   

• Chief economist Brian Callaci was quoted by Marketplace in a story on California’s minimum wage increase to $20, which has resulted in a burst of 20,000 new fast food jobs in the state. “We didn’t really see negative employment effects. California kept adding jobs,” he told the outlet.
   

• Common Dreams cited tweets by OMI’s senior legal analyst Daniel Hanley that expressed skepticism over the $36 billion merger between snack food makers Mars and Kellanova passing regulatory muster. 
   

• The Colorado Sun and New Hampshire local paper Valley News cited Open Market’s Institute’s groundbreaking report on private equity’s growing capture of the childcare industry, published in June in partnership with National Women’s Law Center.

  
  

  🔊 ANTI-MONOPOLY RISING: 

• The European Commission upheld a $2.7 billion fine against Google, bringing to a close a more than seven-year-longdispute over anticompetitive practices that boosted the search giant’s online shopping tools over those of its rivals. (Reuters)
   

• Microchip giant Nvidia is being probed by the Department of Justice for its dominance of the AI chip market, in which it has more than an 80% market share. The DOJ has asked for in-depth information on the corporation’s partnerships and sales practices. Nvidia is also facing scrutiny from regulators in Europe and East Asia. (Wall Street Journal)
   

• The Department of Labor, Federal Trade Commission, National Labor Relations Board, and Department of Justice’s Antitrust Division signed a sweeping memorandum of understanding that seeks to enhance coordination between the various agencies on matters relating to regulating and strengthening labor markets. (ArentFox Schiff LLP)
   

• In a unanimous bipartisan vote, the Federal Trade Commission formally banned corporations from knowingly benefitting from fake reviews on internet storefronts. (CNBC)

  📈 VITAL STAT:

$295 vs. $5,000+

The price consumers can now pay for an FDA-approved set of Apple Airpods hearing aids in comparison to the price they used to pay before the Food and Drug Administration allowed hearing aids to be sold over-the-counter without a prescription, a move that effectively broke up a cartel of hearing aid companies that maintained the prohibitive pricing. (CBS News)

📚 WHAT WE'RE READING:

Character Limit: How Elon Musk Destroyed Twitter — New York Times tech reporters Kate Conger and Ryan Mac dive deep into Elon Musk’s takeover of the platform formerly known as Twitter, highlighting the way his impulses and political views are shaping and gradually diminishing the once-dominant communications platform as they go. By pulling back the curtain on the impetus for Musk’s erratic decisions and the effects those decisions are having on public discourse, Conger and Mac illustrate the dangers of allowing billionaires to take sole control of essential pieces of the web.