Google faces strong EU-US alignment on adtech breakup, but uncharted waters lie ahead

The world’s leading antitrust agencies are both seeking to force a partial sale of Google’s ad business, in a move that will please advocates of Big Tech breakup. But the path to divestiture in the EU is untested and fraught.

Today, the European Commission broke new ground in saying that Google may need to sell off one of its businesses to address conflicts of interest in the world of online advertising. And it did so unusually early in the investigation.

Google is “dominant” throughout the adtech stack, according to the commission.

It has market-leading ad-buying tools serving advertisers, Google Ads and DV360; it has the most popular ad auction where online ad space is hawked, AdX; and its website-facing ad server, DoubleClick for Publishers, or DFP, is pre-eminent.

EU commissioner Margrethe Vestager said the adtech sector was incredibly complex, especially conducive to abuses, and riven with conflicts of interest. A divestment of certain Google businesses — the commission seemed to suggest a bundle of DFP and AdX, or Google Ads and DV360 — may be the only solution.

That is what is being explicitly sought by the US Department of Justice at federal court in Virginia. Google has described that solution as extreme and that its case is not comparable to previous US break-ups of oil or telecom monopolies.

In the EU, such a move would be exceptional, and the commission knows it. Vestager was careful to say the probe was ongoing but that she stressed divestiture was her preferred solution. Monitoring softer solutions — such as promises to change behavior or separate oversight of a business unit — would be too difficult.

She pointed to two other cases — neither of which was fought hard to the courts — that gave limited precedent for today’s step. By flagging such an option at the stage of the formal charge sheet, the commission is putting Google on notice, and thereby protecting its legal position if it comes to a fight.

Usually, the regulator keeps silent when it is still investigating, and even when it concludes a case it simply orders an end to the conduct, giving little guidance. The fact that Vestager was up on stage today, talking about “inherent conflicts of interest” and Google’s “pervasive” influence in the market should have other tech companies worried.

It reflects a sense within the enforcer that remedies in past tech cases — think Google Shopping or Google Android — have taken too long to implement, and have failed to have desired impact when they have kicked in. In what was perhaps the first example of change, a charge sheet to Apple from 2022 over its Apple Pay service also spelt out the commission’s intended solution.

Legally, the commission needs to prove that a divestment is the “only” possible solution and no lesser alternative is viable. It will be for Google to explain that it can reach the same goal by other means.

Dual-track

Making such an extraordinary move is easier for Vestager given she is in lock-step with enforcers in the US. With the Department of Justice also pursuing a divestment, both regulators being united behind a common outcome makes for a forceful narrative, whether before judges or in the court of public opinion.

Google will now face a strategic decision about how to play the two games in parallel. With the US litigation advancing at pace and the European case now distilled into formal charges that need fighting.

Google could keep the European case on the backburner and wait to see what comes out of the US courts, which are generally perceived as the greater threat to the company. Once there is a result there, they could offer the same to Vestager.

But offering up a divestment to the EU regulator before the US legal battle concludes could be risky. Ultimately, a US judge or jury may say it's not necessary over there, and if it had a ruling like that under its belt, Google could fancy its chances challenging any divestment order before an EU court.

Last look

The EU and US antitrust cases are also largely aligned in terms of what they pursue. Both focus on Google’s dominant presence throughout the so-called adtech “stack” and the conflicting interests that arise.

Today the commission said that since 2014 Google consistently favored AdX over rival auctions.

Techniques varied. For example, Google Ads, an important tool for advertisers, would allegedly work predominantly with AdX, helping it build volume while denying that to rivals.

Another wheeze apparently saw Google’s DFP give AdX an exclusive chance to outbid rival auctions. “Google's DFP was organizing a sealed bid auction, but was allowing Google's own participant in that auction, AdX, to open the sealed envelopes of all other rivals before placing its own bid,” remarked Vestager.

She said that Google’s conduct constantly morphed to avoid scrutiny while maintaining the self-preferencing in place: “Each time a practice was detected by the industry, Google subtly modified its behavior so as to make it more difficult to detect, but with the same objectives, with the same effects.”

There is also a striking overlap between the EU case and a French inquiry that ended in 2021 with a fine of 220 million euros ($240 million). There regulators found Google’s DFP had favored AdX, including by giving it a “last look” so it could win bids. Arguably, Google has already been fined for that behavior, at least for the French territory.

Google settled the inquiry, subject to a number of behavioral promises designed to reduce conflicts of interest, overseen by a trustee. Asked whether it could provide an assessment of the remedy’s success, the French competition authority declined to comment.

Today, Vestager also thanked Danish, Italian and Portuguese investigators for sharing insights with her enforcers. No doubt her team also drew on market studies by the UK and German competition authorities into online advertising.

The commission faces a serious challenge in landing a case that would be the most severe, structural intervention into one of the world’s top tech companies. But with support from around Europe and alignment with US colleagues, Vestager will be thinking this is her best shot.