GOOGLE'S AD DOMINANCE COULD LEAD TO ANTITRUST PROBE, SAYS PROFESSOR
Internet search giant Google Inc. could be vulnerable to an antitrust case in the United States due to its dominant grip on the digital advertising market, says a Yale professor who suggests the company’s power is similar in other jurisdictions, including Canada.
Fiona Scott Morton, who previously served as deputy assistant attorney general for economics in the antitrust division of the U.S. Department of Justice under former president Barack Obama, wrote a paper this month that suggests Google has used its strength in Internet search to exert control over the digital advertising market — to the detriment of consumers, advertisers and publishers.
Among the report’s conclusions is that “virtually all roads lead through Google” in digital advertising, where the tech giant performs every function that connects advertisers to publishers.
The tech giant’s strategy has made it “nearly impossible” for publishers and advertisers to do business with each other except through Google, the report says.
As a result, advertisers pay more than they would in a competitive environment, the cost of goods rises, and Google takes a large chunk of the money from advertising, meaning producers can’t produce as much or as high quality content.
“That’s a significant harm,” Scott Morton told the Post. “There’s not as much content on the internet as there would be in a competitive market.”
Her paper uses findings from a preliminary report by the Competition and Markets Authority in the U.K., which is to be finalized in July. According
to the report, Google’s market share of tools used by publishers to serve up advertisements is at least 90 per cent in the U.K. In addition, advertisers use demand-side platforms to bid for ads, and Google’s market share there is between 50 and 70 per cent. When it comes to supply-side platform used by publishers to accept bids, Google is there again, with a market share of between 40 and 60 per cent.
Scott Morton said the figures are relevant for the United States and other places Google operates, such as Canada. “We know Google is a popular search engine in the U.S. and Canada (and there’s) no reason to believe it would be different,” she told the Post.
Her paper, published with co-author David C. Dinielli and titled Roadmap for a Digital Advertising Monopolization Case Against Google, comes on the heels of a news report that U.S. authorities are ramping up probes into the search engine giant.
The Wall Street Journal reported last week the Justice Department and a group of state attorneys are preparing to file antitrust lawsuits against Google and parent company Alphabet Inc. The Journal said the DOJ could act as soon as this summer.
In Canada, the head of Canada’s competition watchdog, Matthew Boswell, has pledged to crack down on anticompetitive behaviour in the digital economy.
Last fall, the Competition Bureau called on market participants to inform the watchdog of conduct that may be harmful to competition.
The bureau said it was examining “concerns that certain core digital markets, like online search, social media, display advertising and online marketplaces, have become increasingly concentrated, to the detriment of consumers and businesses.”
This isn’t the first time the Canadian watchdog has looked into such matters.
In April of 2016, the Competition Bureau discontinued what it described as an in-depth investigation into allegations that Google engaged in anticompetitive business practices related to online search, search advertising and display advertising services in this country.
The investigation concluded that Google had used anticompetitive clauses in some terms and conditions in a way that was “intended to exclude rivals and negatively affected advertisers.” But the Bureau said the tech giant had “removed these clauses and … provided a commitment to the Commissioner not to reintroduce them (or others which have the same effect) for a period of five years.”
In that investigation, the bureau did not find sufficient evidence that Google engaged in any other conduct for an anticompetitive purpose, or that its practices resulted in a substantial lessening or prevention of competition in any relevant market.
Melanie Aitken, who was Commissioner of Canada’s Competition Bureau from 2009 to 2012, said the digital economy is clearly in the sights of Canada’s competition watchdog.
“They’ve made this a real focus for themselves,” she said from Washington, where she works as a partner at Toronto-based law firm Bennett Jones LLP.
Aitken noted that investigating suspected anticompetitive behaviours such as abuse of market dominance is challenging in the tech sector because so much is new, and it is constantly evolving, making such probes particularly tough for smaller regulators with limited resources.