Federal Court Rules Google Holds Illegal Monopoly in Ad Sales

What Happened?

A decision by U.S. District Judge, Leonie M. Brinkema, of the U.S. District Court for the Eastern District of Virginia held that Google’s advertising unit is an illegal monopoly. Marking the second of two Justice Department antitrust cases against Google.

Judge Brinkema is now set to decide what measures to impose on Google to restore competition to the market. Which could mean forcing the company to divest all or part of its highly profitable advertising technology.

Google has said it plans to appeal the ruling. ‘We disagree with the Court's decision regarding our publisher tools,’ said Lee-Anne Mulholland, Google's vice president of regulatory affairs. ‘Publishers have many options and they choose Google because our ad tech tools are simple, affordable and effective.’

Why it Matters

The Virginia court ruling focused on the marketing apparatus Google has spent the past two decades building around its search engine. As well as other widely used products and services, including its Chrome browser, YouTube video site and digital maps. Judge Brinkema’s decision also held that Google has been abusing its power to stifle competition, to the detriment of online publishers forced to rely on its ad network and pricing for revenue.

Publisher ad servers are platforms used by websites to store and manage their digital ad inventory. Along with ad exchanges, this technology lets news publishers and online content providers make money by selling ads. Those funds are the ‘lifeblood’ of the internet, Judge Brinkema wrote.

Google’s ad system arose from a series of acquisitions, starting with Google’s $3.2 billion purchase of online ad specialist DoubleClick in 2008. The U.S. government approved the deals at the time. They later realized they had given Google a platform to manipulate the prices for a wide range of websites dependent on advertising for revenue that also provide a vital marketing service to consumers.

According to the Washington Post, Google is already facing a potential breakup of the company due to a federal search monopoly case. In that landmark decision, Judge Amit P. Mehta, of the U.S. District Court for the District of Columbia, ruled in August that Google operated its search business as an illegal monopoly. 

Thus far, the impact on Google has been minimal, with shares of the technology giant down one point six percent as of mid-day after the Virginia court ruling. 

How it Affects You

According to Reuters, Michael Ashley Schulman, chief investment officer at Running Point Capital, called the ruling a ‘major inflection point’ for Google and the tech sector. Underscoring U.S. courts' willingness to entertain ‘aggressive structural remedies’ in antitrust cases.

‘This could increase regulatory risk premiums across major tech stocks, especially those like Amazon and Meta that operate similarly integrated ecosystems,’ Mr. Schulman added.