Key Takeaways

  • Texas filed a lawsuit claiming Google is manipulating the digital advertising space
  • The move comes as Google already faces pressure for its search engine

The Texas attorney general said he is suing Google parent Alphabet on behalf of a coalition of states for allegedly manipulating the digital advertising market in violation of antitrust laws.

“This internet Goliath used its power to manipulate the market, destroy competition, and harm YOU, the consumer,” Texas Attorney General Ken Paxton said on Twitter.

Paxton accused Google of anticompetitive conduct, exclusionary practices, and deceptive misrepresentations, saying the company used its “monopolistic power” to control pricing and engage in market collusions to rig advertising auctions. 

The attorney general claimed Google has effectively eliminated its competition and “crowned itself the head of online advertising,” adding that the company is illegally profiting by taking away money from websites when it places ads on those web pages. 

Google depends on advertising for much of its profits. Parent company Alphabet reported digital advertising revenue of $37.1 billion for the third quarter of 2020.

“Attorney General Paxton’s ad tech claims are meritless, yet he’s gone ahead in spite of all the facts," a Google spokesperson told Investopedia, noting that digital ad prices and ad tech fees have fallen over the last decade, and that Google’s ad tech fees are lower than the industry average. "These are the hallmarks of a highly competitive industry," the spokesperson continued. "We will strongly defend ourselves from his baseless claims in court.”

Texas’ initial subpoena included more than 200 questions and demands for records, The Wall Street Journal reported. Many of the questions seemed designed to solicit evidence that Google engaged in anticompetitive behavior when building its powerful position.

Google’s ad-tech business buys and sells ads on sites across the web. The company owns the dominant tool in the chain between online publishers and advertisers, giving it power over the monetization of digital content. Google has argued that the ad-tech industry is competitive and that its mergers in the space were meant to improve customers’ experience.

Publishers and advertisers often use multiple technologies simultaneously, with the average large publisher using six different platforms to sell ads on its site. Google said it builds its technologies to be interoperable with over 700 rival platforms for advertisers and 80 rival platforms for publishers.

Nonetheless, many publishers and competitors have accused Google of using its tools in anticompetitive ways.

Other Issues

The lawsuit comes after the Justice Department and a number of states already brought antitrust claims against Google, focusing on its search business.

However, Google isn’t the only tech company in the smoke. Last week, Facebook was sued by the Federal Trade Commission and a coalition of 48 state attorneys general who demanded the unwinding of its acquisitions of Instagram and WhatsApp, claiming the deals made it harder for new entrants to gain scale.

Moreover, tech giants like Facebook and Google have also faced backlash overseas. The European Commission advanced two proposals targeted Big Tech earlier this week, while the U.K. announced that tech giants could be fined up to £18 million ($24 million) or 10% of their annual global turnover if they don’t remove illegal content quickly.