Google Girds for Second Antitrust Battle as DOJ Targets Its Ads Business

Google is now in battle mode. It has hired high-powered lawyers, including a former litigator from the Justice Department’s antitrust division, to build a defense as it tries to protect its position in the search, mobile-software, online-video and ad-tech businesses that helped make it a $1.2 trillion company.

Those four self-reinforcing pillars have helped create the world’s largest digital-ad business, bigger than that of rivals such as

Meta Platforms Inc.

and

Microsoft Corp.

The Justice Department’s lawsuit Tuesday, filed in federal court, requested a jury trial over its claims that Google has engaged in anticompetitive practices in digital-ad brokering. The government is seeking remedies including a breakup of the business, which it called an “illegal monopoly.”

Google said Tuesday the latest lawsuit “attempts to pick winners and losers in the highly competitive advertising-technology sector.”

In 2020, the Justice Department sued Google for allegedly maintaining a monopoly in online search and related advertising, a case that at the time marked a new high point in antitrust actions targeted at the tech sector. That case is scheduled to go to trial in September.

In addition, Google is facing a separate lawsuit brought by state attorneys general that focused on similar issues as the latest Justice Department suit.

“DOJ is doubling down on a flawed argument that would slow innovation, raise advertising fees, and make it harder for thousands of small businesses and publishers to grow,” a Google spokesman said.

Google has long maintained that its ad-tech tools help fund the open web, which in turn creates more content for its search engine to index. That connection makes the business a key part of its larger $209 billion ad operations, even though Google executives have at times played down the significance of the revenue it generates.

In an effort to avert the latest lawsuit, Google last year proposed splitting off parts of its ad-tech business into a new company under the umbrella of parent

Alphabet Inc.

GOOG -2.50%

Its willingness to offer concessions reflected the company’s evolving strategy for handling growing legal and regulatory pressure.

Google believed a settlement could also resolve ongoing investigations across multiple jurisdictions and positioned it as an opportunity for the Justice Department to lead on the issue, said people familiar with the discussions at the time. Antitrust enforcers in the European Union and U.K. are also probing Google’s ad-tech business.

In the latest lawsuit, the Justice Department calls for the divestiture of specific parts of Google’s business: the tools online publishers use to sell advertising, including a software system known as an ad server and an exchange used to transact with buyers, together known as Google Ad Manager.

“Having inserted itself into all aspects of the digital-advertising marketplace, Google has used anticompetitive, exclusionary, and unlawful means to eliminate or severely diminish any threat to its dominance over digital advertising technologies,” Justice Department lawyers wrote in the complaint.

Google will fight both cases as it also deals with new competitors such as ByteDance Ltd.’s TikTok and artificial-intelligence chatbots such as ChatGPT, both of which analysts have pointed to as threats to the company’s search business.

Dan Taylor, a vice president of global ads at Google, said in an online post on Tuesday that competition was increasing in the online advertising industry. Microsoft’s acquisition of the ad-tech company Xandr last year allowed it to win a landmark deal to work on

Netflix Inc.’s

new advertising business, for example, he said.

Google controlled a 28.8% share of the online-advertising market last year, making it the largest player in the industry, according to estimates from research firm Insider Intelligence. Advertising accounted for more than 80% of the $257.6 billion in revenue at Alphabet in 2021.

The lawsuit Tuesday focuses on the portion that facilitates ads on other websites and applications, a business that made up 12% of total revenues in 2021. Google’s ad server for publishers reached a market share of more than 90% by 2015, and its exchange is about four times as large as the closest competitor’s, the Justice Department said in the complaint.

Competition lawyers and historians say there are few historical precedents for the Justice Department bringing a second antitrust case against a company amid an existing complaint. At the same time, they said, the latest lawsuit is rooted in the fundamentals of U.S. antitrust law and will be difficult to fight.

“This is a very solid, traditional antitrust case in which there aren’t any Hail Marys being thrown,” said

Herbert Hovenkamp,

a professor at the University of Pennsylvania Carey Law School and Wharton School.

Justice Department lawsuits alleging monopolistic practices have been rare in the past few decades, making Google’s situation a notable exception, said Laura Phillips-Sawyer, an associate professor at the University of Georgia School of Law who has written about the history of competition law.

“We haven’t seen structural relief pursued in this aggressive of a manner in a really long time,” Ms. Phillips-Sawyer said, citing the high bar to clear, among other reasons. “It’s a watershed moment.”

Jonathan Kanter,

the head of the DOJ’s antitrust division and a longtime proponent of more aggressive antitrust enforcement against big companies, has in recent weeks taken a lead in shaping the new Google lawsuit, according to people familiar with the matter.

Google had asked shortly after Mr. Kanter was confirmed in his role in late 2021 that the Justice Department investigate recusing him from cases against the company, citing federal rules and an executive order by the Biden administration around possible conflicts. The Justice Department recently cleared him to work on the Google cases.

Google has hired an army of lawyers to defend itself in both antitrust lawsuits, including attorneys from Freshfields Bruckhaus Deringer and Wilson Sonsini Goodrich & Rosati, the company’s longtime outside corporate counsel.

Eric Mahr, a Freshfields lawyer advising Google on the ad-tech case, previously served as director of litigation for the DOJ’s antitrust division from 2015 to 2017.

—Sam Schechner contributed to this article.

Write to Miles Kruppa at [email protected]