Google faces antitrust trial over alleged manipulation of ad prices

In a landmark antitrust trial taking place in Washington, reported by Reuters, the US Justice Department has accused Google of engaging in unfair practices to elevate online advertising prices. The case alleges that Google manipulated the multibillion-dollar online auction industry to favor its interests. During the trial, Google executive Adam Juda testified, shedding light on the company’s auction mechanisms and pricing influences.

Adam Juda explained that Google utilizes a formula, incorporating ad quality, to determine the winners of auctions used to place advertisements on websites. The quality of an ad plays a crucial role in this process.

The Justice Department has accused Google of manipulating online auctions, which constitute a significant industry, to prioritize its own financial gains. Google’s auction mechanisms have allegedly been adjusted to influence pricing.

During the trial, Justice Department attorney David Dahlquist referenced a document in which Google acknowledged that it could “directly affect pricing through tunings of our auction mechanisms.” While testifying, Juda confirmed that “tuning” can indeed impact pricing.

One aspect that can be tuned is the long-term value (LTV) formula assigned to an ad. Factors such as the bid amount, potential click-through rate, and ad quality contribute to this calculation.

Dahlquist questioned Juda about whether Google introduced changes that raised the cost-per-click paid by advertisers. Juda responded affirmatively, indicating that such modifications were made.

In response to a query by Google’s attorney, Wendy Waszmer, Juda clarified that Google’s ad quality team does not have the capability to unilaterally raise prices.

Google’s advertising business has faced criticism from advertisers and website publishers for a lack of transparency, with both parties alleging that Google retains an excessive portion of revenue.

The trial has shifted its focus from Google’s expenditures to maintain its search engine as the default option on various devices to the practices within its advertising business.

This antitrust trial raises significant questions about Google’s influence on online advertising prices and its overall approach to the advertising industry. The outcome of the trial could have far-reaching implications for the tech giant’s advertising practices.

Google has a fair share of antitrust cases under its belt. In July 2021, a major antitrust lawsuit led by Utah, Washington DC and 35 other US states alleged that Google’s app store practices have restricted competition through various methods, such as contracts and technical obstacles. Recently, two years after the lawsuit was filed, both sides informed a California federal judge that they have a basic agreement to resolve the claims. 

Google’s legal challenges extend beyond the US. This year in February, the Japan Fair Trade Commission announced the findings of its investigation into the mobile OS and app distribution service market in the country, saying Apple and Google’s businesses don’t face enough competition pressure. Just a few days after, Epic Games filed an appeal in an Indian tribunal alleging that Google isn’t complying with the country’s recent antitrust ruling by not allowing third party app stores on its play store.