Margrethe Vestager, the EU antitrust chief, has issued the following Statement of Objections to Google over practices in the online advertising technology industry.
WHAT EU WANTS
Today, the Commission has sent a Statement of Objections to Google. We are concerned that Google may have illegally distorted competition in the online advertising technology industry, also known as “Adtech”.
In June 2021, the Commission opened an investigation. We wanted to assess whether Google’s conduct in the ad tech value chain violates EU competition rules.
We found that Google may have abused its dominant position by favouring its own adtech services.
“Adtech” is about matching supply and demand for advertising space online. On one side, there is demand from advertisers that want to place their ads on websites and apps. On the other side, there are publishers who can supply online space to display those ads.
In the milliseconds it takes an online news site to load, several complex algorithms are running in the background. They decide which of the millions of possible ads to display to the user at that very moment. Ideally, this should be an ad that attracts the user’s attention and makes them click on it.
To make sure that the best possible match is achieved, many advertisers and publishers rely on intermediaries. Intermediaries that can bring them together. Some of those intermediaries act on behalf of the advertisers. Others act for the publishers of websites and apps. Then, there are the so-called “ad exchanges”, in essence market places where supply and demand meet in real time.
Google offers all of those different services. First: it operates two adtech services for advertisers – they are called “Google Ads” and “DV 360”. Second: it operates a service for publishers, “DoubleClick For Publishers, or DFP”. Third, it operates an ad exchange, “AdX”.
Our investigation has shown that Google may hold a dominant position on both ends of the adtech supply chain. On the buy-side with Google Ads and DV 360. On the sell-side with DFP.
There is nothing wrong with being dominant as such. What our investigation has shown though, is that Google appears to have abused its market position. It did so by ensuring that both its intermediation tools on the buy- side and on the sell-side would favour AdX in the “matching” auctions.
In other words, we are concerned about two potentially anticompetitive conducts by Google, which are both about favouring AdX.
The first aimed at ensuring that its dominant buy-side tools, Google Ads and DV 360, would favour AdX compared to rival ad exchanges.
The second aimed at ensuring that its dominant publisher ad server DFP would favour AdX over rival ad exchanges. The overall purpose was to keep a central role for AdX in the adtech supply chain. This enabled Google to charge a high fee for its “exchange” services.
Over time, Google’s self-preferencing conducts took many different forms. Let me give you two examples.
The first is about the practices by DFP, Google’s sell-side tool for publishers. DFP selects on behalf of publishers the ads that are supposed to bring the most value to them. The selection occurs via an auction between various sources of ad demand.
For the auction to be fair, all auction participants should receive the same information. But since at least 2014, in the ad selection auction run by DFP, Google has been giving AdX a substantial edge over its rivals.
In certain instances, AdX had the right to bid after all other bidders had placed their bids. In others, AdX was informed in advance of the value of the best bid from competitors. This is what you have to bid in an auction. Google’s DFP was organising a sealed bid auction, but was allowing Google’s own participant in that auction, AdX, to open the sealed envelopes of all other rivals before placing its own bid.
The second example is about a practice by Google Ads, Google’s buy-side tool for advertisers. Google Ads places bids on behalf of advertisers so that their ads could be placed on the internet and get good visibility. One would expect Google Ads to place bids on as many ad exchanges as possible, because this would maximise the probability that the ad will be widely displayed. Our investigation showed that Google decided to place Google Ads bids only, or almost only, on Google’s AdX. By doing so, Google managed to make AdX the most attractive marketplace. This gave it a significant competitive advantage over rival ad exchanges.
Those two practices, as well as a number of similar ones, are set out in detail in the Statement of Objections that we sent to Google today. We see the risk that Google’s conduct distorted competition among ad exchanges: rather than letting the best of the ad exchanges win the race, the helping hand of the powerful Google ecosystem gave Google’s own exchange a unique head start over all other rivals in the industry. AdX could afford to keep its commissions high without losing its advertisers.
At this stage of the investigation, we believe that Google’s conducts may amount to an abuse of a dominant position. If proven, these conducts would be illegal under our rules.
We should look ahead. If we come to the conclusion that these practices are illegal, we need to ensure that they are brought effectively to an end.
Google is dominant on both sides of the market, with its buy-side tools and its sell-side tools. Google has a strong market position with AdX, the exchange in between. Google is representing the interests of both buyers and sellers. At the same time, Google is setting the rules on how demand and supply should meet. This gives rise to inherent and pervasive conflicts of interest.
As long as these conflicts of interest remain in place, Google could continue such self-preferencing practices or it could engage in new ones. This market is highly technical market. It is verydynamic. The detection of these behaviours can therefore be very challenging. We have seen this play out concretely: each time a practice was detected by the industry, Google subtly modified its behaviour so as to make it more difficult to detect, but with the same objectives, with the same effects.
A remedy requiring Google just to change its behaviour would allow Google to continue doing what it has been doing so far, just under a different disguise.
Should the Commission conclude that Google acted in an illegal manner, it might require Google to divest part of its services. For instance, Google could divest its sell-side tools, DFP and AdX. By doing so, we would put an end to the conflicts of interest.
The conducts that we have investigated have obviously a worldwide dimension. This is why we have closely cooperated with other competition authorities.
We have gained from the experience and market knowledge of the French competition authority, the first to run a case in these very complex markets. I also want to thank the national competition authorities of Denmark, Italy and Portugal, which carried out investigative measures on adtech practices. They transferred their investigations to the Commission to enable the whole of Europe to benefit from their work. This illustrates the power of the European Competition Network.
Beyond the European Union, we also have regular contacts with the Department of Justice in the United States and the Competition and Markets Authority of the UK.
Our cooperation with the DOJ has been close and fruitful, from the beginning of our respective investigations. There are of course differences between our legal procedures and our legal systems, but we share the same view as to what is good for competition, and ultimately, how to best remedy the issues for the benefit of consumers and citizens. This case clearly shows the benefits of a very strong transatlantic cooperation.
Our actions in this case, I hope you see that they underline the Commission’s wider objective of ensuring that competition on the merits, based on fair terms and conditions, and that this also prevail on digital markets.
Google will now have the opportunity to respond to our concerns and then we will continue our work.