Monopoly Problems

Today's newsletter is a 7 min read:

• 🇺🇸 Monopoly Problems: Google faces a lawsuit over its monopolisation of the ads market. Here's how this impacts Law Firms and their Clients.
• ➕ Plus: Fox and WSJ split, Australia hits record inflation, Microsoft's cloudy forecast, and startups pushed to relocate to the US.

📰 News Spotlight

🚫 Fox News and Wall Street Journal Split: Rupert Murdoch abandons plans to merge Fox Corporation and News Corporation after shareholders object to the proposal, arguing that it would mask the value of News Corp.

🇦🇺 Australia's 33-Year High Inflation: Inflation in Australia reaches a 33-year high in Q4 2022, driven by rising energy costs and a rebound in tourism. This puts pressure on the Reserve Bank of Australia to raise interest rates.

🌥 Cloudy Outlook for Microsoft: Demand for cloud services drops significantly in the face of the economic slowdown, leading Microsoft to issue a downbeat forecast for the current quarter.

💡 Marvel Fusion's Move to America: Investors are pressuring German fusion start-up Marvel Fusion to move to the US due to the government's $370 billion in tax breaks and subsidies for clean-energy businesses, and the $1.4 billion earmarked for the domestic fusion industry.

🤿 Deep Dive

Monopoly Problems

In brief:

• The US Justice Department and eight states have filed a lawsuit against Google, seeking to break up the company's ad-technology business on the grounds of illegal monopolization of the digital advertising market.

What You Need to Know

The Biden administration is taking on Google in a major antitrust case. This lawsuit is the first of its kind for the Biden administration and follows a probe that began under President Trump. Ultimately, the Justice Department (DOJ) is calling for the breakup of Google's ad-technology business.

Why is Google Being Sued?

The DOJ is suing Google for exercising monopolistic control of the digital advertising market. It accused Google of having conflicts of interest because it controls numerous aspects of the digital ad market, including the tech used by website publishers to sell ad space and the biggest exchange where ads are sold.

The complaint also alleged that Google’s acquisitions in 2008 of DoubleClick, a publisher ad server, and AdX, an ad exchange, allowed the tech group to create an ecosystem that locked in publishers.

A dominant force

Google is the top player in the $626.9 billion global digital ad market, with the US representing the biggest piece. Alphabet's ad operations are expected to bring in $73.8 billion in US digital ad revenue in 2023, with most of that coming from Google's search advertising business.

Google dominates the $278.6 billion US digital-ad market, controlling most of the technology used to buy, sell and serve online advertising. The Justice Department claims that Google's dominance allows it to keep at least $0.30 out of every dollar advertisers spend through its online advertising tools.

That's Anticompetitive, Google.

Competitors and publishers have complained that Google leverages its vast network, like its ad exchange, to benefit other areas and weaken rivals.

This lawsuit marks the DOJ's second antitrust suit against Google and the fifth major case in the US challenging the company's business practices. State attorneys general have also filed three separate suits against Google, alleging it dominates the markets for online search, advertising technology and apps on the Android mobile platform in violation of antitrust laws.

Pay Back time

The Justice Department is also seeking damages from Google for allegedly overcharging federal government agencies, such as the US Army, that purchased online ads. The government has spent more than $100 million on online display advertising since 2019, but it's not specified how much the Justice Department is seeking to recoup.

How does this Impact Law Firms and their Clients?

💼 What does this mean for law firm's clients?

Google

• If the lawsuit is successful, it could significantly impact Google's business operations and revenue. For example, Google's search advertising business could be separated from its other businesses, which could result in a loss of revenue and market share.

Advertisers and Publishers

• Advertisers and publishers are also affected by the lawsuit as they rely on Google's digital ad technology to buy, sell, and serve online advertising.
• If the lawsuit is successful and Google is broken up or regulated, it could lead to a more competitive digital ad market, which could benefit both advertisers and publishers by providing more options and better pricing.
• If the lawsuit results in Google facing significant regulatory oversight, it could lead to changes in pricing and operation of the ad services offered, which could impact the businesses' advertising budget and strategies.

Social Media Companies reliant on Ad revenue

• If the lawsuit results in Google being broken up or facing significant regulatory oversight, it could create new opportunities for other companies to enter the digital ad market, potentially increasing competition and decreasing Google's dominance. However, it could also provide a successful track record to pursue other social media companies who have similar strongholds on specific sectors of the ads market e.g. Meta. If the lawsuit fails, it could reinforce Google's dominance and make it harder for competitors to challenge the company.
• Social media companies that rely heavily on ads should carefully consider whether similar actions could be taken against them. They will also need to determine whether they could be liable for other anti-competitive behaviour e.g. Apple in the context of App Stores (see more on this here).

US Government and other global Governments

• The US Government and other global Governments may be affected by the antitrust lawsuit against Google as it could set a precedent for how they approach antitrust cases against tech companies in the future.
• For example, if the lawsuit results in Google being broken up or facing significant regulatory oversight, it could encourage other governments to take similar actions against dominant tech companies in their own markets.

⚖ Which Legal departments would this impact?

Antitrust and Competition

• Who would they advise? DOJ, Google, and any other entities such as other tech or social media companies which could be involved in competition matters.
• Would they see an increase in work? They would see an increase in work as the DOJ's claim is based on antitrust, and competition issues and could spark further claims to be filed by other governmental entities around the world.
• What would they advise on? They would advise the DOJ on the legal issues surrounding the antitrust case and building a case against Google. This would also include advising on potential remedies for Google's alleged antitrust violations, such as breaking up the company or imposing regulatory oversight. On the flip side, they would advise Google on defending the claim and proving that their activity in the ads market does not constitute anti-competitive behaviour. Providing information on other companies' market share, and supportive points in the ads placement process will be key to this.

Corporate

• Who would they advise? DOJ, Google, and any other entities involved in prior acquisitions which become subject to the antitrust investigation.
• Would they see an increase in work? They may see an increase in work if companies like Google are ordered to unwind previous acquisitions (such as
• What would they advise on? They would advise Google on the legal and logistical process of unwinding these acquisitions. Key ones to look out for include the 2007 acquisition of online advertising giant DoubleClick for $3.1 billion, which the Justice Department is now seeking to unwind, the 2010 deal to buy Invite Media for $81 million and the 2011 purchase of AdMeld for $400 million. They will liaise closely with competition colleagues to determine whether these deals can withstand a challenge brought on competitive grounds.

Commercial

• Who would they advise? DOJ, Google, and any other entities involved in prior acquisitions which become subject to the antitrust investigation.
• Would they see an increase in work? They could see an increase in work in reviewing contracts relating to Google's ads system, specifically surrounding pricing, and liability in the context of services offered to governmental agencies.
• What would they advise on? They may be advising on the legal issues surrounding the government's claims that Google overcharged for online ads and the process of seeking damages. Commercial lawyers may need to review service agreements between Google and external providers relating to the ads placement process to determine anticompetitive elements, such as selection process for ads placed on websites via bid requests, and payment provisions in terms of percentage held by Google.

Litigation

• Who would they advise? DOJ, Google, and any other entities involved in prior acquisitions which become subject to the antitrust investigation.
• Would they see an increase in work? The antitrust lawsuit against Google would likely involve significant legal disputes and court proceedings.
• What would they advise on? Their work would include preparing and filing the antitrust lawsuit, representing the DOJ and Google in proceedings, and managing the discovery process. Specific follow up advice may be required in the context of appeals, negotiating settlements or other remedies. Litigation lawyers may also be asked to advise on recouping damages from Google for allegedly overcharging federal government agencies, such as the US Army, that purchased online ads.

🔮 What trends does this highlight?

Trends for Businesses

• The antitrust lawsuit filed against Google demonstrates a growing trend of increased scrutiny of technology companies and their market power. This is likely to continue as governments around the world begin to examine the power and influence of large technology companies, as well as how they may impact competition and consumers.
• It also highlights an increasing trend of competition in the digital advertising market. If the lawsuit is successful, it may result in a more level playing field for competitors and opportunities for new entrants into the market.

Trends for Law Firms

Based on the above trend, law firms can expect continued increase in demand for competition lawyers. There is a clear push around the world for governments to pursue big tech and this latest case in the US is just one piece of it. This will cover key areas like ads, and app stores which are key revenue sources for big tech. These companies will be concerned about this growing trend, and will need both reactive advice on dealing with claims, and proactive advice in handling their current state of affairs and any acquisitions to avoid liability for anticompetitive practices.