State AGs Prevail with Preliminary Antitrust Ruling in Digital Advertising Case Against Google

An opinion from the Southern District of New York issued earlier this week sided in large part with the attorneys general from 16 states and Puerto Rico, finding that Google monopolized several online display ads markets.

Upholding three of four of the plaintiffs’ Sherman Act claims, Judge P. Kevin Castel found that Google also used its dominance to illegally tie together two crucial advertising tools but declined to find an illegal agreement with Meta Platforms over the companies’ bidding agreement, which it said was the product of legitimate, pro-competitive business drive.

The operative complaint was filed this January after consolidation and transfer by the Judicial Panel on Multidistrict Litigation. The lawsuit accused Google of a “sweeping variety of anticompetitive conduct” stifling innovation, limiting consumer choice, and reducing competition. The states sought injunctive relief for the claimed Sherman Act violations brought parens patriae on behalf of their citizens. 

Google moved to dismiss for failure to state a claim. 

Judge Castel’s 92-page opinion delved into the backdrop of the case, describing the multiple roles Google plays in the purchase and sale of display ads on commercial websites and ad impressions on mobile apps. The opinion noted that some of the conduct alleged has since been abandoned and that as such, it was considered only as motive.

At the dismissal phase, the court said that the states plausibly alleged a monopolization claim in the nationwide markets for publisher ad servers, ad exchanges and ad-buying tools for small advertisers. Judge Castel considered a wide variety of conduct and found that some but not all supported a finding of monopolization, like Google’s use of enhanced dynamic allocation, dynamic revenue sharing, and “Project Bernanke,” a scheme devised to boost advertisers’ bids on AdX, Google’s ad exchange, while ensuring that the transaction did not clear on rival exchanges. 

The court also backed the states’ attempt-to-monopolize claim in the nationwide market for ad buying tools for large advertisers and alternative claim for attempted monopolization of the markets for ad exchanges and ad buying tools for small advertisers. Judge Castel cited Google’s “specific intent to monopolize and a dangerous probability of achieving monopoly power in the markets for ad exchanges, ad-buying tools for small advertisers and ad-buying tools for large advertisers.”

As to the unlawful agreement between non-party Meta Platforms, the opinion found the states’ allegations implausible because they did not account for Meta’s motivation to “use its economic clout as an advertiser to drive the hardest bargain it could with Google, and that Google was motivated by the legitimate, pro-competitive desire to obtain as much business as possible from Facebook.”

The cases brought by advertisers and publishers remain pending before the same court.

Google is represented by Freshfields Bruckhaus Deringer US LLP, Axinn Veltrop & Harkrider LLP, and Wilson Sonsini Goodrich & Rosati.