US state attorneys general investigating Google are ordering it to turn over a wide range of information about its advertising business, according to an investigative demand that takes direct aim at the biggest source of the company’s revenue.
Texas Attorney General Ken Paxton’s office, which is leading the nationwide probe, on Monday issued a 29-page civil investigative demand obtained by Bloomberg. In more than 200 directives, investigators ordered the company to produce detailed explanations and documents by Oct 9 related to its sprawling system of online advertising products.
The Sept 9 investigative demand, which is similar to a subpoena, was issued as 48 states, the District of Columbia and Puerto Rico announced an antitrust investigation of Google from the steps of the US Supreme Court in Washington. The attorneys general said they were looking at Google’s advertising practices, but their detailed demand to the company hasn’t been previously reported.
According to the document, the states want information about Google’s past acquisitions of advertising technology companies, including DoubleClick and AdMob; its top advertisers and publishers; data collection practices; pricing models; and the functions of the ad auction market that delivers ads across the Internet.
The document’s questions dig deep into the "black box” of Google’s money-making machine and ask for a thorough explanation of how it all works. Even to experts, the ad tech market can seem opaque and dizzying in its complexity.
The process of showing an ad to a single person visiting a web page can involve dozens of companies and multiple auctions and transactions. Google has worked its way into controlling much of that process, and investigators want to know exactly how powerful the company has become in this space.
"In between advertisers and publishers, the leading intermediary is Google,” Damien Geradin, a competition law scholar and a consultant for publishers, said in an interview. "They own most of the technical stack between advertisers and publishers.”
A spokesman for the Texas attorney general’s office didn’t respond to a request for comment. Google declined to comment beyond a blog post last week by Google’s chief lawyer, Kent Walker, who said the company will work cooperatively with regulators and show how it’s "engaging in robust and fair competition.”
Google controls about 37% of digital ad spending in the US, ahead of No. 2 Facebook at 22%, according to EMarketer. Digital advertising is the main way the search giant and parent Alphabet Inc. make money. The company reported US$116.3bil (RM486.02bil) in ad revenue last year, which represented 85% of overall sales.
The state attorneys general asked for information on how Google shares data with other companies and how it tracks behavioural data of advertisers and people on its Chrome web browser. That could signal an interest in privacy in addition to the focus on competition in the advertising market.
In addition to the requests for information, the attorneys general listed more than 100 separate document requests, including detailed financial documents on fee structures paid by advertisers and publishers. California and Alabama are the only states that aren’t part of the investigation.
Google’s acquisition of ad tech companies over the years allowed it to build a network of products across the advertising market. Investigators want to know what Google’s rationale for each of those acquisitions was at the time.
In some instances, Google has required companies that want to advertise on one of its platforms to use its own services, such as forcing them to use its own ad-bidding system to place ads on YouTube. Investigators want to know more about those policies, why Google instituted them and whether customers ever complain about them.
The demand also asks for details about Google’s relationship with publishers and how it decides how much to charge publishers for each ad it sends them. Some publishers have critiqued the company for withholding too much of the money made from ads shown on their sites.
In addition to scrutiny from antitrust regulators, Google’s acquisition strategy has also drawn the ire of top Democratic lawmakers in Washington, who argue they have enabled the tech behemoth to control far too much of the digital advertising ecosystem, crowding out competitors.
Massachusetts Senator and presidential candidate Elizabeth Warren in March proposed a plan to appoint regulators who would unwind mergers she believes are anticompetitive, including the DoubleClick purchase. Representative David Cicilline, a Rhode Island Democrat, is leading a congressional inquiry of the technology industry in which lawmakers have openly questioned whether antitrust enforcers have been too lax when approving mergers. – Bloomberg