Google's Motion to Dismiss 'Misstates the Law' on Sherman Act Claims: DOJ

Google monopolized, “or attempted to monopolize,” key technologies that make digital advertising possible, said DOJ and eight states, in a Monday opposition response (docket 1:23-cv-00108) to Google’s motion to dismiss their antitrust case in U.S. District Court for Eastern Virginia in Alexandria. Its “anticompetitive conduct” thwarted competition and “stifled innovation” in digital display advertising technology for 15 years, it said.

Plaintiffs noted Google lost a “substantial part” of its motion to dismiss a related case pending in U.S. District Court for Southern New York (21-md-3010) and seeks to dismiss its complaint “on equally meritless grounds.” The Virginia court should deny Google’s motion because it 1) “attempts to adjudicate fact-intensive market definition questions at the motion to dismiss stage,” 2) “misstates the law” on market share for Sherman Act claims; 3) seeks “premature opinions” about specific allegations in the complaint rather dismissal of whole claims; and 4) “wrongly characterizes” the U.S. as an indirect purchaser of digital ads, said the response.

For the past 15 years, Google has had monopolies over the markets for publisher ad servers, ad exchanges and ad networks, said the response. Through its 2008 acquisition of DoubleClick for Publishers (DFP), Google obtained access to premium advertising inventory from third-party websites and also acquired AdX, a “nascent ad exchange,” it said.

Google began consolidating its control across the ad stack by “imposing high costs on publishers looking to use another ad server” by having exclusivity requirements linking Google Ads to AdX and AdX to DoubleClick for Publishers, said the response. It also imposed rules on DFP transactions that made it difficult for advertiser and publisher customers to work with competing ad tech companies, “denying these rivals the scale necessary to challenge Google’s dominance,” it said.

In Southern New York District Court, Google declined to challenge the market definitions for publisher ad servers, ad exchanges or advertiser networks before U.S. District Court Judge Kevin Castel, said the response. In largely denying Google’s motion to dismiss, Castel said the complaint at issue “plausibly alleged Google engaged in a wide variety of anticompetitive acts that harmed competition in each of these three markets.”

Google now argues “none of these alleged product markets are plausible,” said the response. Defining markets is a “fact-intensive” exercise involving the commercial realities of a market and competition, said the response, saying courts “hesitate to grant motions to dismiss for failure to plead a relevant product market” unless there are “glaring deficiencies.” Because all the complaint’s product markets reflect "commercial realities," all its claims should proceed, the response said.

Google claims that because there are potential substitutes outside each of the three product markets at issue, the relevant markets must be too narrowly defined, said the response. Markets “must be drawn narrowly to exclude any other product to which, within reasonable variations in price, only a limited number of buyers will turn,” said DOJ, citing Times-Picayune v. DOJ. Products that are interchangeable to some degree, “but do not share significant cross-elasticity of demand, are not in the same relevant antitrust product market,” it noted. In the DOJ complaint, definitions for publisher ad server, ad exchange and ad network markets “are all recognized by industry participants and supported by Google’s own documents,” the response said.

The complaint sufficiently alleges Google’s monopoly power in the ad exchange market, said the response, saying monopoly power can be proven through evidence of control over prices or the exclusion of competition. Google, it said in one example, created a special set of rules for bidding by AdX vs. other exchanges, “ensuring that AdX would win auctions more often than the competition.” Its ability to take anticompetitive actions in the ad exchange market without “triggering an exodus of its customers to competing ad exchanges demonstrates Google’s monopoly power,” it said.

Google argues for “partial dismissal” of the complaint’s first and second claims, claiming the purchases of DoubleClick and Admeld weren't anticompetitive when viewed in isolation. Since the case isn’t a challenge to a merger under the Clayton Act, there’s not a question of whether one of the acquisitions on its own is anticompetitive, the response said. The complaint alleges Google’s acquisitions were part of an anticompetitive course of conduct leading to violation of Section 2 of the Sherman Act, related to “monopoly power to exclude competitors and fix prices.”

Google’s argument that the federal government isn't a direct purchaser of ad tech services because it used ad agencies to buy advertising, “fails because an ad agency is acting as an agent of the advertisers, not a reseller of a good or service,” said the response.