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    Google to face lawsuit for Ad tech practices, rules UK Competition Appeal Tribunal

    Google must face a lawsuit of up to £13.6 billion for allegedly abusing its dominance in the online advertising market, the UK’s Competition Appeal Tribunal (CAT) ruled on June 5. This comes a month after Google filed a petition opposing the case. The lawsuit was brought forward by ‘Ad Tech Collective Action’ (ATCA) on behalf of publishers who claim to have suffered losses due to Google’s allegedly anti-competitive behavior.

    This lawsuit adds to a long list of antitrust cases against Google’s ad tech practices including in the EU and and 2 cases in the US.

    What is Ad Tech?

    In order to understand the case, one needs to understand the landscape of online advertising or “Ad tech”. Online publishers usually provide ad space for advertisers to publish their ads which are called “impressions.” To fill their websites with “impressions”, publishers conduct an auction for the “impressions.” A publisher needs access to an “ad server” to find advertisers to participate in the auction. The server identifies when an ad space is available for an advertiser to bid on. It is then that an “ad exchange” facilitates an auction for “impressions”.  The ad exchange facilitates 2 things-

    • For the publishers: allows them to sell ad space through SSP (supply-side platform)
    • For advertisers: allows them to bid ad space through DSP (demand-side platform)

    The “ad exchange” conveys an advertiser’s bids to the “ad server”, and the latter then chooses the bid best suited for the publisher and an ad is placed on the website. All of this takes place within fractions of a second.

    To put it briefly, the process of buying advertising space on an online platform requires a server and an exchange to sell and buy. There are multiple ad servers and ad exchanges. However, Google owns all the steps, plus the platform. It runs an ad server, DoubleClick for Publishers (DFP), an exchange (AdX) that hosts its own SSP and DSP.

    So for advertising, Google’s ad server(DFP) solicits bids for ad space on publishers’ websites from advertisers. Their ad exchange (AdX) organizes auctions for this ad space and suggests bids from buyers to the server (DFP). The winning bid from the advertiser gets ad space on a website.

    What are Ad Tech Collective Action’s accusations?

    Ad Tech Collective Action (ATCA) accused Google of abuse of dominance in three of the markets for digital advertising: ad servers, SSPs, and DSPs. They accused Google’s ad server, DFP, of favoring Google’s exchange, AdX’s SSP over rival SSPs. Similarly, they accused AdX of favoring DFP over other ad servers.

    Finally, ATCA had allegations against Google’s DSPs (Google Ads and DV360). They alleged that Google Ads and DV360 tended to favor buying ads on AdX’s SSP over rival SSPs. Additionally, they claimed that Google’s DSP, Google Ads, submitted bids to rival SSPs only “for specific targeting purposes and certain types of advertising campaigns – whereas its submission of bids to AdX is not limited in this way.” ATCA accused Google Ads of charging advertisers a higher “take rate” for buying impressions from rival SSPs compared to when they bought impressions from AdX, thus disincentivizing advertisers from buying from rival SSPs. This also created a situation where advertisers were less likely to win a bid as they had to make lesser bids to save costs. “These practices have resulted in a situation where virtually all of the advertiser demand that goes through Google Ads is directed at AdX”, they said.

    Thus, they accused Google of being anti-competitive by having their server and exchange favor each other and its buying platform favoring its exchange.

    What did Google argue?

    Google argued that ATCA’s case was “misconceived.” It accused Ad Tech of having “10 different approaches to the quantification of 4 different effects all said to arise from each of 15 different pleaded abuses”.

    It demanded that Ad Tech Collective provide a “counterfactual case” i.e. explain how advertisers would have benefited in the absence of Google’s actions. Google went further and suggested that Ad Tech Collective needed to demonstrate what Google should have done in order to avoid the alleged abuse altogether.

    For example, citing a sub-complaint that accused it of imposing a 5-10% fee on rival SSPs, Google said, that if “Google would have developed (at cost to itself) and provided to others a service (the bringing together of SSPs in the Open Bidding auction) at no charge”, why would that be a realistic business model consistent with normal competition? Additionally, it said, that if Google must charge a smaller fee, what would ATCA claim to be a fair price?

    It asked for the ATCA to – prove the allegations that Google’s actions  “lead to a 20-40% drop in gross revenues for publisher”, cite the SSPs affected by their business model, and prove the overall loss in revenue for other parties.

    What was the CAT’s judgment?

    The Tribunal disagreed with Google’s view that ATCA had not provided adequate counterfactual cases. It stated that though ATCA could have been more explicit, the counterfactual was “contained in the description of the abuse.”

    The CAT called on Dr. Latham, an Ad-tech expert to provide a way for the Tribunal to judge if Google’s behavior was anti-competitive. Dr. Latham stated that Google’s anti-competitive behavior can be determined based on 3 effects: Gross price effect, Take rate effect, Umbrella effects, and Overhang damages. Here’s how one can determine if Google is anti-competitive:

    Gross price effect: Google’s conduct reduced the prices at which ads were sold by publishers by limiting AdX’s competition by disfavoring rival SSPs. In simple terms, Google’s conduct made these auctions less competitive, to the detriment of publishers.

    Take rate effect: AdX gained a higher market share and “take rates” by Google’s weakening of the SSP market.

    Umbrella effects:  By reducing the revenue received for ad sales through SSPs by limiting the competition for its own SSP, Google weakened the bargaining position of publishers and reduced revenue for other ad networks.

    Overhang damages: Google’s accumulated advantages will never allow its rivals to recover and its harms will persist for the long term.

     The Tribunal ruled that this was an adequate methodology for assessment. Thus, if ATCA can prove these effects, and the Tribunal are in agreement, Google can be charged for being anti-competitive.

    Google legal director Oliver Bethell said in a statement,  “This lawsuit is speculative and opportunistic. We’ll oppose it vigorously and on the facts.”

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    The post Google to face lawsuit for Ad tech practices, rules UK Competition Appeal Tribunal appeared first on MEDIANAMA.

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