Analysis-Google faces greater threat of forced ad unit sale from U.S. lawsuit

[January 27, 2023]  By Jack Queen and Mike Scarcella

(Reuters) - The U.S. government is more likely to force Google to divest a key business with an antitrust lawsuit it filed this week than a group of states that has pursued a similar case for three years, legal experts said.

The complaint filed Tuesday in a Virginia federal court by the U.S. Department of Justice Antitrust Division attempts to compel Google to sell part of its advertising technology unit.

The suit mirrors allegations in another antitrust case brought against Google in New York federal court by a Texas-led coalition of 17 states in 2020. Both suits accuse the Alphabet Inc-owned company of abusing its dominance in online advertising, which Google has vigorously denied.

A court would be more likely to order structural changes in a company with nationwide impact if the U.S. government were making the argument, not just a group of states, the experts said.

“To the extent that any federal court is going to be in the business of breaking up Google, it’s going to be a lot more comfortable doing that if the plaintiff is the federal government,” said Vanderbilt University law professor Rebecca Haw Allensworth.

Still, Allensworth and other experts were skeptical that a court would force the sale of a business unit at a company as large and central to the economy as Google. Google's ad-tech business accounted for roughly 12% of the company’s revenue in 2021 and plays a vital role in its overall sales.

In the states' case, a New York federal judge in September rejected Google’s bid to dismiss it entirely. But the court disallowed some of the claims, including allegations that the company struck an illegal cooperation agreement with Facebook parent company Meta Platforms Inc.

The states' suit asks for any remedies the court deems appropriate, and Texas Attorney General Ken Paxton has said all possible punishments are on the table. The Justice Department's suit seeks at minimum the sale of Google’s ad manager suite, among other things.

The federal "complaint has a degree of specificity that the other Google complaint does not," New York University law professor Harry First said. "That indicates to me that they are very serious about actually changing the structure of Google's ad tech business."

Google logo is seen through broken glass in this illustration taken, January 25, 2023. REUTERS/Dado Ruvic/Illustration

The Texas Attorney General's Office did not respond to a request for comment while the Justice Department declined to comment. Google did not immediately respond to a request for comment.

States periodically sue companies for alleged violations of antitrust law, but the federal government sometimes either intervenes directly or files its own suit to assert its nationwide perspective.

Legal experts said that while judges don't always defer to the federal government when it steps into state antitrust disputes, the opinions of the DOJ and U.S. Federal Trade Commission can factor heavily in their decisions.

For example, after New York and 12 other states sued to block the merger of wireless carriers T-Mobile and Sprint in 2019, the U.S. government argued the deal should go forward because it would improve wireless coverage in rural areas.

In that case, the DOJ urged the court to give weight to its “uniform, nationwide perspective" and deny the states' request for an injunction blocking the deal. The court agreed, and the merger later went through with certain conditions in a separate settlement brokered by the Justice Department.

“If the ultimate goal is to change the structure of the company, the federal government is in a much stronger position,” Syracuse University law professor Shubha Ghosh said.

Google also faces two largely parallel antitrust lawsuits by states and the federal government alleging unlawful dominance in online searching. The company has denied those allegations as well.

(Reporting by Jack Queen and Mike Scarcella; editing by Amy Stevens and Cynthia Osterman)

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