Wake Forest Law Review
9Feb

Google and the Ad Tech Stack: Monopolizing the Industry Doesn’t Just Make You Rich; It Also Makes You a Criminal

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By Jenna White

As we all know, online advertising is almost impossible to escape.  In fact, the average consumer in the United States sees about five thousand advertisements each day.[1]  Even more frustrating to consumers is website publishers’ ever-increasing use of paywalls and subscriptions.[2]  But publishers are not to blame.  Google is.  By monopolizing the digital ad tech market, Google has effectively diminished the monetary value of online advertising, forcing publishers to resort to paywalls and subscriptions to remain afloat.[3]

On January 24, 2023, the Department of Justice (DOJ) filed a Complaint against Google, alleging violations of the Sherman Act,[4] which imposes criminal penalties for monopolistic business practices.[5]  Specifically, DOJ alleges that, through anticompetitive acquisitions and exploitation of its dominance in the tech industry, Google now controls the leading technology used by nearly every publisher and advertiser to buy and sell advertising space.[6]  The Complaint compares Google’s practices to Goldman or Citibank owning the New York Stock Exchange.[7]

Digital Ad Technology

A brief breakdown of how advertisers purchase advertising space from publishers is necessary to understand the breadth of Google’s practices over the past two decades.  Publishers sell space on their websites (referred to as inventory) that advertisers can buy to display their ads.[8]  Inventory is offered by publishers either through direct sales (one-to-one negotiations with advertisers) or indirect sales, where inventory is offered through an intermediary, most commonly an ad exchange.[9]  Ad exchanges are essentially auctions, where publishers offer ad space to advertisers and sell to the highest bidder.[10]

To facilitate these transactions, both advertisers and publishers use ad servers.[11]  When a consumer accesses a website, the publisher’s ad server auctions the ad space through an ad exchange.[12]  Advertisers use ad servers to connect them to these ad exchanges, make bids, and manage their ad campaigns.[13]  Ad exchanges match advertisers and publishers by providing information about the website and the available ad space, and, depending on the scope of the ad exchange and the data available to it, provide information about the individual consumer viewing the website.[14]  The figure below provides a simplified visual of the process, which collectively is referred to as the ad tech stack:[15]

Fig. 1

Google’s Takeover of the Ad Tech Stack

DOJ’s primary allegations rest on Google’s control of the entire ad tech stack.  On the publisher side, Google owns the leading publisher ad server, Google Ad Manager, after its 2008 acquisition of DoubleClick for Publishers (DFP) for three billion dollars.[16]  Google has grown DFP’s market share from sixty percent at the time of acquisition to ninety percent.[17]  On the advertiser side, Google owns the leading advertiser ad servers, Google Ads and Display & Video 360 (DV360), as well as DoubleClick Campaign Manager, which manages advertiser’s ad campaigns.[18]  Most importantly, Google’s 2008 acquisition of DoubleClick included the now-leading ad exchange AdX.[19]  Google’s comprehensive ownership of the ad tech stack, on its own, would be unlikely to trigger violations of the Sherman Act.  Nevertheless, Google has exploited its control over digital ad technology and siphoned an inconceivable fortune from the industry by stifling competition and innovation, depriving publishers of real choice and forcing advertisers to pay far more than they would in a competitive market. 

 Alleged Sherman Act Violations

In its Complaint, DOJ alleges violations under Sections 1 and 2 of the Sherman Act.[20]  Section 1 prohibits contracts, combinations, and conspiracies “in restraint of trade.”[21]  DOJ alleges that Google has engaged in unlawful tying of AdX and DFP in violation of Section 1 by effectively requiring publishers to use both technologies.[22]  The Supreme Court has defined tying as “an agreement by a party [here, Google] to sell one product [here, DFP] on the condition that the buyer [here, publisher] also purchases a different (or tied) product [here, AdX], or at least agrees that he will not purchase from any other seller.”[23]

DOJ argues that Google has unlawfully tied AdX and DFP primarily by offering ad space on Google Ads exclusively through AdX and limiting real-time access to AdX to publishers that use DFP.[24]  Because advertisers cannot afford to forego Google Ads as a revenue stream, virtually all advertisers bid for inventory on AdX.[25]  Therefore, publishers are effectively forced to auction inventory on AdX to reach Google’s advertising demand.[26]  Additionally, AdX is configured to provide lower prices to publishers who access AdX auctions through non-Google (non-DFP) ad servers.[27]  Together, these practices amount to unlawful tying of AdX and DFP, and DOJ will likely argue away any potential defenses or justifications.[28]

Section 2 of the Sherman Act prohibits monopolizing, attempting to monopolize, or conspiring to monopolize.[29]  DOJ alleges that Google has violated Section 2 by monopolizing the publisher ad server market (through DFP), monopolizing or attempting to monopolize the ad exchange market (through AdX), monopolizing the advertiser ad network.[30]  DOJ asserts that Google increased and maintained its monopoly in each of the relevant markets by acquiring DFP and AdX, restricting access to AdX to DFP, manipulating auction bids to benefit AdX, acquiring competitors, and restricting publishers’ ability to transact with competitors or at preferred prices.[31]  DOJ emphasizes that “[a]lthough each of these acts is anticompetitive in its own right, these interrelated and interdependent actions have had a cumulative and synergistic effect that has harmed competition and the competitive process.”[32]

Through these anticompetitive practices, Google has made a fortune.  When advertisers purchase ad space from publishers through AdX, Google skims off some of the purchase price for itself.[33]  Additionally, Google charges advertisers and publishers for use of its ad servers.[34]  Per internal Google documents, Google estimates that it retains about thirty-five cents of every dollar spent on digital ads, primarily through AdX, where it charges twenty percent for ad space bought.[35]  The figure below demonstrates how control of the ad tech stack has proved to be a cash cow for Google:[36]

Fig. 2

Google has constructed this money-grabbing structure through monopolistic practices, which, in turn, have reaped significant harm on advertisers, publishers, and the industry at large.  DOJ alleges that Google has disrupted the sale of inventory, reduced publishers’ profits, harmed advertisers’ and publishers’ profitability by producing lower-quality transactions, and restricted choice and innovation throughout the ad tech stack.[37]  The Complaint also lists the United States as an advertiser harmed by Google’s anticompetitive conduct, alleging that United States departments and agencies, including the Army, have incurred monetary damages as a result of Google’s conduct.[38]  Though the overarching purpose of the Sherman Act is to protect consumers,[39] DOJ failed to identify specific harm to consumers or the general public, beyond stating that “Google’s anticompetitive acts have had harmful effects on competition and consumers.”[40]  The Complaint briefly alludes to publishers’ increased use of subscriptions, paywalls, and alternative forms of monetization,[41] which potentially harm consumers by reducing access to information and Internet services.  However, the Complaints fails to develop this connection between website monetization and consumer harm; rather, the emphasis is on the publishers’ ability to remain profitable through advertising alone.[42]  Nevertheless, given that anticompetitive practices arguably always harm consumers, DOJ’s allegations may be sufficient.  

As to remedies, DOJ seeks a judgment decreeing that Google violated the Sherman Act, damages to the United States for the monetary damages it incurred, the “divesture of, at minimum, the Google Ad Manager suite” (which includes DFP and AdX), and an injunction against further anticompetitive practices.[43]

Google’s anticompetitive practices described in this blog barely scratch the surface of DOJ’s claims.  DOJ alleges a systemic, intentional takeover of the ad tech stack, characterized by tactful acquisitions, exploitation of Google’s customers and consumers, and secret projects that further entrenched Google’s monopoly.  For example, in 2014, the Complaint describes ‘Project Bell,’ which lowered advertisers’ bids, without advertisers’ permission, to publishers who partnered with Google’s competitors.[44]  Project Bell demonstrates the extent of Google’s anticompetitive scheme, which somehow thwarted the Federal Trade Commission (the agency charged with enforcing the Sherman Act, along with DOJ)[45] for nearly two decades.

When Google laid the first brick in its monopoly by acquiring DoubleClick (DFP and AdX), the FTC investigated but ultimately failed to challenge the acquisition, concluding that DFP’s sixty percent market share was insufficient to pose a risk of monopoly.[46]  Had the FTC pursued its initial investigation, Google’s chokehold on digital ad tech may have been avoided.  Nevertheless, the FTC’s failure to act likely gave Google the confidence to openly flaunt its unlawful practices, providing DOJ with ample evidence to bring the Sherman Act down on its monopoly.

[1] Ryan Holmes, We Now See 5,000 Ads A Day . . . And It’s Getting Worse, LinkedIn (Feb. 19, 2019), https://www.linkedin.com/pulse/have-we-reached-peak-ad-social-media-ryan-holmes/.  

[2] Felix M. Simon & Lucas Graves, Reuters Inst. for the Study of Journalism, Pay Models for Online News in the US and Europe: 2019 Update 1 (May 2019), https://reutersinstitute.politics.ox.ac.uk/sites/default/files/2019-05/Paymodels_for_Online_News_FINAL_1.pdf (finding that almost 70% of publishers in Europe and the US operate some form of paywall).

[3] Complaint at 118–19, United States v. Google, No. 00-108 (E.D. Va. filed Jan. 24, 2023).

[4] Id. at 132-39. 

[5] Sherman Act, 15 U.S.C. §§ 1–38.

[6] Complaint, supra note 3, at 117.

[7] Id. at 3.

[8] Damien Geradin & Dimitrios Katsifis, Tilburg University, Google’s (Forgotten) Monopoly – Ad Technology Services on the Open Web 3 (May 21, 2019), https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3391913#.  

[9] Id.

[10] Id.

[11] Id.  

[12] Id.

[13] Id.

[14] Id. at 3–4.

[15] Complaint, supra note 3, at 16 fig. 2.

[16] Id. at 32.

[17] Id. at 45.

[18] Id. at 19–20.

[19] Id. at 18.

[20] Id. at 132–39. 

[21] 15 U.S.C. § 1.

[22] Complaint, supra note 3, at 138–39.

[23] N. Pac. Ry. Co. v. U.S., 356 U.S. 1, 5–6 (1958).

[24] Complaint, supra note 3, at 138.

[25] Id.

[26] Id.

[27] Id. at 43–44.

[28] See, e.g., id. at 138 (alleging that “Google’s exclusionary conduct lacks a procompetitive justification”).

[29] 15 U.S.C. § 2.

[30] Complaint, supra note 3, at  132-39.

[31] Id.

[32] Id. at 133, 135, 137.

[33] Id. at 22.

[34] Id.

[35] Id. at 23.

[36] Id. at 23 fig. 4.  

[37] Id. at 133, 135, 137.  

[38] Id. at 123.

[39] Robert H. Bork, Legislative Intent and the Policy of the Sherman Act, 9 J.L. & Econ. 7, 11 (1966) (arguing that “the legislative intent underlying the Sherman Act was that court should be guided exclusively by consumer welfare”).

[40] Complaint, supra note 3, at 138.

[41] Id. at 4, 119.

[42] Id. at 118-119 (alleging that, as a result of Google’s practices, advertisers purchase less inventory from “publishers that internet users rely upon to generate and disseminate important content, and ultimately fewer publishers are able to offer internet users content for free (without subscriptions, paywalls, or alternative forms of monetization)”).

[43] Id. at 138-39.

[44] Id. at 72.

[45] Federal Trade Commission, The Enforcers, https://www.ftc.gov/advice-guidance/competition-guidance/guide-antitrust-laws/enforcers.  

[46] Federal Trade Commission, Federal Trade Commission Closes Google/Double Click Investigation (Dec. 20, 2007), https://www.ftc.gov/news-events/news/press-releases/2007/12/federal-trade-commission-closes-googledoubleclick-investigation.   

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8Feb

Addicted to Advertising: Should the U.S. Continue to Allow Direct-to-Consumer Drug Advertising?

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Grace Genereaux

Whether you are watching television, scrolling on TikTok, or browsing the internet, you are likely to see one particular type of advertisement: prescription drugs. Only the United States and New Zealand allow for drug companies to directly advertise prescription drugs to consumers.[1] Other countries have banned the advertising of prescription drugs over a concern of harmful effects on health outcomes.[2] Drug advertising can cause people to spend more money on a pharmaceutical when there is a cheaper alternative and may provide “distorted drug information, unnecessary prescriptions, and reduced prescribing quality.”[3] This type of advertising is referred to as direct-to-consumer advertising (“DTCA”), and it has remained a controversial topic.[4]

Those who wish to ban DTCA for prescription drugs are concerned about the reliability and effectiveness of these advertisements in actually communicating the benefits and risks of a drug.[5] European countries have chosen to keep the ban on DTCA for prescription drugs due to the sensitive nature of drug information.[6] Countries are concerned with the DTCA of pharmaceuticals because of the “perceived deleterious effects on rational prescribing, pharmaceutical expenditure, and health outcomes.”[7] These issues come into play as drug advertising increases demand for specific, more expensive, pharmaceuticals.[8] Individuals see these advertisements all over in daily life and are then prompted to bring the drug up to their doctor, which may lead their doctor to prescribe them a more expensive drug instead of the cheaper alternative.[9] There is also concern about television and internet advertisements  not properly conveying the message of risks and benefits.[10] Often these warnings come at the end of a commercial and consist of a voice rapidly listing off all of the side effects of a drug, which can result  in the consumer  being unable to fully understand the information.[11]

People on the other side of the issue argue that DTCA of prescription drugs brings several benefits to patients.[12] Drug companies argue that DTCA for prescription drugs “facilitate[s] meaningful discussions between doctors and patients about their health, otherwise unknown diagnoses, and available treatments.”[13] Specifically, drug companies argue that DTCA causes more people to visit their doctor concerning a diagnosis that may have gone unnoticed.[14] Patients also may be more likely to discuss problems with their doctor that they previously did not feel comfortable discussing.[15] The Association of the British Pharmaceutical Industry argues that “the current ban on drugs advertising is unfair and is not in patients’ interests” because it limits the patient’s choices.[16] While the decrease in stigmatization of medical problems and patient autonomy is a positive result of drug advertising, these advertisements do not adequately address the complicated risks associated with prescription drugs.[17] In response to supporters of DTCA, one  European Parliament member points out that in the U.S., the top advertised drugs are also the top selling drugs.[18] This demonstrates that advertising clearly has an effect on the market.

Recently, lawmakers in the U.S. have been pushing the FDA to pass the Banning Misleading Drug Ads Act which would help stop advertisers from using distractions and unclear language in their advertisements.[19] The Act finalizes a prior rule from the FDA which requires a drug advertisement “be presented in a clear, conspicuous, and neutral manner.”[20] This also means that advertisers cannot use images or text that would distract the consumer from the information.[21] Overall, it is an attempt to clarify the past rule and require that “drug ads [must] include a statement related to side effects, contraindications, and effectiveness.”[22] The lawmakers behind the legislation are concerned that drug companies directly advertising to consumers undermines doctors’ opinions.[23] These lawmakers share a substantial concern over   advertisers’ ability to manipulate older consumers who depend on prescription drugs.[24] This Act wants to finish what the FDA started and stop the information from drug commercials taking over the important information that a doctor would provide a patient.[25] The Act promotes patients making informed decisions with the help of their doctor by limiting “drug manufacturers from obscuring dangerous side effects . . . in their  advertisements. . . .”[26]

While the Banning Misleading Drug Ads Act attempts to limit the harm DTCA of prescription drugs can cause on consumers, it has still not passed,[27]and DTCA remains legal in the U.S. Many groups support the Act and further regulation of DTCA, but lawmakers will likely need to do more than pass this legislation to really stop the negative effects of DTCA.[28] Prescription drugs are a unique product that could seriously harm consumers if taken incorrectly. It is important for individuals to have accurate information and that is not distorted by distracting drug advertisements. Clear drug advertisements that communicate accurate risks and benefits of a prescription drug allow consumers to make informed choices and may facilitate more open conversations with their doctors.

 However, DTCA for prescription drugs overall still puts consumers at risk and manipulates the drug market.[29] Drug advertising is a billion-dollar industry that takes advantage of the consumer and can lead to doctors inappropriately prescribing medications.[30] DTCA in the U.S. “helped create an epidemic of prescription drug use, with U.S. sales reaching $425 billion in 2015.”[31] Opioids, for example, were marketed as a safe option for long term pain relief, but, in reality were not.[32] Doctors then feel pressure to provide demanding patients certain medications, and this contributes to extreme health crises like the opioid epidemic.[33] Drug companies that can afford the most advertising will likely continue to gain more popularity, even if there are better, cheaper, and safer alternatives.

 Drugs can be lifesaving, but ones that are extremely addictive and dangerous have no place being marketed to the public.[34] While the Banning Misleading Drug Ads Act is one step closer to more transparency in the pharmaceutical market, lawmakers should continue fighting against DTCA of prescription drugs. Consumers in the U.S. should be protected the same way consumers are protected in every other country besides the U.S. and New Zealand. There are many reasons that DTCA for pharmaceuticals is banned in almost all countries and the U.S. should reconsider their stance.

[1] Deborah Gleeson & David B. Menkes, Trade Agreements and Direct-to-Consumer Advertising of Pharmaceuticals, 7 Int’l J. Health Pol’y & Mgmt. 98, 99 (2018).

[2] Id. at 98.

[3] Id.

[4] Id; Andrew Andrzejewski, Direct-to-Consumer Calls to Action: Lowering the Volume of Claims and Disclosures in Prescription Drug Broadcast Advertisements, 84 Brook. L. Rev. 571, 572 (2019).

[5] Andrzejewski, supra note 4, at 572.

[6] See Giampaolo Velo & Ugo Moretti, Direct-to-Consumer Information in Europe: The Blurred Margin Between Promotion and Information, 66 Brit. J. of Clinical Pharmacology 626, 626–27 (2008).

[7] Gleeson, supra note 1, at 98.

[8] Id.

[9] See id.

[10] Andrzejewski, supra note 4, at 584–85.

[11] See id.

[12] See Gleeson, supra note 1, at 98.

[13] Andrzejewski, supra note 4, at 572.

[14] Id.

[15] See, e.g., Aaron Twerski, Liability for Direct Advertising of Drugs to Consumers: An Idea Whose Time has Not Come, 33 Hofstra L. Rev. 1149, 1151–52 (2005) (discussing patients who are more likely to talk to their doctor about alternative medications when the drug they are on causes negative side effects such as a decrease in libido).

[16] Claire Cozens, Europe Rejects Drug Advertising, Guardian (Oct. 23, 2022, 11:54 AM), https://www.theguardian.com/media/2002/oct/23/advertising.marketingandpr.

[17] See Twerski, supra note 15, at 1152–53.

[18] Cozens, supra note 16.

[19] Joanne S. Eglovitch, Proposed Legislation Takes Aim at Prescription Drug Advertising, Regul. Affs. Pros. Soc’y (July 11, 2022), https://www.raps.org/news-and-articles/news-articles/2022/7/proposed-legislation-takes-aims-at-prescription-dr.

[20] Food and Drug Administration Amendments Act of 2007, Pub. L. No. 110-85, § 906, 121 Stat. 823, 940 (2007).

[21] Spanberger Leads Effort to Crack Down on Drug Companies & Misleading Ads, Increase Transparency for Consumers, (July 5, 2022), https://spanberger.house.gov/posts/spanberger-leads-effort-to-crack-down-on-drug-companies-misleading-ads-increase-transparency-for-consumers.

[22] Id.

[23] See id.

[24] Id.

[25] See id.

[26] Id.

[27] All Information for H.R.8289 – Banning Misleading Drug Ads Act of 2022, 117th Cong. (2022), https://www.congress.gov/bill/117th-congress/house-bill/8289/all-info.

[28] Eglovitch, supra note 19.

[29] Jeremy A. Greene & David Herzberg, Hidden in Plain Sight Marketing Prescription Drugs to Consumers in the Twentieth Century, 100 Am. Pub. Health Ass’n 793, 793 (2010).

[30] See Bruce M. Psaty et al., Addressing the Opioid Epidemic – Opportunities in the Postmarketing Setting, 376 New Eng. J. of Med. 1502, 1502 (2017).

[31] Id.

[32] Andrew Kolodny, How FDA Failures Contributed to the Opioid Crisis, 22 AMA J. of Ethics 743, 745 (2020).

[33] Miguel J. Franquiz & Amy L. McGuire, Direct-to-Consumer Drug Advertisement and Prescribing Practices: Evidence Review and Practical Guidance, 36 J. of Gen. Internal Med. 1390, 1393 (2020); Twesrki, supra note 15, at 1151.

[34] See Psaty, supra note 30, at 1503.

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