Europe wants Google to break up ad business, tech giant upset

They simply can’t stop. EU regulators hit Google with fresh antitrust charges and say it has to break up its main cash cow – the lucrative digital ad business. Google disagrees.

It’s only a “preliminary view,” but the European Commission has now informed Google that it has judged the company in breach of EU antitrust rules by distorting competition in the advertising technology industry (adtech).

The Commission said in a press release that Google favors its own adtech services to the detriment of competing providers, advertisers, and online publishers. This kind of abuse of its dominant position has been in place since at least 2014, regulators said.

Inherent conflicts of interest

The only way to satisfy competition concerns, in the view of the regulators, is to sell off parts of the business. According to the Commission, “only the mandatory divestment by Google of part of its services” would be satisfactory. A “behavioral remedy” is not likely to be effective.

“Google is active on both sides of the market with its publisher ad server and with its ad buying tools and holds a dominant position on both ends. Furthermore, it operates the largest ad exchange. This leads to a situation of inherent conflicts of interest for Google,” said the Commission.

“The Commission's preliminary view is therefore that only the mandatory divestment by Google of part of its services would address its competition concerns.”

Margrethe Vestager, the Commission’s executive vice-president in charge of competition policy, added that Google was actually present at almost all levels of the adtech supply chain because it collects user data, sells ad space, and acts as an online advertising intermediary.

“Our preliminary concern is that Google may have used its market position to favor its own intermediation services. Not only did this possibly harm Google’s competitors but also publishers’ interests, while also increasing advertisers’ costs. If confirmed, Google’s practices would be illegal under our competition rules,” said Vestager.

EU Vestager
Margrethe Vestager

The announcement is, of course, not unprecedented. The US Justice Department and eight American states filed an antitrust suit against Google in January 2023 – also in order to shatter its alleged monopoly on the adtech ecosystem.

In the complaint, the US government also demands that Google divest itself of the adtech-related businesses, remaining with search – its core business – and other products of services such as YouTube, Gmail, and cloud services.

Fines aren’t effective

However, it’s the EU that’s paving the way for governments around the world to crack down on Big Tech. For instance, the European Parliament overwhelmingly voted to approve the EU’s AI Act, which could set unprecedented restrictions on how companies use artificial intelligence.

Even though the details of the bill are still to be discussed in the European Council, the move nevertheless solidifies Europe’s position as the de facto global tech regulator, The Washington Post said. The new amendments, if adopted, could influence tech policymaking around the world.

"Breaking our ad tech tools would diminish the availability of free, ad-supported content that benefits everyone,"

Dan Taylor, Google’s vice-president of global ads.

Google is naturally unhappy – its primary source of revenue is online advertising, afterall. Since the Commission hasn’t yet issued its final decision, the firm will be hoping that it softens its stance.

The company officially responded to the European regulators, saying that the success of its ad business has helped it keep many of its services free of charge, and that the EU’s investigation has focused on a narrow part of its ad business anyway.

Dan Taylor, Google’s vice-president of global ads, said the Commission’s statement failed to recognize how advertising technology “helps merchants reach customers and grow their businesses – while lowering costs and expanding choices for consumers.”

“The digital advertising market enjoys competitive pricing, lively innovation, and robust competition — helping advertisers, publishers, and consumers. We look forward to showing how our ad tech tools help make the internet open and accessible — and how breaking them would diminish the availability of free, ad-supported content that benefits everyone,” said Taylor.

The EU has previously hit Google with more than 8 billion euros (now $8.6 billion) worth of fines in three separate antitrust cases, involving its Android mobile operating system and shopping and search advertising services. Google has appealed in all three cases.

However, it now seems Brussels has had enough and decided that fines – which can reach up to 10% of annual revenue – aren’t enough.