The recent antitrust Advertisement Technology ('AdTech') trial in the US is likely to shape how tech regulation is perceived across the globe.

Introduction

The US District Court of Virginia began the antitrust Advertisement Technology (‘AdTech’) trial against Google Inc. last week. Some of the key questions before the Court include inquiring the applicable supply chain in AdTech, identifying the presence of Google in it and possibility of monopolisation in violation of US antitrust laws. The case has been filed by the Department of Justice, US accompanied by multiple state attorney generals where the government has sought a decree against the company along with divestiture in key components of the AdTech stack to restore fair play and competition in the market.

Background

The trial has begun in the background of similar investigations ordered in multiple jurisdictions such as the European Union (EU), France and India in the AdTech industry. As far as the EU is concerned, the European Commission (EC) is investigating whether Google prefers its own AdTech services over rivals which may be in violation of competition law. Some of the other issues include inquiring the modus of auction conducted by the Publisher Ad server, i.e. DFP (owned by Google), on the supply side, possibility of preferential treatment given to the Supply Side Platform (SSP) owned by Google (Advertisement Exchange - AdX) by informing it well in advance the bids received by other competing supply side platforms. Similarly, on the demand side there are further concerns on various tools used by Google prefering AdX thereby making it a key component in the AdTech stack and allowing it to charge a high fee.

In the case of India, the Competition Commission of India (CCI) has held that Google imposes one-sided and discriminatory conditions on publishers by providing them incomplete information on revenues generated through sale of advertisements on their websites. The information asymmetry further reflects in the ability of publishers to manage data and audience engagement effectively. The tech-giant offers zero-click search on its result pages based on the content generated by publishers, which deprives them of the user traffic on their website. Lastly, the Commission has held that the existing bargaining power imbalance between the publishers and Google related to revenue sharing negotiation may also be a competition concern.

Competition concerns

The only final decision when it comes to competition in the AdTech industry is passed by the French competition authority (‘Autorité de la concurrence’). The Authority in the order has identified the AdTech supply chain and charted the history of development of the advertisement technology. The Autorité de la concurrence (AdLC) has held that AdTech started with the meditation technique where the publisher Ad server conducted programmatic sales of advertisement space through a cascade process. The supply side platforms were ranked on the basis of their historic performance and the inventory was accordingly allotted. Mediation was succeeded by dynamic allocation and enhanced versions of it where, even though they resulted in increased revenues for the publishers through setting up of higher floor prices, the essence was in DFP giving preferential treatment to AdX by giving it the ‘last look’ to competing SSPs’ bid data. This allowed AdX to curate its response in real-time and win the bid just by a difference of €0.01. The dynamic allocation was followed by header bidding which was mostly developed on the initiative of competing SSPs to balance the competitive edge of Google in the earlier technology. In header bidding, there used to be an auction-for-auction which simply meant SSPs had to place their bid for each impression to register a win. Through such a process, the advantage drawn by Google through the ‘last look’ method was, in effect, neutralised. Header bidding was then ultimately succeeded by Exchange Bidding Dynamic Allocation (EBDA) and Unified pricing Rules where Google sought to derive competitive edge either through withholding of information on performance of Ads, or outright imposition of terms on whether the auction would be conducted on first-price method, or second-price on the competitors.

The AdC held that the DFP (publisher Ad server) and AdX (SSP), both owned by Google, favour each other to the detriment of competing players, advertisers and publishers. The demand at the AdWords and DV360 on the advertiser’s end could further be accessed only through AdX SSP. This provides an unfair advantage to Google in the supply chain and deviates outside the scope of competition. The Authority ultimately imposed a fine of €220 million on Google and received a settlement proposal from the company detailing the remedies to be undertaken by it. Amongst others, the company offered to make DFP interoperable with other third-party SSPs competing with AdX on one hand, and AdX interoperable with other third-party publisher Ad servers competing with DFP on merits on the other.

Regulatory concerns

Apart from competition aspects, the AdTech industry seems to be marred with other regulatory issues. For instance, the California government recently proposed to bring a new legislation which required Google to share revenues with publishers for distributing their content. The law is currently shelved after a public-private deal between Google and the state government where the former has committed a fund to support local journalism through research. The same issue has propped up, though in slightly different form, in India where the government recently held consultation with industry partners and publishers to look into whether any regulatory intervention is required given the changing nature of journalism. The involvement of Big Tech remains a concern there.

Conclusion

The US district court seems to have a lot on the table. The Court in the given instance has to first look whether Google has violated antitrust law. This finding would be of interest given the pronounced nature of private injury in the case of US antitrust law as compared to the EU law. In case the Court finds a case of contravention, the question of remedy will come up. Based on the French decision, a return to header bidding process seems an obvious choice. If Indian precedent is anything to go by, the issue of fair revenue distribution and ensuring a level playing field between publishers and the intermediary would also fall in the purview of the Court. Given the nature of AdTech industry, the problem of conflict of interest seems inherent. In such a case, isolating the DFP, i.e. the publisher Ad server owned by Google, from the rest of the AdTech stack, or even breaking Google might also be on the table. Disinvestment, though, would be of least concern to Google. A lot would also depend on the discovery made during testimonies which would be presented before the Court during the trial process. Since the French competition authority has already moved the needle, the outcome of this case is likely to affect how regulation is perceived across the globe given varied issues. South Asian countries would be no exception.