A recent lawsuit filed by the Department of Justice could have a profound impact on American commerce. The public would be best served if the outcome recognizes the long-held belief that monopolies are bad for U.S. consumers and are anathema to a competitive marketplace.
The Columbian — along with all newspapers — has a vested interest in the issue. The lawsuit takes aim at Google’s advertising practices, which have contributed to a precipitous decline of the print media industry.
But beyond the interests of a specific industry, all Americans have a vested interest in the lawsuit; newspapers are the primary collectors and purveyors of local news, and their decline weakens our democracy. Various studies have demonstrated that communities bereft of local reporting generally experience a decline in voter participation and candidates for office, and that political corruption is more likely.
Like nearly every business, newspapers have been transformed by the internet, which has become essential for dispensing news and generating revenue. But efforts to create that revenue are hampered by Google’s dominance in the digital advertising marketplace.
As online advertising soared over the past 15 years, one-quarter of newspapers failed and the industry lost two-thirds of its journalists. “Fewer advertising dollars reach website publishers — because of higher ad tech fees and less efficient advertising matches — meaning those publishers have fewer resources to create content for internet users,” the lawsuit says.
As CNBC explains: “Google’s advertising business has drawn critics because the platform operates on multiple sides of the market — buying, selling and an ad exchange — giving it unique insight into the process and potential leverage.”
The lawsuit also alleges that Google sought to monopolize the advertising sector by acquiring competitors to “set the stage for Google’s later exclusionary conduct across the ad tech industry.” CNBC writes: “This allowed Google to require publishers in some instances to use all of its tools to gain access to any one, rather than working with rival tools for parts of the online ad-buying process.”
Google officials argue that online advertising is, indeed, competitive. “We are one of hundreds of companies that enable the placement of ads across the Internet,” a company executive wrote. “. . . competition is increasing as more and more companies enter and invest in building their advertising businesses.”
That will be left for the courts to decide. Meanwhile, a lawsuit filed by the Trump administration claims that Google uses its monopoly to cut off competition for internet searches through exclusionary agreements; that suit is expected to go to trial this year.
Guarding against monopolies — and protecting consumers — is an important function of the Justice Department. A clear analogy can be drawn between the Google case and the breakup of the Bell System, which monopolized telephone service and ancillary industries in the United States.
In 1982, AT&T agreed to a breakup of the system — a move that enhanced consumer choice and helped drive innovation in phone services. The bad news for those seeking a resolution of the Google situation — that was eight years after the Justice Department initially filed a lawsuit.
Many newspapers likely cannot wait that long for Google to be held accountable for its advertising practices. In the meantime, print media and American democracy will suffer.