EU Commission: Statement of Objections on Online Advertising to Google

Following the ECJ rulings on Google Shopping (ECJ, ruling of 10.11.2021 - T-612/17) and in regard to Android mobile phones (ECJ, ruling of 14.09.2022 - T-604/18), there is new movement at EU level regarding a suspected abuse of market power within the meaning of Article 102 TFEU by Google.

Already on 22 June 2021, the EU Commission opened an investigation into Google's presumably anti-competitive behaviour in online advertising technology (so-called ad tech). By sending a Statement of Objections to Google on 14 June 2023, the procedure now takes the next step.

The EU Commission has informed Google of its preliminary view that the company is breaching EU antitrust rules by distorting competition in the adtech sector. The Commission had found that Google favours its own technology services for online display advertising at the expense of competing providers of such services as well as advertisers and online publishers.

The Commission's preliminary view is that in this particular case a behavioural remedy is unlikely to prevent the risk of Google continuing such self-favouring behaviour. The competition concerns could only be addressed by the compulsory divestiture of part of Google's services.

The subject matter and facts

The present investigation is directed against Google's involvement in the online advertising business, which is the primary source of its revenue. Google is active on several sides of the advertising market: On the one hand, it sells advertising space, on the other hand, it mediates between advertisers. Instruments are being offered by Google on three levels:

1. Tools for buying advertising, namely "Google Ads" and "DV 360";
2. "DoubleClick for Publishers" (DFP) as an ad server on which publishers can manage advertising space on their websites or apps;
3. "AdX" as an ad exchange, which serves as an interface between advertisers and publishers and is a trading platform for auctions of display advertising.

To begin with, the Commission finds that there is a dominant position held by Google in the ad server market and the market for buying online advertising.

As a preliminary result, it is then stated that this dominant position has allegedly been abused since 2014, because Google's own ad exchange AdX is claimed to have been offered preferentially on both market sites:

• On the buyer side via Google Ads and DV 360, which avoided other competing ad exchanges and instead predominantly used AdX.
• On the seller side via DFP, which gave publishers advance information about the best bid from competitors so that the bid could be accepted in the auction, ultimately making competing ad exchanges less attractive.

This simultaneous preferential treatment is said to have created an undue competitive advantage, further enhancing Google's strong position in the ad tech market and thus facilitating the demand for higher user fees.

The Commission assumes – as it emphasises – for the moment that behavioural measures would not be sufficient as a remedy, since conflicts of interest are unavoidable due to the activity on various market sides. It even threatens to order the divestment of part of Google's business if the objections are confirmed.

Procedure and powers of the Commission

Following the initiation of proceedings, as in this case on 22 June 2021, the investigation ends with a decision by the Commission. Beforehand, the company in question must be granted a hearing and be sent a statement of objections (SO). If abusive conduct is confirmed at the end of the investigation, the Commission will in principle order the termination of the infringement under Article 7 of the Cartel Procedure Regulation (Regulation 1/2003) or the company offers commitments according to Article 9 of Regulation 1/2003.

Both behavioural and structural measures can be considered as remedies under Art. 7 of Regulation 1/2003 which are threatened to Google to be ordered after the conclusion of the investigation. These remedies are even applicable if the abusive conduct has already been stopped but still has continuing effects.

Both types of remedial measures must be proportionate: Among several equally suitable remedies, the one that is least burdensome for the addressee and still appropriate in the individual case must be chosen. Structural measures are subsidiary, meaning they may only be adopted if behaviour-oriented orders are not sufficient to stop the infringement.

Behavioural measures are usually aimed at a specific part of the market behaviour, for example, it may be imposed to change the terms and conditions or pricing systems. A structural measure could be, for instance, the disposal of business assets or the granting of access to certain facilities. In principle, this could also include a divesture of the company, although the extent to which structural measures may be taken is heavily discussed in the antitrust literature. However, there is a consensus that such an anti-divesture order could only be proportionate in rare cases at best.

In addition, a fine may still be imposed in the event of established violations of Art. 101 or 102 TFEU.

Comment

The repeated action against Google and other big tech companies underlines the focus of the EU Commission to take particularly strong action to prevent a weakening of competition in the digital sector. Despite the fundamental possibility and the threat of structural measures and possibly even a divestment, it remains to be seen whether these will actually be implemented. So far, there are no current examples in this regard. Because of the subsidiarity of structural measures and their enormous intensity of intervention, the justification effort for the Commission is high.

Even if Google has strong market power and despite all the criticism of its business model, it is still to be noted that market power alone is not anti-competitive in itself, but only its abuse. In particular, the control of market structure is not provided for in the scope of Art. 102 TFEU – as opposed to merger control. In the future, the Commission's actions should also be classified in this normative structure, so that legal certainty prevails and the principle of proportionality is upheld.