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Justice Department Questions Publishers in Ongoing Google Probe

Naomi Nix, David McLaughlin, Mark Bergen and Gerry Smith

(Bloomberg) -- The U.S. Justice Department is organizing meetings with large publishing companies to seek information about how Alphabet Inc.’s Google operates in the digital advertising market, according to people familiar with the matter

In a sign the government is advancing its antitrust investigation, the agency has contacted News Corp., Conde Nast and The New York Times Co. within the last two months. At least one of the meetings, with Conde Nast representatives, already occurred, two people said.

The meetings come about five months into the Justice Department’s broad investigation into whether technology platforms, including Google, are using their dominance to thwart competition in digital markets. The Google probe focuses on digital advertising, search operations and conduct in the shopping-comparison market.

News organizations have long harbored grievances about Google’s control over the digital advertising market. Media companies have struggled to win enough digital advertising dollars to make up for the shortfall in print advertising as more readers seek content online and digital marketers become increasingly focused on targeting individuals instead of publications’ audiences.

While the Justice Department met with publishers early in the Google probe, the recent outreach was initiated by the department and questions are more in-depth, said two of the people. The information gathered by investigators could be used to build an antitrust case against the company. The people familiar declined to be named because they weren’t authorized to speak publicly.

A Google spokeswoman pointed to a blog post in which the company argues that it competes with many others in the digital advertising industry, including Amazon.com Inc., Facebook Inc., Oracle Corp. and Verizon Communications Inc.

News Corp., The New York Times, Conde Nast and the Justice Department declined to comment.

Google’s advertising practices have an outsized impact on the news business. Google and Facebook take in about 60% of all U.S. digital advertising revenue, according to eMarketer, a research firm. News Corp., which publishes The Wall Street Journal and owns HarperCollins Publishers, has complained publicly to regulators about Google’s dominance in the technology ecosystem that delivers ads across the internet. News Corp. has invested in digital advertising companies that compete with Google.

Google maintains that it passes on 70% of revenue generated by digital advertising to publishers and has invested in new programs to help news organizations drum up subscriptions and adapt to the digital age. Some publishers have said the figure is lower.

Publishers and advertisers have long complained that Google’s vast and complex digital advertising system is a “black box” that leaves them in the dark about how ad placements are fulfilled and how prices are set.

The process of showing a single ad to a person visiting a web page often involves an assembly line of different companies for buyers and sellers, many of which are controlled by Google. For instance, an advertiser might use Google Campaign Manager and Google Display & Video 360 to store its digital advertisements and manage its bidding for advertisement placements. On the other end of the process, publishers depend on Google Ad Manager to conduct auctions between marketers for ad space on their websites.

For more: How Google’s Ad Ecosystem Works

Google’s recent decision to stop supporting third-party cookies over the next two years may have caught the government’s eye. Cookies are a key tool used by marketers to track would-be customers as they move around the internet -- an essential part of the digital advertising ecosystem.

Google’s move, announced in a blog, may offer users more privacy but also gives the company more power by cutting off marketers’ use of valuable information about their customers. The company has previously warned that publishers could see a drop in revenue after the elimination of cookies.

Publishers note that any changes Google makes to its search engine can have an outsized impact on how their readers find and see their content.

Deputy Attorney General Jeffrey Rosen said in an interview last year that the department plans to move quickly and keep the probe from dragging on.

The review coincides with other federal and congressional inquiries into the online platforms. The Federal Trade Commission, which shares antitrust jurisdiction, is also probing the technology sector. Texas Attorney General Ken Paxton is leading a multi-state probe into Google, focused on its power in the advertising market.

Rhode Island Democrat David Cicilline, chair of the House Judiciary Committee’s antitrust panel, is also examining the tech sector, including how Google and Facebook treat the news business.

--With assistance from Gerrit De Vynck.

To contact the reporters on this story: Naomi Nix in Washington at nnix1@bloomberg.net;David McLaughlin in Washington at dmclaughlin9@bloomberg.net;Mark Bergen in San Francisco at mbergen10@bloomberg.net;Gerry Smith in New York at gsmith233@bloomberg.net

To contact the editors responsible for this story: Sara Forden at sforden@bloomberg.net;Nick Turner at nturner7@bloomberg.net;Jillian Ward at jward56@bloomberg.net

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