Former FTC Policy Director and DOJ antitrust lawyer David Balto speaks with Yahoo Finance Live about the lawsuit that Google is facing from the Department of Justice and eight states surrounding its use of advertising market power.
- Google reversing on this news we're about to give you. To get you up to speed now on big tech, Google in hot water today over the company's dominance in the digital advertising market. Yahoo Finance's tech editor Dan Howley has the details. Hey, Dan. What are we learning today?
DAN HOWLEY: That's right, Dave. The US Department of Justice, as well as a number of state attorneys general sued Google today, alleging that it takes part in anticompetitive practices with regards to its advertising platforms. Now, they allege that Google essentially owns the entire middle part of the advertising spectrum online, so from the buyers who are looking to purchase ads to the sellers who are looking to sell space on their websites. And that makes it difficult for them to sell and make equitable deals. Attorney General Merrick Garland today said today's complaint alleges that Google used "anticompetitive, exclusionary, and unlawful conduct to eliminate or severely diminish and threat-- any threat to its dominance over digital advertising technologies."
- All right. Howley. Thanks so much. We want to continue talking about this. The DOJ's latest lawsuit against Google is the Biden administration's biggest antitrust move against big tech yet, and follows from Trump-era action against the group back in 2020. So to put this all into some perspective, let's get to David Balto. He's a former Justice Department antitrust lawyer and former FTC policy director. It's great to have you here. So just first off, your reaction to this case and how strong it potentially could be.
DAVID BALTO: Thanks. I am concerned about, you know, whether this is really a sound case. The foundation of any antitrust cases, the impact on consumers, 60 years ago, Justice Brennan explained that the purpose of the antitrust laws is to protect competition and not competitors. And for the Justice Department to bring a case where it's basically choosing winners or losers or trying to adjust the scales of competition I think is misguided.
- David, does this fit the definition of a monopoly?
DAVID BALTO: It could. But these are markets that evolve so incredibly rapidly. And there's a lot of new entry and a lot of growth in the advertising market. You know, caution here that Google is-- you know, does have a large market share in that market.
But is that going to be sufficient? What the Justice Department is going to have to show is that ultimately consumers are harmed by exclusionary conduct that-- by Google that effectively substantially raises prices to consumers. And that part isn't really tied together here in this complaint.
- Well, David, within this complaint, the DOJ writing, "having inserted itself into all aspects of the digital advertising marketplace, Google has used anticompetitive, exclusionary, unlawful means to eliminate or severely diminish any threat to its dominance over digital advertising technologies." I know you're not sold on this case. But more broadly speaking, the Biden administration cracking down on big tech, what does that signal to some of the other larger competitors here going forward?
DAVID BALTO: Well, I think everybody really needs to bone up on their responsibilities under the antitrust laws. And the Biden administration is clearly taking a more aggressive stance. But to effectuate change, the FTC and the Justice Department have to go to court. And a court is going to ask in the first instance and the last instance, how are consumers harmed by this conduct? And the complaint talks about advertisers and rival web entities being harmed. But it really doesn't say a lot about how consumers ultimately are harmed.
- Apparently a part of the DOJ, the government's case is something an ad exec inside Google actually referenced, an analogy saying essentially this would be like if Goldman or Citi owned the NYSE, the Stock Exchange. How fitting is that analogy? And David, what would be a potential remedy if, in fact, the government's right here?
DAVID BALTO: You know, I know as a former prosecutor that you always have these wonderful moments where you find some statements some executive made. And you're going to go and sail forth on that statement. And you'll certainly win in court. And, you know, 99 times out of probably 102 those statements fall short. So it's a nice observation by that fellow, but I don't think it really ties together.
Here, there's a natural integration between all the different elements of the advertising business. Those things really do fit in hand in glove. And it's going to be an interesting question about how that integration is harmful. Now, ultimately, the Department of Justice has a very stiff burden in order to demonstrate that divestiture is necessary.
Divestiture is really required only in, like, two or three times in this century. There is just a handful of cases requiring divestiture. And what you've got to be able to demonstrate is that the integration will necessarily lead to anticompetitive conduct, and there's no less-restrictive means of addressing the potential for anticompetitive conduct.
That's precisely the question the court in Microsoft faced in 2001 when the Justice Department tried to require the split up of Microsoft. And the court said, sorry, you haven't met that burden. And I think the Justice Department will have a really hard time meeting that burden in this case.
- David, there's a Reuter piece that mentions that you used to be a consultant for Google. Is that true?
DAVID BALTO: Mm-hmm. Yes.
- So what would you be telling Google now, today, that they are in this position given the fact that the Biden administration, once again, cracking down and the fact that this is the fifth suit that Google has faced in just the last 2 and 1/2 years?
DAVID BALTO: I think I'd advise them to do what they're precisely doing, which is putting consumer welfare at the front of all of their conduct. They're going to compete aggressively because we want firms to compete aggressively. You know, we could go and sort of say, well, we don't want firms to compete too hard because we want everybody to have an opportunity. But when we handicap, when we try to handcuff competition, ultimately consumers will lose. So I think I would just always say put consumers' interests at the forefront and make sure you're fulfilling satisfying those interests of consumers.
- Well, David this is not all Google faces. They've got a case that starts in September related to 2,000 actions from the Trump administration over search. They've got three other states pursuing action, including Texas AG Ken Paxton. Their lawyers are going to be well paid over the next couple of years.
I want to ask you about the story that's coming up next after the break, which is Ticketmaster and Live Nation facing a hearing in front of the Senate Judiciary Committee. You testified against the merger of Ticketmaster and Live Nation. What do you think came out of that hearing today? And might they be broken up? Should they?
DAVID BALTO: Well, here's the critical question, how are consumers affected? And if you bought a ticket any time recently, you know by paying those super competitive charges for access to tickets that there's a monopolist there, and that monopolist is exercising their monopoly power. Quite unlike the situation with Google, there's direct to consumer harm.
Moreover there's a very good case for separating the two companies. They're not integrated. There's not efficiencies that come about because the two firms are together. Rather, by bringing the two firms together, they've created a monopoly broth of exclusionary conduct. And the only way to sort of separate that broth is to break up the two companies.
- All right. Excellent stuff. David Balto, really appreciate you coming on with us today. Thank you, sir.