Alphabet (Google) has submitted a settlement proposal to the European Commission regarding its adtech business, in an attempt to avert the spectre of forced divestment. This is in response to September’s €2.95 billion fine and the tough stance of regulators, who suggested selling parts of the company as the only effective solution to conflicts of interest. Google says its plan fully addresses the EC’s concerns without a “disruptive break-up” that would harm thousands of European publishers and advertisers.
The crux of the long-standing dispute lies in Google‘s position, which the US Department of Justice has described as a ‘trifecta of monopolies’. The company simultaneously controls the dominant demand-side tool (Google Ads), the key supply-side ad server (Google Ad Manager) and the largest exchange (AdX) linking the two sides. Regulators on both sides of the Atlantic have alleged that Google is using this integration to favour its own exchange. Data from the publishers’ server (Ad Manager) was alleged to give AdX an unfair informational advantage over competing exchanges, in effect reducing publisher revenues and harming marketplace rivals.
Instead of a structural split, Google offers ‘instant product changes’. A concrete example of this is allowing publishers to set different minimum prices (floor prices) for different bidders in Ad Manager. This is a direct response to criticism of the existing, often opaque auction mechanisms. The company also promises to increase the interoperability of its tools to give customers supposedly more flexibility and choice.
Google’s proposal is a defensive manoeuvre on two fronts. It is almost identical to the one filed in the US, where the Department of Justice is already fighting in court for the forced sale of the AdX exchange. A US judge ruled, incidentally, that Google had illegally linked its ad server to the exchange. The European Commission is now reviewing the bid, but there are many indications that regulators may not be content with technical fixes. If the US court orders divestment, this will also solve Brussels’ problem.
