Google vows to fight European Union's threat to break up its ad business

By Samuel Stolton

Alphabet Inc.’s Google has vowed to fight the European Union’s threat to break up its ad business, setting the scene for an antitrust battle that could eventually rival its ongoing clash with the US Justice Department and state attorneys general.

In a recent letter to EU watchdogs, Google warned it won’t accept the mandatory divestment of part of its services, deemed by Margrethe Vestager, the bloc’s currently-on-leave antitrust chief, as “the only way” to restore competition.

Google is set to formally oppose the EU’s June statement of objections before the end of the year, said a person familiar with the content of the letter, who spoke on condition of anonymity. 

Such a move could kick-start years more of legal wrangling with EU regulators who accused Google of favoring its own ad exchange program over rivals, bolstering the company’s central role in the ad tech supply chain.   

In June, the EU said that it was concerned that Google’s allegedly intentional conduct in the adtech supply chain gives its own exchange — AdX — a competitive advantage that may have foreclosed rival ad exchanges, to the detriment of fair competition. 

The EU case is a direct attack on the black-box of online advertising where Google automatically calculates and offers ad space and prices to advertisers and publishers as a user clicks on a web page. 

The European Commission declined to comment. A Google spokesperson didn’t comment beyond referring to a previous blog post in which the company said that the EU’s complaint doesn’t “recognize how advanced advertising technology helps merchants reach customers and grow their businesses.”

Since the EU’s complaint, Vestager has taken temporary leave from the Brussels-based commission in order to pursue the role of president of the European Investment Bank.

A statement of objections sets out the EU’s findings and is usually — though not always — a precursor for fines or orders for companies to change their business practices. Firms on the receiving end can contest the filings in writing or at oral hearings. When the EU makes a final decision, companies can then sue the regulator.

Google has been in the EU’s cross-hairs for years. Vestager’s team has fined Google €8.3 billion ($8.8 billion) in total, including for abuses of its dominance on its mobile operating system and its display advertising operations, all of which the company is appealing.

But the EU’s biggest and most recent case has been overshadowed by events in the US, where Google is being sued by the US Justice Department and state attorneys general in a case that could also result in the breakup of the 25-year-old company. 

The US showdown focuses on agreements between the tech giant and other companies to make Google’s search engine the preselected option, or default, in browsers and mobile devices.