Competition Bureau’s legal action against Google puts major U.S. cases in ‘Canadian context’ | CBC News

Canada’s Competition Bureau launched a legal fight against Google on Thursday, saying the tech giant has used its power in online advertising to hurt competition and harm Canadian businesses.

The bureau wants Google to sell off two of its advertising technology tools and pay penalties for what it calls anti-competitive behaviour in Canada’s digital advertising market.

The case targets how Google buys and sells online advertising — the ads that appear when people visit websites. Publishers rely on this ad revenue to stay in business, while advertisers use these systems to reach customers. The bureau says Google has too much control over this entire process.

Canada’s antitrust watchdog has built a strong case against Google’s advertising technology by learning from recent U.S. legal actions, said Jennifer Quaid, an associate professor at the University of Ottawa’s law faculty.

“The bureau has done a pretty good job. They go to a lot of trouble explaining the factual situation, which of course tracks how the U.S. has described it, but they’ve also adapted it to the Canadian context.”

Google has faced three major antitrust cases in the United States in the past year. In the first case, a federal judge in Washington, D.C., ruled in August that Google violated U.S. antitrust law through its dominant search business, after the Justice Department alleged the company paid billions of dollars to be the default search engine on phones and browsers. Google says it intends to appeal the decision.

The second case, in which closing arguments were heard on Monday, targets Google’s advertising technology business, with the Justice Department seeking to break up parts of its ad tech operations. The third case, decided in December 2023 by a jury in California, found Google’s app store practices are anti-competitive — a decision the company is challenging in court.

“We got all these things coming from multiple different angles,” said Dwayne Winseck, a professor at Carleton University’s school of journalism and communication in Ottawa.

“Each one of these decisions talks about several things in common — the acquisition of a monopoly through a series of ownership acquisitions over the last 15 years and that it has built protective moats around the dominant market power or monopolies that it has acquired,” he said.

“These defensive strategies have had severe consequences downstream on everyday users and particularly on businesses and third parties that rely on search, advertising and platform distribution for their very livelihood.”

Company has ‘abused its dominant position’

The Competition Bureau case targets the systems that control how websites sell advertising space and how advertisers bid to place their ads.

“Google has abused its dominant position in online advertising in Canada by engaging in conduct that locks market participants into using its own ad tech tools, excluding competitors and distorting the competitive process,” Matthew Boswell, the bureau’s commissioner of competition, is quoted as saying in a news release.

The agency’s investigation resulted in several specific allegations about Google’s conduct. The company allegedly tied its various ad tech tools together, making it difficult for customers to use competing services. It gave its own tools preferential access to advertising inventory and took negative margins in certain circumstances to disadvantage rivals.

The bureau also found that Google dictated terms to publisher customers about how they could transact with rival ad tech tools.

Google disagrees with these claims. “Our advertising technology tools help websites and apps fund their content, and enable businesses of all sizes to effectively reach new customers,” Dan Taylor, vice-president of Global Ads at Google, said in a statement. The company maintains that advertisers and publishers have plenty of choices in the market.

Changes to law may be no match for vast data

The case will test recent changes to Canada’s Competition Act. “The commissioner is drawing on recent modifications to the abuse of dominance provisions that were conducted in 2022,” the University of Ottawa’s Quaid said. These changes transformed how regulators can tackle digital market problems.

The 2022 amendments gave the Competition Bureau stronger tools to address market dominance. They increased maximum penalties for abuse of dominance to $10 million ($15 million for subsequent violations) or three times the benefit gained from anti-competitive conduct, whichever is greater. If that benefit can’t be determined, the penalty can be up to three per cent of the company’s annual worldwide revenues.

The law now explicitly defines anti-competitive behaviour as actions intended to have a “predatory, exclusionary, or disciplinary negative effect” on competitors or harm competition overall.

Particularly relevant to the Google case, the amendments added new factors for assessing competition impact, including network effects, the entrenchment of leading companies’ market positions and the effects on non-price competition like quality and consumer choice.

“We’ve had a raft of changes to the Competition Act that would have never been possible five, 10 years ago,” Winseck, of Carleton University, said.

However, Quaid said even major changes to Google’s business might not immediately reduce its market influence. “They will have to modify how they do things, maybe they will have to get out of certain lines of business, but is that going to diminish their overall economic footprint in the short to medium term? I don’t think so,” she said.

She pointed to Google’s vast data holdings as the fundamental challenge — one that may lie beyond the reach of traditional competition law. “What’s valuable is the information they gather and store and are able to constantly repackage and make into new revenue streams…. But I don’t know that any antitrust agency has a way of dealing with that directly.”

“What they have to do now is they have to reach for the big hammers in the regulatory toolkit,” Winseck said, referring to the global cases against Google. Possible remedies could include forcing Google to “spin off Google Chrome” or “bust up and unwind acquisitions that are decades old — AdMob, DoubleClick,” he said.

What’s at stake?

For Canadian publishers and advertisers, the stakes are high. The bureau argues that Google’s practices have inflated advertising costs while reducing publishers’ revenues. A successful case could create more competition in advertising technology, potentially lowering costs and giving website owners more choices in how they monetize their content.

The case now moves to the Competition Tribunal, where both sides will present their evidence.

Quaid emphasized that these are unproven allegations. “Caveat one is I’ve only read the bureau’s arguments. I don’t know what Google’s counterarguments are…. And caveat two is we have not seen the evidence on which this is based. These are allegations, which must be proved in court.”

The timeline for the case remains uncertain, but similar cases in other countries have taken years to resolve. Meanwhile, Canadian businesses continue to navigate a digital advertising market that the Competition Bureau says is fundamentally unfair, as regulators grapple not just with Google’s current market position but its underlying sources of power in the digital economy.

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