Google refutes Competition Bureau’s claims in ad market suit

Google is firing back at the Competition Bureau following a suit the watchdog filed against it alleging anti-competitive conduct, with the search giant now arguing that the bureau’s claims are flawed, unlawful, and without merit. After a years-long investigation, the competition watchdog filed an application with the Competition Tribunal in November accusing the Alphabet Inc. subsidiary of exploiting its dominance in the advertising technology industry to give itself an unfair advantage. The bureau is asking for Google to be forced to sell off two of its ad tech tools, pay a fine, and be banned from continuing the alleged conduct. In its response to the suit, filed Feb. 14, Google takes issue with the remedies sought by the bureau – which include a monetary penalty equal to three times the value of the benefit derived from the alleged anti-competitive practices, or three per cent of Google’s worldwide gross revenues. The company says the requested fine could amount to billions of dollars, while saying forcing it to sell off parts of its company would allegedly violate trade agreements between Canada and the United States. “A financial penalty of that magnitude is constitutionally impermissible in an otherwise civil proceeding of this nature and contrary to the public interest. The very threat of such a fine will diminish or negate the incentives of Google, Google Canada and many other businesses to invest and innovate, thus undermining consumer welfare,” the search giant wrote in its filing. Google contends that the Competition Bureau’s understanding of the ad tech market is incorrect, asserting that the “relevant markets” that Google is accused of abusing are “fictitious.” According to the Competition Bureau, in the world of online web advertising, publishers often sell ad space on their websites to advertisers through automated auctions, using platforms known as ad tech tools. The collection of tools used throughout the buy-and-sell process are known as the ad tech stack. “No other single ad tech provider has Google’s scale or reach across the ad tech stack, with over 200 billion Canadian web ad transactions flowing through Google’s ad tech tools in 2022,” said the bureau in its application, stating that the company owns four of the largest online ad tech services used in Canada. The Competition Bureau alleges that Google illegally tied its buying and selling tools together to maintain its market dominance, distorting auction dynamics by “giving its own tools preferential access to ad inventory, taking negative margins in certain circumstances to disadvantage rivals, and dictating the terms on which its own publisher customers could transact with rival ad tech tools.” The ad tech tools in question include what the bureau calls a “publisher ad server” formerly known as Doubleclick for Publishers (DFP), which Google says is used by publishers to manage their ad inventory; a tool called Google Ads, which Google says is used by advertisers to purchase ad inventory from publishers; and AdX, an ad exchange that supports the buying and selling of ad inventory through an automated auction process. The Competition Bureau wants Google to sell off DFP and AdX. Google says it combined the functionalities of both tools into a single user interface called “Google Ad Manager” in 2018. According to Google, the market is “far broader” than the bureau states, encompassing all types of digital advertising, such as mobile apps and connected TVs, and not just web advertising. It also denies the bureau’s view that the sell-side, buy-side, and exchange side of advertising are separate product markets. “Google faces stiff competition in the ad tech industry on numerous fronts, including from large and sophisticated companies with enormous resources such as Microsoft, Meta, Amazon, and many others,” the company asserts, adding that its share of the market has declined over time. “To avoid this reality, the commissioner attempts to gerrymander the ‘relevant market’ to a narrow subset of digital advertising and then splice a single, two-sided market into three artificial ones,” Google alleges. “Assumptions made by the commissioner to reach such a highly artificial result defy commercial reality. “This tribunal should dismiss this application on this basis alone,” the company asserts. Google argues its actions, including interoperability between its ad tech tools, were driven by legitimate business justifications and are pro-competitive, benefiting publishers, advertisers, and users. The company also denies unlawfully restricting access to rival ad exchanges. “Google does not have any substantial degree of market power in any properly defined relevant market in Canada, North America, or the world,” the company asserts, even in the bureau’s allegedly false view of the market. As such, Google also argues that its conduct has not substantially lessened or prevented competition in any relevant market. Competition Bureau is violating Google’s constitutional rights, company alleges In addition to its response to the bureau’s application, Google also filed with the tribunal a notice of constitutional question in support of its arguments that the remedy sought by the watchdog is so large that the company is entitled to protections under the Canadian Charter of Rights and Freedoms and the Bill of Rights. “Depending upon the manner in which it is calculated,” the financial penalty that the Competition Bureau seeks “will vastly exceed the quantum of any fine that has ever been imposed in a penal proceeding in Canada,” alleges Google. “By virtue of its nature and magnitude, the financial penalty … constitutes a consequence of a true penal character. As a result, it is incumbent upon the state — in this case, the bureau, the commissioner and this tribunal — to respect and safeguard protections guaranteed to Google, including, without limitation, rights guaranteed by the Charter and Bill of Rights.” Google alleges that, under such protections, the evidence used by the bureau in its application was “improperly compelled,” as the company was essentially forced to be a witness against itself in the watchdog’s investigation. The search giant also argues its rights are being violated because the bureau is seeking to “retroactively punish” Google with penalties that were not previously available to the commission until the Competition Act was amended in 2022 and 2023, based on conduct alleged to have occurred before those amendments were enacted. “Because the amendments to of the Competition Act were substantive rather than procedural in nature … the commissioner must both prove his claims of abuse of dominance and limit the quantum of any financial penalty in this application based on the wording of the Competition Act as it existed before June 2022,” Google argues. “Violations of the rights of Google and Google Canada under the Charter and the Bill of Rights have already occurred, and will inevitably occur hereafter if the commissioner’s application is permitted to proceed,” Google maintained. The company also took aim at the government for the Competition Act amendments, alleging that by providing “the tribunal with the power to impose true penal consequences in otherwise civil proceedings,” without providing protections “guaranteed” by the Charter and the Bill of Rights, “Parliament exceeded its constitutional authority and ignored longstanding self-imposed guardrails provided for under the Bill of Rights.” In an email to The Wire Report, Competition Bureau spokesperson Sarah Brown said that the watchdog “stand behind” the findings of its investigation. She declined to comment further but noted that the bureau has 14 days to file its reply to Google’s arguments. None of the allegations has been tested in court. phalentm@thewirereport.ca

Google refutes Competition Bureau’s claims in ad market suit

Court |
By Phalen Tynes-MacDonald
| February 21, 2025

Unlock all the Canadian telecom, broadcasting and digital media news you need.

FREE TRIAL

SUBSCRIBE

Inside The Wire Report

Information

Hill Times Publishing

Get in Touch With Us

Google refutes Competition Bureau’s claims in ad market suit

Court | By Phalen Tynes-MacDonald | February 21, 2025

Unlock all the Canadian telecom, broadcasting and digital media news you need.

FREE TRIAL

SUBSCRIBE

Related Stories

Rogers fights back in dispute with Competition Bureau over ‘Infinite’ data plans

OPINION: More competition does not require new competitors

Competition Bureau suing Google for alleged anti-competitive ad practices

The Big Fix: Vass Bednar, Denise Hearn tackle competition in Canada in new book

Reuse & Permissions

Inside The Wire Report

Information

Hill Times Publishing

Get in Touch With Us

Court |
By Phalen Tynes-MacDonald
| February 21, 2025