The European Commission, the European Union’s executive branch, today announced an antitrust investigation into Google LLC’s ad business that will scrutinize its display advertising unit, YouTube and Android.

Notably, EU officials also plan to probe Google’s high-profile efforts to replace third-party cookies in Chrome. The search giant hopes to replace them with a machine learning technology called FLoC that promises to improve privacy for users. However, the technology has drawn criticism from browser makers and others that worry it may not deliver the promised benefits. 

The key question the European Commission hopes to answer is whether Google, using its strong market position, gave its online advertising services an unfair advantage at the expense of competitors. Officials will scrutinize several key components of Google’s online advertising business as part of the investigation. 

“We are concerned that Google has made it harder for rival online advertising services to compete in the so-called ad tech stack,” said European Commission Executive Vice President Margrethe Vestager. “A level playing field is of the essence for everyone in the supply chain. Fair competition is important — both for advertisers to reach consumers on publishers’ sites and for publishers to sell their space to advertisers, to generate revenues and funding for content.”

The first Google business officials will look at is YouTube, which generated close to $20 billion in revenue for the search giant last year, mainly from ads. Large brands coordinate advertising campaigns they run on the platform using a Google Service called Ad Manager. The antitrust investigation will look into “potential restrictions placed by Google on the way in which services competing with Google Ad Manager are able to serve online display advertisements on YouTube.”

The probe will also cover a number of related Google products that brands commonly use to advertise on YouTube. Those products are the search giant’s DV360 campaign management service, the AdX marketplace through which brands buy advertising space they use in campaigns and Google Ads. Officials will investigate concerns that the company has built the services to work better with another one than with competing offerings.

The second major focus of the probe is Google’s display advertising business, which helps brands buy display ads such as promotional banners on publishers’ websites. Google display advertising products use data that the search giant collects about users to personalize ads. The investigation will examine “restrictions placed by Google on the ability of third parties, such as advertisers, publishers or competing online display advertising intermediaries, to access data” useful for ad personalization. 

Also on the agenda is a pair of upcoming changes Google has announced recently to the way it collects user data for advertising. The search giant says the changes will improve privacy for consumers by limiting brands’ ability to track their online activity.

The first move under scrutiny concerns Google’s Android operating system. Android apps track users for advertising purposes using a technology called Advertising ID that Google plans to update later this year with an opt-out option, meaning users will receive the ability to disable tracking. The EU will look into how the change may affect “online display advertising and online display advertising intermediation markets.”

For Chrome, Google has announced similar plans to stop the use of third-party tracking cookies, which serve a role comparable to that of Advertising ID on Android. The search giant intends to replace third-party cookies with a technology called FLoC that will run directly in users’ Chrome installations. FLoC uses machine learning to let advertisers continue to personalize ads to users’ interests as they did before, but without directly accessing data about individual users.

The technology has drawn criticism from competing browser makers, the Electronic Frontier Foundation and others, which argue that it won’t increase but rather will decrease user privacy online. The EU plans to study if Google’s Privacy Sandbox project, the internal initiative through the company is developing FLoC, will harm the “display advertising and online display advertising intermediation markets.”

The EU will be “looking at Google’s policies on user tracking to make sure they are in line with fair competition,” Vestager said.

If Google is found to violate EU antitrust law in one or more of the areas officials are examining, it could potentially face fines. The European Commission may additionally order Google to change the business practices that investigators find to be anticompetitive, which could have a significant impact on not just the search giant but the entire online ad market. Google is the industry’s top player, with ad revenue of nearly $150 billion in 2020.

In addition to advertisers, Apple Inc. is another company that can potentially be expected to track the antitrust probe closely. Google’s decision to add an opt-out option to the Advertising ID feature in Android came after Apple made the comparable ad tracking mechanism inside iOS opt-in.  

The EU probe raises the possibility that the iPhone maker could face similar scrutiny over its mobile advertising  practices. Importantly, however, Apple is in a much different situation than Google because it’s not a dominant player in the online advertising market. 

Photo: Google