Mon, 21 Oct 2019

A nationwide group of states opened an investigation into whether Google's advertising practices violate antitrust laws, targeting the heart of the search giant's business.

Attorneys general from 48 states, led by Ken Paxton of Texas, and from the District of Columbia and Puerto Rico announced the probe Monday on the steps of the Supreme Court in Washington, citing concerns that the company is raising costs for advertisers and questioning whether consumers are getting the best information from search results.

"This is a company that dominates all aspects of advertising on the internet and searching on the internet," Paxton said.

The investigation is the latest sign of the rapidly expanding antitrust investigations confronting Google along with other giant US technology companies. Government officials have grown increasingly skeptical of the dominance of the industry's biggest players and are taking preliminary steps to rein them in after a mostly hands-off approach.

The sheer size of the investigating group, which includes every state except California and Alabama, poses a threat to Google. The states have a track record of taking on major companies such as cigarette makers and banks over harms to consumers and wresting fines that can amount to billions of dollars.

Multi-state investigation

"It's amazing that they have 50 AGs that are part of the multi-state investigation," said Charlotte Slaiman, a senior policy counsel for consumer advocacy group Public Knowledge. "That indicates a greater number of staff resources that can be brought to bear. Any investigation into the advertising practices of Google is going to take a lot of time."

Shares of Google parent Alphabet, fell as much as 1% following the announcement and closed down less than 1% at $1 205.27 in New York. The stock is trading about 7% below a record reached in late April. Google is based in Mountain View, California.

"We are acting as one today in regards to launching what I know will be a fair and full investigation," said District of Columbia Attorney General Karl Racine.

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California Attorney General Xavier Becerra's office declined to comment on why it didn't join the coalition of states. A spokeswoman for Alabama didn't respond to a request for comment.

The announcement by the states comes days after New York State Attorney General Letitia James announced she is leading a separate coalition of states in a wide-ranging investigation of Facebook, which is based in Menlo Park, California. The other states probing Facebook are Colorado, Florida, Iowa, Nebraska, North Carolina, Ohio and Tennessee, plus the District of Columbia, according to James's statement.

The Google investigation focuses on digital advertising, the main way the search giant and parent Alphabet Inc. make money. The company reported $116.3bn in ad revenue last year, which represented 85% of overall sales. Paxton said the group has issued a civil investigative demand to Google to gather information about the company's advertising practices.

Consumer harm

Google critics cheered news of the investigation. Yelp, which has long complained about the search company's practices, said biased search results that steer users to Google's own products harm consumers.

"The time has come for the tech giants to be held accountable for violating our antitrust laws," Public Citizen, a government-transparency group, said in a statement. "Google's anticompetitive behavior is a serious problem for our economy and our democracy, and the state attorneys general clearly get that."

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Attorneys general Monday said Google search results are skewed toward its own products and those of advertisers rather than the best information.

"When my daughter is sick and I search online for advice or doctors, I want the best advice from the best doctors not the ones - not the doctor and not the clinic - who can spend the most on advertising," Arkansas Attorney General Leslie Rutledge said.

Google declined to comment beyond a Friday blog post by Google's chief lawyer, Kent Walker, who said the company planned to work constructively with regulators.

The Justice Department is also probing Google's role in the online advertising market and its search operations, Bloomberg has reported, although it's inquiry is separate from the state efforts. Google disclosed on Friday that the department had issued civil investigative demands, which are akin to subpoenas, for all documents in prior antitrust probes.

Racine, the lone Democrat at the press conference, said the probe was off to a good start, though it's too soon to say how long it might last. He noted the earliest inquiries go back to 2016 when he and Utah's Sean Reyes called for the Federal Trade Commission to consider reopening its investigation into Google's search practices.

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