Download This PaperConsequences of Dissolution of Google’s Digital Advertising Business: The Remedy Requested in the Google Open Web Display Advertising Case
49 Pages Posted: 20 Jul 2023 Last revised: 21 Jan 2024
Date Written: January 19, 2024
Abstract
This paper examines an open question about the potential impact of the relief requested by the U.S. Department of Justice (DOJ) in its case that alleges Google’s management of its digital advertising business violated the Sherman Act: Would the relief increase innovation and output or instead decrease it? A model of U.S. total business sales is estimated, with comparison of ordinary least squares and instrumental variables regressions, and with examination of multicollinearity and the sensitivity of the estimates to alternative specifications. The simulation of the model for the counterfactual scenario with the dissolution of Google’s ad tech stack as requested in DOJ’s 2023 complaint finds that for 2019 the cost for the U.S. manufacturing, wholesale trade, and retail trade sectors would have been between three and four percent of gross domestic product. The finding in the multi-sector model of the strong performance of the advertising placed through Google—its impact on business sales and value added—is not inconsistent with interpretations of good performance with respect to the various antitrust standards encompassed by a consumer welfare standard or a standard based on total economic welfare. The question about the effects of the requested relief remains open, but the strong performance in the multi-sector model supports the view that Google’s conduct promoted innovation and increased output, not monopolistic restriction of output.
Keywords: antitrust; Google; growth, innovation, monopolization; open web display advertising; Sherman Act; technological progress, U.S. Department of Justice
JEL Classification: K21, L16, L41, M37, O3, O4
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