US accuses Google of illegal methods to push up ad prices

WASHINGTON (Reuters): A lawyer for the U.S. Justice Department pressed a Google executive on Wednesday about techniques the search and advertising giant used to push up online advertising prices in an allegedly unfair way.

Testifying at a once-in-a-generation antitrust trial in Washington where the United States has accused Google of abusing its dominance of search and some advertising, Google executive Adam Juda said the company uses a formula, which includes the quality of an ad, to decide who wins auctions that are used to place advertising on websites.

The Justice Department has accused Google of manipulating online auctions – a multibillion dollar industry dominated by Google – with these formulas to favor its own bottom line.

Justice Department attorney David Dahlquist asked Juda if he agreed with a document that Google had prepared for the European Union, which said that the company can “directly affect pricing through tunings of our auction mechanisms.” Juda said he did not.

Pressed on if “tuning” can impact pricing, Juda said, “They can.” Juda’s testimony began on Tuesday and continued into Wednesday.

Juda said one thing that can be “tuned” is a rough formula that gives an ad a long-term value, or LTV, based on the bid given, the potential click-through rate or how many people will likely click on it and the quality of the advertisement and website associated with it.

Dahlquist asked Juda if they had introduced changes to ad sales in a way that raised the cost-per-click by a consumer that advertisers pay. “I believe that’s fair,” said Juda.

But Wendy Waszmer, a lawyer for Google, asked Juda on Wednesday afternoon on if there were ways that his ads quality team could raise prices unilaterally. “No,” Juda responded.

Google’s advertising business has been criticized by advertisers and website publishers for a lack of transparency, with both accusing Google of siphoning off too much revenue.

The testimony on advertising is a change from previous testimony that has focused on the billions of dollars that Google has spent to keep its search engine the default on smartphones and other devices.