GOOGL Alphabet Inc

By Brent Kendall and Drew FitzGerald 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (March 7, 2020).

WASHINGTON -- AT&T Inc. is working with the Justice Department as the government considers whether to bring an antitrust case against Alphabet Inc.'s Google, two years after the telecommunications giant was at loggerheads with the department over its acquisition of Time Warner, according to people familiar with the matter.

AT&T has conferred several times with Justice officials to share its views that Google is stifling competition in the advertising sector, where AT&T is seeking to make inroads with its Xandr division, the people said.

Those discussions have included an audience with the top DOJ officials overseeing the probe, they said, and the Dallas company also is cooperating with a group of state attorneys general, led by Texas, that are investigating Google's ad practices.

Google has said the ad marketplace remains competitive, with the search giant competing against companies large and small to power digital advertising across the web.

It isn't uncommon for rival companies and industry customers to speak with the Justice Department during an antitrust review, and the department has spoken with many companies during its Google probe, including Wall Street Journal publisher News Corp, a longtime Google critic, and others such as Yelp, DuckDuckGo and Oracle Corp.

AT&T in recent years has said it wants to take on Google and Facebook Inc. in the fight for advertising dollars. It has built its Xandr advertising division to leverage its wireless subscriber base, its pay-TV customers and the stable of entertainment content it acquired when it bought Time Warner in 2018.

Two years ago, it was AT&T that was embroiled with the Justice Department, which filed suit against the company over its proposed acquisition of Time Warner, alleging the merger would harm competition in pay-TV markets. AT&T won the case and the merger went ahead.

"We talk to advertisers. You're hard-pressed to find an advertiser who says, I would like to spend more with Facebook and Google," AT&T Chief Executive Randall Stephenson testified during the 2018 trial.

In court, he and other AT&T officials touted their plans to take on the tech giants in advertising as a counterargument to DOJ's claims that the Time Warner transaction would be anticompetitive.

The telecom and media company is also a major advertiser in its own right, spending large sums to market everything from cellphone plans to Warner Bros. movies, further complicating its relationship with Google, the world's biggest digital advertising company.

AT&T was deeply critical of the Justice Department's decision to challenge the Time Warner deal, and its motivation in doing so, but the company's recent dialogue with the department underscores the reality that adversaries often cooperate when their interests align.

Google's practices in the ad-tech business are a key focus of the Justice Department's investigation. In recent months, the department has been posing increasingly detailed questions -- to Google's rivals and executives inside the company itself -- about how Google's third-party advertising business interacts with publishers and advertisers, The Wall Street Journal reported last month.

AT&T became a player in the digital ad market through its 2018 purchase of AppNexus, a technology provider for buyers and sellers of online ads -- and a vocal Google critic. A few months after closing the Time Warner deal, it formally launched Xandr as the company's new advertising company, encompassing AppNexus and other AT&T advertising assets. It acquired video ad-targeting service Clypd a year later, strengthening a division that benefits from its parent's access to more than 170 million mobile, broadband and satellite-TV customer connections.

Xandr is pitching itself as a potential counterweight in the ad marketplace to Google and Facebook. Xandr's revenue has continued to grow but still accounts for only about 1% of its parent's revenue, which topped $181 billion in 2019 before interdivision eliminations.

AT&T and Xandr officials have voiced concerns about an array of Google tactics that discourage advertisers from doing business with Google's competitors, including rules that required advertisers to use Google's tools for purchasing video ads on YouTube, according to some of the people familiar with the matter.

A Xandr executive was among the participants last year in a Justice Department workshop examining competition issues in television and digital advertising.

AT&T for years has maintained an uneasy relationship with Alphabet. The tech giant's Google Fiber division has competed with AT&T in some home-broadband markets, while its YouTube TV service grabbed a large share of U.S. households swapping traditional pay-TV service for online channels, hurting results at AT&T's DirecTV.

But the two companies have struck alliances in other areas. AT&T agreed to integrate Android technology into its TV set-top boxes, giving Google's preferred operating system a foothold in a still massive pay-TV customer base. AT&T's newest TV service uses hardware with Google Assistant built into its remote control.

The setup gives AT&T exclusive control of information about what its customers are watching while they use its TV service, a valuable input for its advertising business. At the same time, Alphabet will get insights into AT&T subscribers' use of other apps downloaded from its Google Play store.

Keach Hagey and John D. McKinnon contributed to this article.

Write to Brent Kendall at brent.kendall@wsj.com and Drew FitzGerald at andrew.fitzgerald@wsj.com

(END) Dow Jones Newswires

March 07, 2020 02:47 ET (07:47 GMT)

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