10 US states accuse Google of colluding with Facebook to manipulate online ad market

Lawsuit accuses Google of violating antitrust and consumer protection laws.

10 US state attorneys-general have jointly filed a lawsuit against Google, accusing the tech giant of acting anti-competitively in digital ad markets.

The complaint, which focuses on Google's role in buying and selling display ads online, was filed by Texas attorney-general Ken Paxton on behalf of a 10-state coalition.

"Google's internal documents belie the public image of brainy Google engineers having fun at their sunny Mountain View campus while trying to make the world a better place. Rather, to cement its dominance across online display markets, Google has repeatedly and brazenly violated antitrust and consumer protection laws," the coalition said in its legal complaint [PDF].

"Its modus operandi is to monopolise and misrepresent."

Among the accusations are that Google colluded with Facebook to reduce the competitiveness of technologies, such as header bidding, which directly impacted the effectiveness of Google's ad exchange. 

Header bidding, adopted in 2014, routes ad inventory to multiple neutral exchanges each time a user visits a web page in order to return the highest bid for the inventory. Publishers used header bidding as it permitted them to route inventory to multiple exchanges and, by 2016, about 70% of major online publishers in the United States had adopted the innovation.

According to the legal complaint, Facebook considered competing against Google with its own exchange, but it eventually came to an agreement with Google not do so while also curtailing its involvement with header bidding. In return, Google gave Facebook information, speed, and other advantages in the auctions that Google runs for publishers' mobile app advertising inventory in the United States, the complaint alleges.

Other anti-competitive tactics that Google allegedly used to shut down competition from header bidding included deceiving exchanges into bidding through Google instead of header bidding and telling them Google would stop front running their orders when in fact it would not. 

The lawsuit also accuses Google of allegedly restricting publishers from using header bidding, which requires JavaScript, by creating Accelerated Mobile Pages (AMP). According to the attorneys-general, Google designed AMP to force publishers to route rival exchange bids through Google's ad server so that Google could continue to peek at rivals' bids and trade on inside information. 

They also said in the complaint that Google falsely told publishers adopting AMP would enhance load times, despite knowing that this was not true for certain publishers. 

"Some publishers did not adopt AMP because they knew their pages actually loaded faster than AMP pages," the legal complaint said.

Google also allegedly gave non-AMP ads an artificial one-second delay in order to both make AMP pages appear faster and slow down header bidding, according to the complaint.

In addition, the coalition claims that Google allegedly signed another exclusive agreement with Facebook to give it access to millions of Americans' end-to-end encrypted WhatsApp messages, photos, videos, and audio files. Although, it was quickly pointed out on Twitter that WhatsApp has the optional ability to store backups on Google Drive.

"Google is a trillion-dollar monopoly brazenly abusing its monopolistic power, going so far as to induce senior Facebook executives to agree to a contractual scheme that undermines the heart of competitive process," Paxton said. "In this advertising monopoly on an electronically traded market, Google is essentially trading on 'insider information' by acting as the pitcher, catcher, batter, and umpire, all at the same time."   

Paxton, who is leading the lawsuit and a former Republican Texas State Senator, is facing an indictment on felony securities fraud charges. He also attempted to overturn the 2020 Presidential Election results in Pennsylvania, Michigan, Georgia, and Wisconsin, but this was rejected by the US Supreme Court last week.

This case is the second antitrust lawsuit that has been brought against Google in recent months, with the US Department of Justice (DoJ) filing a monopolisation case against the company in October. It also follows various federal antitrust investigations conducted by the FTC, House Judiciary Committee, and the DoJ on Google and other big tech companies. 

The findings from the House Judiciary Committee's probe, released two months ago in a 450-page report, found Google holds a monopoly, with search dominance "protected by high entry barriers".

Such anti-competitive tactics, the report listed, include contractual restrictions and exclusivity provisions to extend Google's search monopoly, such as in the case of its 2005 purchase of the Android operating system.

"Google exploits information asymmetries and closely tracks real-time data across markets, which -- given Google's scale -- provide it with near-perfect market intelligence," the report said. "In certain instances, Google has covertly set up programs to more closely track its potential and actual competitors, including through projects like Android Lockbox.

Worldwide, governments are pushing for increased oversight of big tech companies, with the European Commission proposing two new pieces of legislation yesterday. If passed, the EU would have the power to compel big tech companies to take down harmful content and open up competition, otherwise they risk paying hefty fines.

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