Google, Facebook Had Illegal Deal to Rig Ad Market, Says Texas Antitrust Suit

Alphabet Inc.’s Google reached an illegal deal with Facebook Inc. to maintain a chokehold over the lucrative digital advertising market, according to a lawsuit filed by 10 states led by Texas.

The complaint, which targets Google’s central role in the buying and selling of display ads across the web, was filed in federal court in Texas Wednesday.

“Google repeatedly used its monopolistic power to control pricing, engage in market collusions to rig auctions in a tremendous violation of justice,” Texas Attorney General Ken Paxton said in a video posted on Twitter announcing the lawsuit.

“If the free market were a baseball game, Google positioned itself as the pitcher, the batter and the umpire,” Paxton said.

The case marks the second antitrust action against the search giant after the U.S. Justice Department filed a landmark monopolization case against the company in October.

Texas and the states said Google came to dominate the display advertising market not through innovation, but by relying on exclusionary tactics that shut out competition.

“The Supreme Court has warned that there are such things as antitrust evils,” the complaint says. “This litigation will establish that Google is guilty of such antitrust evils, and it seeks to ensure that Google won’t be evil anymore.”

A Google spokesperson called Paxton’s suit “meritless” and said the company had “invested in state-of-the-art ad tech services that help businesses and benefit consumers.”

“Digital ad prices have fallen over the last decade,” the spokesperson added. “Ad-tech fees are falling too. Google’s ad-tech fees are lower than the industry average. These are the hallmarks of a highly competitive industry.”

The states accused Google of entering into an illegal agreement with Facebook, its biggest competitor in the advertising market, to manipulate the online auctions where ad space is bought and sold. The agreement hasn’t been previously been made public.

Facebook threatened to compete against Google with its own marketplace and support a type of auction favored by publishers. Facebook then backed off in return for Google giving Facebook “information, speed and other advantages” in auctions run by Google for publishers’ mobile apps, according to the complaint.

Facebook didn’t immediately respond to a request for comment on the allegations.

Many of the details of their arrangement are redacted from the complaint, including Google’s internal code name for the deal, which was inspired by a Star Wars character, the complaint says.

Pressure on dominant technology companies has escalated under President Donald Trump. Last week, Facebook was sued by the Federal Trade Commission and a coalition of states that want to break up the company by unwinding its acquisitions of Instagram and WhatsApp, deals the government says were part of a campaign to illegally crush competition.

The push is expected to continue under President-elect Joe Biden as the power of internet platforms has become a rare issue that’s raised concerns from both parties.

Paxton had also joined the Justice Department’s case in October, along with 10 other Republican state attorneys general, in the most significant monopolization case in more than two decades. The federal case focuses on Google’s position in online search, alleging that it used exclusive deals to extend its monopoly.

The Google adtech business, which sells services that handle almost every step a digital ad takes on its journey from a brand’s creative team to a consumer’s screen, generated more than $21 billion in revenue in 2019.

Paxton disclosed on Tuesday he would hire the law firm of mass-torts practitioner Mark Lanier, who won a multi-billion verdict against Johnson & Johnson in 2018, to lead the trial team. Paxton also said he plans to hire the firm Keller Lenkner LLC, which has sued Facebook. Ken Starr, the former independent counsel whose probe led to President Bill Clinton’s impeachment, will also be a part of the team from Lanier’s firm, Bloomberg reported.

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