Lawsuit: Google and Facebook executives conspired to manipulate ad auctions

According to a newly edited (and less heavily redacted) version of a 2020 multistate lawsuit targeting Google and led by Texas Attorney General Ken Paxton.

why is it important: While a previous version of the lawsuit also alleged collusion between the two companies, the newly released documents shed new light on the effort, dubbed “Jedi Blue”, as well as the extent of the involvement of the leaders.

Details: While the lawsuit itself deals with a range of Google’s practices, much of the attention has focused on its discussions with Facebook, particularly those around the automated method of buying and selling ads. online known as “header bidding”.

  • With header bidding, publishers let many ad exchanges bid on their inventory at once before their ad servers release it to the highest bidder. This theoretically helps publications sell more and at more competitive rates.
  • The complaint essentially alleges that Google negotiated an agreement with Facebook to support its alternative to the header auction, called an “open auction”.
  • The header auction was a threat to Google because it allowed publishers to offer their inventory to bid on so they could make more money, instead of forcing them to use Google’s open auction technology. Google, in which Google would take a share of ad serving. costs.

In an email, Facebook COO Sheryl Sandberg calls the work with Google “strategically important” and at another point emails suggest CEO Mark Zuckerberg had to approve the arrangement.

  • “Google CEO Sundar Pichai also personally signed the terms of the agreement,” according to the lawsuit.
  • The lawsuit also cites a 2015 email in which “Google employees expressed concern that Google’s exchange was ‘in fact competing’ with other ad exchanges.”
  • The latest version of the lawsuit can be found here (PDF).

Backtrack: Paxton first announced that he was suing Google in December 2020, accusing Google of abusing its market power to rig auctions to place advertisements and raise prices for online advertising.

  • Paxton is leading the pursuit, joined by a number of other Republican state AGs.
  • That initial lawsuit accused Google of entering into a secret deal with Facebook to avoid competing with each other’s ad tech companies, though details of the allegations have been heavily redacted.

be smart: A controversial figure in his own right, Paxton separately faces complaints from people who worked under him, accusing him of corruption, abuse of power and other crimes. He also led the failed multi-state effort to have the Supreme Court invalidate election results in crucial swing states and hand the 2020 election to President Trump.

What they say“The unredacted complaint in the ad tech lawsuit should put an end to the argument that Google wins simply because its products are ‘better,'” said David Chavern, CEO of News Media Alliance, a trade group that represents thousands of newspapers.

  • “Anti-competitive side deals and market manipulation don’t count as innovation. Google has been deliberately cutting news publishers’ finances for years and then asking us to say thank you,” he added.

The other side: Companies, meanwhile, dispute the idea that their effort was secretive or inappropriate.

  • “We sign hundreds of deals each year that don’t require CEO approval, and this was no different,” a Google representative said in a statement. “And contrary to AG Paxton’s claims, the fact of this deal was never a secret – it was well publicized.”
  • “Meta’s non-exclusive auction agreement with Google and similar agreements we have with other auction platforms have helped increase competition for ad placements,” a Meta spokesperson said. in an email. “These business relationships allow Meta to deliver more value to advertisers while compensating publishers fairly, which translates to better results for everyone.”

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