Google accused of giving unfair advantage to Facebook in online ads

By Rahul Vaimal, Associate Editor
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The two biggest players in online advertising, Facebook and Google, used a series of deals to unfairly strengthen their market power, alleges Texas and nine other American states a lawsuit against Google.

US-based tech giants Google and Facebook compete heavily in internet ad sales and together own over half of the market globally. The two players agreed in a publicized deal in 2018 to start giving Facebook’s advertiser clients the option to place ads within Google’s network of publishing partners, the complaint alleged. The complaint accuses that executives at the highest level of the companies signed off on the deal.

For instance, a shoe blog that uses software from Google to sell ads could end up generating revenue from a footwear retailer that bought ads on Facebook.

Google reached similar partnerships with other advertising companies as part of an effort to maintain market share that was internally codenamed Project Jedi, a source with direct knowledge of the matter said.

But what Google did not announce publicly is that it gave Facebook preferential treatment, the complaint alleged. Facebook agreed to back down from supporting competing software, which publishers had developed to dent Google’s market power, the complaint said. “Facebook decided to dangle the threat of competition in Google’s face and then cut a deal to manipulate the auction,” it said, citing internal communications.

In return, the states said, Facebook gained several advantages, including access to Google data and policy exceptions that allowed its clients to unfairly position more ads than other Google partner advertisers could.

The complaint also alleged that Google and Facebook engaged in fixing prices of ads and have continued to cooperate, though it is unclear just how and when the companies allegedly used their “market allocation agreement.”

However, it said that “given the scope and extensive nature of cooperation between the two companies, Google and Facebook were highly aware that their agreement could trigger antitrust violations. The two companies discussed, negotiated, and memorialized how they would cooperate with one another.”

Peter Schottenfels, Google spokesman, described the accusations of the states about the ongoing partnership as false and said Facebook does not receive special data. Facebook did not offer any comments.

The states did not accuse Facebook of wrongdoing in the complaint.

The US Department of Justice also has been investigating the agreement between the companies as part of its antitrust probe into Google, people familiar with the investigation said. But the Justice Department, which sued Google over separate conduct in October, has yet to bring any allegations related to the 2018 deal.