NEW DELHI: It's no longer a secret that Big Tech giants compete and collude with each other to sustain their monopolies.
Facebook CEO Mark Zuckerberg and Google chief executive Sundar Pichai secretly approved an allegedly illegal deal in 2018 to cement their dominance over the online advertising market, documents filed in a US court have revealed.
The records, part of an anti-trust lawsuit by a coalition of US states, reveal highly controversial details about the search giant's alleged collusion with Facebook to carve up the digital advertising market space.
The allegations
The complaint, filed by Texas and 14 other US states, alleged that Google had reached out to Facebook after the social media company emerged as a powerful online ad rival in 2017.
According to the suit, the IT giants allegedly struck “an unlawful agreement” to give Facebook “information, speed and other advantages” in the ad auctions Google ran in exchange for the social network backing down from its competitive threats.
It accused Google of monopolising the advertising technology market, the tools used to buy, sell and display the online ads that fund many websites.
The New York Post, citing the filings, reported that Google "duped" publishers and advertisers for years about how it prices and executes its ad auctions, creating secret algorithms that hiked prices for buyers while deflating revenue for some advertisers.
"Google used the extra cash it got from inflated ad prices to improperly expand its monopoly," the report said.
DRS
According to a report in Wired, Google allegedly used 3 programmes: Project Bernanke, Dynamic Revenue Share (DRS) and Reserve Price Optimisation-to give itself undue advantage over competitors.
Under its "Project Bernanke", Google allegedly used to game the "second-price" auction. The winner would be paying the amount equal to the second highest bidder, while the publisher would be paid at the rate of third highest bidder and Google would keep the difference to itself.
We are all familiar with the “Decision Review System (DRS)“ in cricket. The DRS, a technology-based system, helps the third umpire assist on-field umpires to validate/correct their decisions. Similarly, under Google's DRS, the company would peek at all the bids and adjust its commission rate in order to win an auction, the Wired reported.
Under its Reserve Price Optimisation, Google used bid history pocket more money from advertisers.
'Jedi Blue' deal
The suit, being led by Texas attorney general Ken Paxton, was originally filed in December 2020 and updated last year in November. The new unredacted version was filed earlier this week.
The agreement was internally dubbed by Google as "Jedi Blue," the color being a reference to Facebook's logo, according to the filing.
The suit said Google and Facebook swore themselves to secrecy about the terms of their agreement since no rational developer would choose to have its auctions rigged by the market's two largest buyers.
The deal was signed by Facebook's chief operating officer Sheryl Sandberg and a Google senior vice president in September 2018.
The unredacted court filings reveal that Pichai and Zuckerberg also personally signed off on the terms of the deal.
In fact, Sandberg is said to have played a crucial role in getting the agreement approved, calling it a “big deal strategically" in one of the emails to Zuckerberg.
“We’re nearly ready to sign and need your approval to move forward,” Sandberg and her team told Zuckerberg in an email cited by the complaint.
Denials
Google spokesperson Peter Schottenfels has rejected the multistate suit as a "hapless legal maneuver" from attorney general Paxton.
The IT giant said that despite Paxton’s three attempts to rewrite his complaint, it is still "full of inaccuracies and lacks legal merit".
"Our advertising technologies help websites and apps fund their content and enable small businesses to reach customers around the world. There is vigorous competition in online advertising, which has reduced ad tech fees, and expanded options for publishers and advertisers," the company said.
Google said it will seek dismissal of the case next week.
Facebook's parent company Meta also played down the allegations and denied that the arrangement was illegal.
"Meta's non-exclusive bidding agreement with Google and the similar agreements we have with other bidding platforms, have helped to increase competition for ad placements," Meta spokesperson Christopher Sgro said in a statement.
Original lawsuit
The original December 2020 lawsuit was filed around the same time the US Department of Justice submitted its own antitrust complaint against Google.
The DOJ claimed Google has long broken the law in its quest to remain “the gateway to the internet,” and has disadvantaged competitors in an effort to sell more online search ads.
Last month, more than 200 newspapers filed suit against Facebook and Google, who were accused of unfairly manipulating the advertising market and siphoning away their revenue.
Both Facebook and Google face legal challenges from regulators who allege that they have grown too powerful in the tech space by gaining an unfair advantage over other companies.
(With inputs from agencies)
