January 20, 2022

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Google and Facebook’s top execs allegedly approved dividing ad market among themselves

Google and Facebook’s top execs allegedly approved dividing ad market among themselves
The alleged 2017 deal between Google and Facebook to kill header bidding, a way for multiple ad exchanges to compete fairly in automated ad auctions, was negotiated by Facebook COO Sheryl Sandberg, and endorsed by both Facebook CEO Mark Zuckerberg (now with Meta) and Google CEO Sundar Pichai, according to an updated complaint filed in…

The alleged 2017 deal between Google and Facebook to kill header bidding, a way for multiple ad exchanges to compete fairly in automated ad auctions, was negotiated by Facebook COO Sheryl Sandberg, and endorsed by both Facebook CEO Mark Zuckerberg (now with Meta) and Google CEO Sundar Pichai, according to an updated complaint filed in the Texas-led antitrust lawsuit against Google.

Texas, 14 other US states, and the Commonwealths of Kentucky and Puerto Rico accused Google of unlawfully monopolizing the online ad market and rigging ad auctions in a December, 2020, lawsuit. The plaintiffs subsequently filed an amendment complaint in October, 2021, that includes details previously redacted.

On Friday, Texas et al. filed a third amended complaint [PDF] that fills in more blanks and expands the allegations by 69 more pages.

The fortified filing adds additional information about previous revelations and extends the scope of concern to cover in-app advertising in greater detail.

Presently, there are three other US government-backed unfair competition claims against Google ongoing: a federal antitrust lawsuit from the US Justice Department, a challenge from Colorado and 38 other State Attorneys General (filed around the same time as the Texas-led complaint), as well as a competition claim focused on Android and the Google Play Store filed last July.

The third amendment complaint delves into more detail about how Google allegedly worked “to kill header bidding,” which Google is said to have viewed as an existential threat to its position as an ad market gatekeeper. It elaborates on the negotiation between Google and Facebook to convince Facebook to stop supporting header bidding in exchange for favorable treatment. The deal, referred to as “Jedi Blue” internally and eventually as “Open Bidding” when discussed publicly, allegedly allowed Facebook to win ad auctions even when outbid by competitors.

The third amended complaint explains, “Facebook’s Chief Operating Officer [REDACTED] was explicit that ‘[t]his is a big deal strategically’ in an email thread that included Facebook CEO [REDACTED]. When the economic terms had taken their form, the team sent an email addressed directly to CEO: ‘We’re nearly ready to sign and need your approval to move forward.’ Facebook CEO wanted to meet with COO [REDACTED] and his other executives before making a decision.”

The resulting 2018 Google-Facebook “Jedi Blue” deal was, it’s claimed, ultimately signed by Philipp Schindler, SVP and head of Google advertising sales and operations and Facebook’s COO [REDACTED] – known to the world as Sheryl Sandberg, a member of Facebook’s board of directors who formerly served as Google VP of Global Online Sales and Operations.

“Google CEO Sundar Pichai also personally signed off on the terms of the deal,” the court filing says.

The expanded filing includes new allegations about how Google used Accelerated Mobile Pages to hinder header bidding.

What’s more, the revised filing adds support for the claim that a Google ad program called Dynamic Revenue Share or DRS cheated to help Google win more valuable ad impressions.

“DRS manipulated Google’s exchange fee after soliciting bids in the auction and after peeking at rival exchanges’ bids to win impressions it would have otherwise lost,” the revised complaint says.

And the complaint now contends that Google personnel admitted the unfairness of the DRS system: “Google internally acknowledged that DRS made its auction untruthful: ‘One known issue with the current DRS is that it makes the auction untruthful as we determine the AdX revshare after seeing buyers’ bids and use winner’s bid to price itself (first-pricing)….'”

Google has previously rolled its eyes at the Texas et al. lawsuit. In January, Adam Cohen, director of economic policy at Google, devoted a blog post to rebutting the allegations.

On the subject of header bidding, Cohen says Google created its alternative, Open Bidding, because header bidding has drawbacks.

“You won’t read this in AG Paxton’s complaint, but the technology has real drawbacks: Header bidding auctions take place within the browser, on your computer or mobile phone, so they require the device to use more data in order to work,” he wrote. “This can lead to problems like webpages taking longer to load and device batteries draining faster. And the multilayered complexity of header bidding can lead to fraud and other problems that can artificially increase prices for advertisers, as well as billing discrepancies that can hurt publisher revenue.”

Google also maintains a competition website through which the company can tell the world how “Google’s free products help people and small businesses across America.”

In an email to The Register, a Google spokesperson disputed the claims made in the latest complaint but didn’t respond to a request to detail specific inaccuracies.

“Despite Attorney General Paxton’s three attempts to re-write his complaint, it is still full of inaccuracies and lacks legal merit,” Google’s spokesperson said. “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. We’ll continue to fight this meritless lawsuit in court.”

Not to mention the other similar lawsuits. ®

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