Did Google and Facebook Executives Conspire to Drive up Ad Auction Prices? Amended Lawsuit Says Yes.

Further details of the multi-state lawsuit against Google and Facebook have recently emerged as the 2020 lawsuit was newly amended. The updated lawsuit accuses Google and Facebook of abusing their marketing power in 2015 to artificially inflate advertising auction prices to increase revenue, while agreeing to avoid competing with one another’s lucrative ad-tech businesses. Led by Texas Republican Attorney General Ken Paxton, fellow Republican AGs in Arkansas, Idaho, Indiana, Kentucky, Mississippi, Missouri, North Dakota, South Dakota, and Utah have joined together to accuse the digital giants of market manipulation. While AG Paxton calls the actions market manipulation, Google and Facebook claim the lawsuit is meritless.

Several documents support the accusations of collusion, as they outline the methods and show how executives at each company were involved.

At the heart of the pricing complaint is how Google and Facebook responded to the practice of automated header bidding. In the header bidding process, ad exchanges bid on inventory simultaneously before servers release it to the highest bidder. This helps publishers sell more ads, at more competitive rates.

The header bidding practice threatened Google’s ad revenue stream because publishers could sell their inventory directly instead of using Google’s ad serving technology, of which Google takes a cut. To combat these potential losses of ad commissions, Google developed an alternative called open bidding.

The lawsuit alleges that Google worked out a deal with Facebook to support its open bidding process instead of header bidding, even suggesting that Google CEO Sundar Pichai personally signed off on the terms of the agreement. One smoking gun email from Facebook COO Sheryl Sandberg referred to the arrangement with Google as a “big deal strategically.” Other emails indicated that CEO Mark Zuckerberg would need to OK the deal.

Newspaper trade group representative David Chavern, CEO of the News Media Alliance, summed up the sentiment of many publishers with his comments: “Anti-competitive side deals and market manipulation don’t count as innovation. Google has been purposely suppressing news publishers’ finances for years and then asking us to say thank you.”

Google and Meta (formerly Facebook) say their efforts were neither secret nor inappropriate, citing examples of public announcements such as this blog that predated the lawsuit by years. According to a Meta spokesperson, “these business relationships enable Meta to deliver more value to advertisers while fairly compensating publishers, resulting in better outcomes for all.”