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Sundar Pichai

Google CEO Sundar Pichai
Beck Diefenbach/Reuters

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  • Unsealed court documents have revealed a string of explosive new allegations against Google.
  • Google boasted it had stymied privacy regulation, and struck a deal with Facebook that was “suboptimal” for publishers, it is claimed.
  • One employee likened Google owning the AdX ad exchange network to “Goldman or Citibank” owning the NYSE.

In December 2020, Google’s advertising business became the subject of a massive antitrust lawsuit led by Ken Paxton, the Texas Attorney General.

Paxton headed up a coalition of states who claimed the tech giant used “exclusionary tactics” to distort competition in the online ad market.

The suit offered new details about the mechanics of Google’s ad auction systems, as well as a little-known partnership it had struck with Facebook in 2018 that was codenamed “Jedi Blue.” The complainants said the tie-up between the two tech giants amounted to price-fixing and harmed competition. You can an Insider analysis of the lawsuit here.

On Friday, the courts made an unredacted copy of the complaint public for the first time, revealing further allegations that Google had boasted about “slowing down” privacy regulation in Europe, and knew its deal with Facebook was “suboptimal” for publishers. 

Much of the suit hinges on Google’s apparently desperate attitude to “header bidding” — an alternative to its own ad auctioning practices that one Google employee described as an “existential threat.” 

Following its $3.1 billion acquisition of DoubleClick in 2008, Google became the market leader in offering ad-serving technology to publishers. It also owns the biggest online ad marketplace, or ad exchange, AdX. Google’s participation in multiple sides of digital ad auctions is the basis for much of the lawsuit, which states: “Google is pitcher, batter, and umpire, all at the same time.”

Header bidding was developed by a roster of independent ad tech players that compete with Google as a way to democratize the way ad slots on publishers’ sites get filled, and maximise their ad revenue. It also circumvented Google’s ability to operate on multiple sides of the ad-bidding process, per the suit. Google takes between a 22% and 42% cut on ad dollars flowing throw its exchange, the suit said, and was so desperate to nuke header bidding tech that one employed proposed dropping its fees to zero.

The Texas lawsuit alleges Google’s “Jedi Blue” deal with Facebook was among the questionable tactics employed over the past few years to hedge the risk that header bidding posed.

In response to the lawsuit, a Google spokesperson said that just because Texas AG Ken Paxton had said something, that “doesn’t make it true.” 

“This lawsuit is riddled with inaccuracies. In reality, our advertising technologies help websites and apps fund their content, and enable small businesses to reach customers around the world,” they added.

“There is vigorous competition in online advertising, which has reduced ad tech fees, and expanded options for publishers and advertisers. We will strongly defend ourselves from his baseless claims in court.”

Below are five of the biggest new claims included in the unsealed antitrust suit. Insider approached Google for comment.

Google is said to have boasted about ‘slowing down’ European privacy regulation.

Google Texas AG unredacted complaint ePrivacy

Google is alleged to have undermined privacy concerns.
UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK

Google is said to be colluding with other Big Tech companies, including the likes of Apple, Facebook, and Microsoft, in joint efforts to slow the rise of privacy legislation around the world. 

Texas AG Ken Paxton claims to have obtained a copy of a memo prepared by Google ahead of one such meeting, in which the company said it hoped the group could “find areas of alignment and narrow gaps in our position and priorities on child privacy and safety.” 

The suit also quoted Google as having said it had already “been successful in slowing down” privacy regulations in the EU. 

European officials have fined Google for anti-competitive behaviour — over search, shopping, and Android — three times in as many years: first for $2.7 billion in 2017again for $5 billion in 2018, and once more for $1.7 billion in 2019. The firm has repeatedly rejected the EU’s findings, however, and met officials in court to appeal the first fine in February 2020

One Google employee compared its AdX exchange to a situation where ‘Goldman or Citibank owned the NYSE.’

Google owning AdX is like Citi, Goldman owning NYSE lawsuit quote

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK

“Google operates the largest electronic trading market in existence,” the lawsuit read.

It stated that while financial exchanges like the NYSE and NASDAQ matched “millions of trades daily,” Google’s ad exchange processed about 11 billion online ad spaces every 24 hours.

Google’s dominance of the online ads industry, the suit said, allowed it to “use its powerful position on every side of online display markets to unlawfully exclude competition.”

The suit quoted one unnamed senior Google employee as saying “the analogy would be if Goldman or Citibank owned the NYSE.” In other words, a situation where a dominant bank owned the dominant stock exchange.

The tech giant knew its deal with Facebook was ‘suboptimal’ for publishers.

Facebook CEO Mark Zuckerberg Testifies Before The House Financial Services Committee

Facebook CEO Mark Zuckerberg
Chip Somodevilla / Getty Images

In another supposed attempt to curtail header bidding, Google launched its own Exchange Bidding program.

Some feared the program, later known as Open Bidding (and codenamed as “Jedi”), would still rig the ad market in the tech giant’s favor.

Open Bidding allowed multiple ad exchanges to participate in Google’s ad auctions at once, using its Dynamic Allocation product.

Google said it would maximize the money publishers could make from their ads and fix some other problems with header bidding, like longer page load times and the draining of devices’ battery life.

Facebook, with its billions of users and thousands of advertisers, was an extremely important client for Google to get on board with Open Bidding.

The Open Bidding partnership between the pair was announced publicly, but not all the details were out in the open. As part of the agreement, Facebook was required to make “commercially reasonable efforts” to bid on 90% of the bid requests it received from Google.

What’s new, however, is the allegation that Google insiders were actively aware that the deal was not a win for customers. 

The filings read: “In Google’s words, the Jedi program ‘generates suboptimal yields for publishers and serious risks of negative media coverage if exposed externally.” 

Google sought to create a ‘walled garden’ online with Project NERA

According to the suit, Google wanted to make it more difficult for publishers to track their users.

The plan, dubbed Project NERA, allegedly aimed to leave publishers even more dependent on Google’s own services. 

One way the firm planned to execute this was to slowly “create a closed ecosystem out of the open internet.” It began by asking users to log into its popular Chrome web browser, then automatically log them into other Google services, such as Gmail and YouTube. Logging into Gmail or YouTube would likewise log them into Chrome.

In the words of the suit, Google got these users to give it permission to track them across the open web, allowing it to “circumvent reliance on cookie-tracking technology,” and drove down the value of publishers’ own ad space in the process.

This made it easier for Chrome to track users moving from one publisher’s site to the next, and meant Google could go back to publishers and offer them the chance to “tap into its now-deeper drove of user data” — for a fee. 

“Google would continue to use Chrome to collect data about their users to sell more Google ads at the expense of the publishers’ ad space,” the suit read.

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