After a claim circulated that Google colluded with archrival Facebook Inc. in an illegal deal to manipulate auctions for online advertising, which is an industry that the two companies dominate, Texas Attorney General Ken Paxton on Wednesday filed an antitrust lawsuit against Alphabet Inc.'s Google.
Google even reportedly named the secret pact after a Star Wars character.
Based on the lawsuit, any collaboration between two competitors of such magnitude should have set off the loudest alarm bells in terms of antitrust compliance. Apparently, it did not.
However, the American multinational technology company disputed the allegation that it had made an illegal move.
Facebook, on the other hand, declined to release any comment on the issue.
Google responded in an emailed statement, saying that these allegations are inaccurate as FAn or the Facebook Audience Network is only one of the more than 25 companies participating in their Open Bidding program. Google added that there was nothing exclusive regarding their involvement as they are not receiving any special data.
The complaint centers on the automated ad technology called header bidding that routes digital ads into a live auction. It is designed to increase the money for web publishers, such as news outlets, who can get it for their real estate ad. With more bids from the widest array of sources, rates can go up.
From a variety of smaller advertising technology companies, by 2016, 70 percent of major publishers were already using header bidding.
It also posed a threat to Google's ad exchange system because the approach opened up the bidding process to other exchanges.
So Google created a program to 'secretly let its own exchange win,' according to the Texas suit.
The said program was named after a character in the Star Wars Saga, but the state redacted the said name, Bloomberg reported.
For Facebook, the social network introduced header bidding in 2017 for its ad-selling tools, and a year later, the American technology conglomerate brought it to its apps.
The tool also allowed Facebook to take small cuts of ads sold across the web and even on mobile phones, not just on its properties like Instagram.
The program also directly competed with Google; however, it did not last long as Facebook pulled back from the practice.
The Texas suit mentioned that because Google cut a deal that is signed at the highest level, it prompted Facebook to sell ads on mobile apps easier. It gave advantages in ad auctions, Reuters reported.
The deal was given a codename that relates to Star Wars, and despite the suit being redacted, especially the name, Wall Street Journal reported that it was 'Jedi Blue.'
Texas said in the complaint that Google understood the severity of the threat to its position if Facebook were to enter the market and support header bidding.
Texas also mentioned that to diffuse this threat, Google made overtures to Facebook.
The suit was also backed by several states accusing Google of tricking publishers into buying ads through Google services instead of header bidding.
Related article: 48 US States Sue Facebook for Alleged Abuse of Market Power
