Google, Facebook Chiefs Signed Off On Secret Deal, Lawsuit Says

Google chief executive Sundar Pichai personally approved a deal with Facebook aimed at killing off competition in the advertising technology market, a group of US states have alleged in a newly unsealed antitrust complaint.

The lawsuit, led by Texas attorney general Ken Paxton and supported by 15 other states and Puerto Rico, accuses Google of abusing its dominance in the market to increase its profits.

The 2018 deal, which Google codenamed “Jedi Blue”, was signed by Facebook chief executive Mark Zuckerberg and chief operating officer Sheryl Sandberg, according to the complaint.

“Google CEO Sundar Pichai also personally signed off on the terms of the deal,” it adds.

Image credit: Facebook

‘Big deal’

Sandberg allegedly helped negotiate the agreement and urged Zuckerberg to approve it, calling it “a big deal strategically”.

The Facebook team that negotiated the deal sent Zuckerberg an email telling him, “We’re nearly ready to sign and need your approval to move forward.”

The two companies denied the deal was illegal. Google said the lawsuit was baseless and “full of inaccuracies”.

The states originally filed their suit against Google in December 2020, updating it with a heavily redacted version of their most recent complaint in November. The complaint was refiled with fewer redactions after a New York judge ruled additional details should be made public.

Google and Facebook, now Meta Platforms, are the No. 1 and No. 2 players in the online advertising market.

When online publishers began using an alternative system for selling their ad space, Google allegedly worked to undermine it by creating a similar system it controlled, the lawsuit says.

Competition

The states argue Google reached a deal with Facebook to join its effort to “kill” the publishers’ competing plan, which Facebook had previously supported.

“Google quickly realised that this innovation substantially threatened its exchange’s ability to demand a very large – 19 to 22 percent – cut on all advertising transactions,” the states’ filing said.

“Following the agreement, Facebook curtailed its involvement with header bidding in return for Google giving Facebook information, speed, and other advantages.”

The deal included an agreement on how often Facebook would win the publishers’ auctions, according to the filing.

Google also allegedly misled buyers and sellers of ad space about the precise nature of the auctions they were participating in, allowing Google to make more money in the process, and used at least three programs to manipulate ad auctions to coerce publishers and advertisers into using Google’s tools.

‘Lacks legal merit’

Google said the complaint was “still full of inaccuracies and lacks legal merit”, adding that the agreement did not require Pichai’s approval.

“We sign hundreds of agreements every year that don’t require CEO approval, and this was no different,” the company said. It said it would ask the judge to dismiss the case.

Facebook has not been named in the lawsuit.

The case is one of several arising from investigations by the federal government and groups of states into online platforms. Meta, Apple and Amazon are also facing antitrust inquiries.

Matthew Broersma

Matt Broersma is a long standing tech freelance, who has worked for Ziff-Davis, ZDnet and other leading publications

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