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Google and Facebook colluded to undermine competition in advertising, according to documents uncovered by the New York Times. Obtained during an antitrust lawsuit in Texas, the documents lift the lid on ‘Jedi Blue’ – a cloak and dagger sweetheart deal between two tech giants that monopolize online advertising.

 

So what’s the deal?

  • Google and Facebook are accused of abusing their market position to strike a backroom deal to further their business interests.

  • The agreement is said to have seen Facebook win more favorable terms when bidding for advertising in return for its support for Google’s Open Bidding platform for selling adverts over header bidding – where advertising space is auctioned across multiple ad exchanges.

  • Google has long agitated against this method of buying advertising, maintaining that it slows down web pages and causes batteries to drain faster, as well as elevating the risk for fraud and billing errors.

  • As a result, Facebook gained more time to bid for adverts and was able to strike direct billing deals with sites hosting the ads. The underhand arrangement is also said to have seen Google furnish its rival with its data to enable Facebook to better target audiences.

  • In a quid pro quo, Facebook consented to bid on a minimum of 90% of ad auctions when it could identify users, with a pledge to spend at least $500m a year.

  • Such terms handed Facebook an unfair advantage over Google’s other advertising partners according to the New York Times, which spoke with six of these to help build its case. This meant Facebook was almost guaranteed to win a consistent number of adverts.

  • Evidence of collusion was first obtained from documents filed as part of an antitrust complaint lodged by the Texas attorney general Ken Paxton, amid suspicion the tech pair were getting too cozy.

  • This relationship even included a clause that committed both companies to ’cooperate and assist’ in the event of any investigation into their business practices.

 

Why it matters

  • Should apparent collusion be corroborated it would further undermine confidence in digital advertising – particularly if a guaranteed win rate is confirmed.

  • In response to the allegations, Google contends that its agreement has been misrepresented, while Facebook maintains that such deals serve to enhance competition.

  • Irrespective of the truth of the matter, the lack of transparency shown by both parties will do little to instill confidence in competitors or legislators.

  • Addressing the claims directly, Google director of economic policy Adam Cohen wrote: “Our agreement with Facebook Audience Network (FAN) simply enables them (and the advertisers they represent) to participate in Open Bidding.

  • “Of course we want FAN to participate because the whole goal of Open Bidding is to work with a range of ad networks and exchanges to increase demand for publishers’ ad space, which helps those publishers earn more revenue.

  • “AG Paxton inaccurately claims that we manipulate the Open Bidding auction in FAN’s favor. We absolutely don’t. FAN must make the highest bid to win a given impression. If another eligible network or exchange bids higher, they win the auction.

  • “FAN’s participation in Open Bidding doesn’t prevent Facebook from participating in header bidding or any other similar system. In fact, FAN participates in several similar auctions on rival platforms.”

  • Both Google and Facebook have been in the eye of an antitrust storm, with Google fending off multiple lawsuits from the Department of Justice and three dozen states centered on its near-monopoly of search and search advertising, as well non-search advertising.

  • Facebook, meanwhile, has been embroiled in lawsuits filed by the Federal Trade Commission as well as attorney generals from dozens of states that accuse the company of abusing its command of the digital marketplace and engaging in anti-competitive behavior.