Could a secret deal with Facebook spell serious trouble for Google?
With Google already the subject of several antitrust probes, the stakes have been upped by allegations that the search giant has been colluding with Facebook over advertising.
Court documents obtained by the New York Times reveal further details of what state attorneys generals, led by Texas’ Ken Paxton, are calling an illegal price-fixing deal, known as Jedi Blue.
Under the deal, it's alleged, Facebook agreed to drop a plan to change the way it sold online advertising and instead support Google’s Open Bidding platform.
Unlike header bidding, whereby ad space is auctioned across multiple ad exchanges, the Google platform is claimed to offer faster load times and better security.
"Header bidding auctions take place within the browser, on your computer or mobile phone, so they require the device to use more data in order to work," says Adam Cohen, Google's director of economic policy, in a blog post.
Quid pro quo
However, as a result of the deal, Facebook apparently gained more time to bid for ads, and was able to strike direct billing deals with websites. It also got more insight into consumers.
In return, it's said, Facebook agreed to bid on at least 90 percent of ad auctions when users could be identified, with a minimum spend of $500 million.
Other ad partners have told the New York Times that they didn't get the same terms. However, Cohen denies there was preferential treatment.
"AG Paxton inaccurately claims that we manipulate the Open Bidding auction in [Facebook Audience Network] FAN’s favor," he says.
"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."
The lawsuit also alleges that Google uses privacy concerns as an excuse to steal a march on its competitors - for example, by cutting off publishers’ user IDs.
And, it suggests, the company is happy enough to violate privacy when, for example, it signed a deal with Facebook that gave it access to millions of Americans’ end-to-end encrypted WhatsApp messages, photos, videos and audio files.
Again, Cohen denies this, claiming the company has strict controls over ad tracking tools like cookies and ad identifiers, and that it's 'committed to operating our advertising business in a way that gives people transparency into and control over how their data is used'.
The key to the case
Under Section 1 of the Sherman Antitrust Act, companies are forbidden from striking agreements that 'unreasonably restrain trade' - and it's on this point that the latest lawsuit is likely to hinge.
And certainly, between them, Google and Facebook now have a near stranglehold over the advertising industry. In a report published earlier this month, the non-profit American Economic Liberties Project found that 85 percent of online advertising space is controlled by the pair.
However, Facebook argues that it's not anti-competitive.
"Partnerships like this are common in the industry, and we have similar agreements with several other companies," says a spokesperson.
Nevertheless, pressure is mounting, with both companies - and Google in particular - already under scrutiny over antitrust issues. Facebook's in trouble with the Federal Trade Commission and dozens of states for alleged anti-competitive behaviour, while Google's fighting lawsuits from the US Department of Justice and from numerous states over its control of the search market.
And it's this DoJ case against Google that may have the best chance of success: it mirrors closely the case against Microsoft in the late 1990s which, though it didn't bring about the breakup of Microsoft, did result in a settlement.
Google looks set for changes - it's just a question of how and when.