Antitrust breach? 10 US states sue Google over advertisement deal

Texas and nine other US states have sued Google, accusing it of working with Facebook Inc in an unlawful manner that violated antitrust law to boost its already-dominant online advertising business.

The states asked a judge on Wednesday for the Alphabet Inc-owned company, which controls a third of the global online advertising industry, to compensate them for damages and sought “structural relief”, which is usually interpreted as forcing a company to divest some of its assets.

The Texas lawsuit is the second big complaint from regulators against Google and the fourth in a series of federal and state lawsuits aimed at reining in alleged bad behaviour by Big Tech platforms that have grown significantly in the past 20 years.

Google called the Texas lawsuit “meritless”. Facebook did not immediately respond to requests for comment by the Reuters and Bloomberg news agencies.

Wednesday’s action raises the legal stakes for Google, which is expected to face a third antitrust lawsuit from more than 30 attorneys general, according to a source familiar with the matter.

In its lawsuit, Texas asks a judge to find Google guilty of breaking antitrust law and to order the violations to stop. It accuses Google of abusing its monopoly over the digital advertising market, allowing its own exchange to win advertising auctions even when others bid higher and overcharging publishers for ads.

It also accused Google of working with Facebook. The two companies compete heavily in internet advertisement sales and together capture more than half of the market globally.

“As internal Google documents reveal, Google sought to kill competition and has done so through an array of exclusionary tactics, including an unlawful agreement with Facebook, its largest potential competitive threat,” the lawsuit said.

Global pressure

The lawsuit, filed in the Eastern District of Texas, also hews closely to concerns publicly raised by Rupert Murdoch-owned News Corp and other media companies to regulators in the United States and Europe over the last two years.

It said Google lowered its fees to near-zero to gain dominance among publishers, used deceptive tricks to broker transactions between publishers and advertisers and extracted high fees from both parties for playing referee.

Under proposed new European Union rules unveiled this week, US and other large technology platforms that treat their own services more favourably, at the expense of rivals, could be forced to sell businesses and pay billion-dollar fines.

The EU’s new Digital Markets Act would not allow companies deemed to be so-called “gatekeepers” to rank their offerings above those of rivals on their own platforms, or use competitors’ data to compete with them.

US internet giants are also facing regulatory scrutiny in Australia. Its government finalised plans on Tuesday to make Facebook and Google pay the country’s media outlets for news content, a world-first move aimed at protecting independent journalism that has been strongly opposed by the internet giants.

Under laws to go to parliament this week, Australian Treasurer Josh Frydenberg said the Big Tech firms must negotiate with local publishers and broadcasters how much they pay for content that appears on their platforms. If they cannot strike a deal, a government-appointed arbitrator will decide for them.

Free market

In a video posted on Twitter, Texas Attorney General Ken Paxton said: “If the free market were a baseball game, Google positioned itself as the pitcher, the batter and the umpire.”

Paxton, who faces allegations he abused the power of his office and committed bribery, also recently contested the results of the November 3 US presidential election in several battleground states. The Supreme Court rejected that suit.

A Google spokeswoman said the company will defend itself from the Texas lawsuit’s “baseless claims in court”. She added: “Digital ad prices have fallen over the last decade. Advertising tech fees are falling too. Google’s ad tech fees are lower than the industry average. These are the hallmarks of a highly competitive industry.”

Paxton, along with 10 other state attorneys general, also joined a US Department of Justice lawsuit against the company in October that accused the $1 trillion California-based company of illegally using its market power to hobble rivals.

The nine states that joined Texas on Wednesday are Arkansas, Indiana, Kentucky, Missouri, Mississippi, South Dakota, North Dakota, Utah and Idaho. All have Republican prosecutors.

Google advertising sales account for more than 80 percent of Alphabet’s revenue. But most of the sales and the bulk of Alphabet’s profits come from Google’s high-margin operation of placing text advertisements above search results.

The business targeted on Wednesday – placing advertisements on partner apps and websites – matters far less to Google.

Alphabet reported quarterly digital advertising revenue of $37.1bn in its latest financial report. Alphabet shares ended 0.2 percent lower at $1,757.19 on Wednesday. Facebook shares, which briefly turned negative after details of the Texas lawsuit were published, reversed losses and ended little changed