Google, Facebook CEOs oversaw illegal ad auction deal that gave Facebook an advantage, states allege

Chief executives of Google and Facebook personally oversaw an illegal 2018 deal that advantaged Facebook on Google’s ad auctions, a group of state attorneys general led by Texas allege in an amended antitrust complaint against Google on Friday.

Facebook, recently renamed Meta, is not listed as a defendant in the complaint.

The complaint also alleges Google manipulated its ad pricing tiers under a secret program called Project Bernanke that removed second-place bids on ad auctions. It allowed Google to pocket part of the difference between first and third-place bids while also harming publishers that rely on ad revenue and who could have made more from higher bids.

Under the agreement with Facebook, Google and Facebook illegally collaborated to decrease prices paid to publishers, cut out rival ad networks and manipulate ad auctions operated by publishers, the complaint says.

The new filing shows just how far up the arrangement, alleged in earlier filings, went. Facebook Chief Operating Officer Sheryl Sandberg, whose name is redacted in the complaint, called the agreement “a big deal strategically” in an email including CEO Mark Zuckerberg, whose name was also redacted. Sandberg and Google CEO Sundar Pichai signed off on the deal’s terms, the states allege, noting Sandberg was previously a high-ranking executive in Google’s advertising business. Sandberg’s signoff was earlier reported by The Wall Street Journal.

According to the third amended complaint in the case, Google made the deal after Facebook announced a move that would help publishers and advertisers get around Google-imposed fees for advertising through its services. The states alleged Google feared a long-term threat to its ad server monopoly if enough buyers were able to bypass its fees.

An internal Facebook document quoted in the complaint allegedly said that partnering with Google would be “relatively cheap compared to build/buy and compete in zero-sum ad tech game.” Google allegedly code-named the arrangement “Jedi Blue,” referencing Facebook’s blue logo.

The group of 16 states and Puerto Rico alleged that this and other actions Google took in the online advertising space sought to illegally preserve its monopoly power, violating the Sherman Antitrust Act.

Google has previously strongly rejected the claims in the Texas-led lawsuit, with Director of Economic Policy Adam Cohen calling it in a 2021 blog post a “misleading attack.” A Google spokesperson said Friday that the company would file a motion to dismiss next week and said that the case remains “full of inaccuracies and lacks legal merit.”

The Google spokesperson called states’ characterization of the Facebook arrangement inaccurate, saying, “We sign hundreds of agreements every year that don’t require CEO approval, and this was no different.”

The spokesperson added that the agreement was publicized at the time, linking to a Facebook blog post from 2018 naming Google as one of its new bidding technology partners.

Shares of Meta were up more than 1% midafternoon on Friday while Google parent Alphabet rose nearly 1%.

The agreement, according to the Google spokesperson, simply allows the Facebook Advertising Network and advertisers it represents “to participate in Open Bidding, just like over 25 other partners do. That helps increase demand for publisher ad space and helps publishers earn more revenue, as we explain here.”

A Meta spokesperson said Friday in a statement that its “non-exclusive bidding agreement with Google and the similar agreements we have with other bidding platforms, have helped to increase competition for ad placements. These business relationships enable Meta to deliver more value to advertisers while fairly compensating publishers, resulting in better outcomes for all.”

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