Google defends its partnership with Fb and denies states’ claims to an anti-competitive benefit

Sundar Pichai, CEO of Alphabet, gesticulates during a meeting at the annual meeting of the World Economic Forum (WEF) on January 22, 2020 in Davos.

(Photo by Fabrice COFFRINI / AFP) (Photo by FABRICE COFFRINI / AFP via Getty Images)

Google on Sunday denied allegations made by a group of attorneys general, led by Texas’s Ken Paxton, that the ad purchase agreement with Facebook was anti-competitive.

In a blog post, Google’s director of economic policy, Adam Cohen, described the lawsuit by 10 Republican-led states as “misleading.” The statement is Google’s most comprehensive response to date to the lawsuit, which is also the only Facebook to name a “co-conspirator” (although Facebook is not named as a defendant). The company faces two other complaints from a bipartisan group of attorneys general and the Justice Department.

The statement followed an article in the New York Times earlier Sunday that described further details of the alleged agreement, citing an unedited draft of the complaint. The Wall Street Journal previously reported the unedited draft in December.

According to this version of the complaint, as described by the Times, a Google executive saw an “existential threat” in Facebook’s 2017 announcement that it was testing a move to ad space. At the time, Facebook was considering a project for header bids, a form of ad buying that publishers could use to bypass their reliance on Google’s platforms.

However, that project ended when the two reached an agreement in 2018 that Facebook would partner in Google’s Open Bidding project, which allows competing ad sharing alongside its own but charges a fee for winning bids. This agreement was different from others offered to partners in the alliance, according to members interviewed by the Times, who refused to be identified for fear of jeopardizing their relationship with Google.

According to documents and interviews submitted by the Times, Google allegedly gave Facebook more time to bid for ads than other members of the alliance. Google also allegedly offered Facebook more insight into who would end up on ads and a guaranteed “win rate” on bids, the Times reported. The two agreed to “work together and support one another” in the event the agreement was investigated for competition concerns, the filing suggests.

In the blog post responding to the allegations, Cohen defended open bidding as a tool that benefits publishers. Cohen wrote that Open Bidding fixes some of the issues with header bidding like slow page loading and that header bidding is still a growing market, citing a 2019 eMarketer report.

Cohen noted that Google’s agreement with Facebook was widespread at the time, and that Facebook and its advertisers can only participate in open bidding.

“We absolutely do not,” Cohen manipulated auctions in favor of Facebook. The agreement doesn’t prevent Facebook from placing header bids, yet it still requires the company and its advertising network to bid the highest in order to win, Cohen wrote. He also said that Google’s fees to advertisers are below the industry average and that there is a lot of competition in this area.

“Partnerships like this are common in the industry, and we have similar agreements with several other companies,” a Facebook spokesman said in a statement. “Facebook continues to invest in these partnerships and create new ones that will help increase competition in ad auctions to get the best results for advertisers and publishers. Any suggestion that these types of agreements harm competition is unfounded.”

A day after the Texas-led group filed its lawsuit against Google, a non-partisan coalition of 38 states and territories sued Google over other antitrust concerns, including allegedly exclusive contracts and discriminatory behavior towards competitors on their search results pages. The Justice Department and a group of Republican-led states previously sued Google over some of the same treaty concerns.

Facebook has separately faced complaints from the Federal Trade Commission and attorneys general from 48 states and territories alleging it violated the antimonopoly law.

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