Texas Accuses Google and Facebook of an Illegal Conspiracy

“If you can prove an agreement between two firms, once you have proof of that agreement, it is called per se illegal,” said Sally Hubbard, director of enforcement strategy at the Open Markets Institute, an anti-monopoly think tank. “This is why antitrust enforcers love to bring Section 1 cases, because if you can find evidence of more than one firm agreeing to fix prices, agreeing not to compete, agreeing to allocate a market—once you prove that agreement, it’s automatically illegal. It ends there.”

Google says there’s nothing improper about the arrangement. A company spokesperson said that Facebook is one of more than 25 companies that participate in Google’s Open Bidding program and doesn’t receive any special privileges.

Does Texas have evidence to the contrary? It’s tough to tell, because the complaint is maddeningly redacted. Unlike last week’s Facebook antitrust filing or the House report on Big Tech from over the summer, most of the juicy details and internal documents, including a screenshot of the contract terms between Facebook and Google, are blacked out. (The heavy redactions are not the only strange thing about the case. The Texas attorney general’s office, fresh off a losing effort to overturn the presidential election, announced the suit in a weird, amateurish video posted to Twitter before the case had been filed.) Still, there are some tantalizing clues. The document alludes to an email about the arrangement from Dan Rose, Facebook’s vice president of partnerships, to CEO Mark Zuckerberg. That suggests that whatever deal the two companies had was signed off on at the highest levels. Another heavily redacted section alleges Google violated users’ privacy in “egregious ways” after signing an agreement with Facebook in 2015 that gave the company access to “millions of Americans’ end-to-end encrypted WhatsApp messages, photos, videos, and audio files.” (Facebook acquired WhatsApp the year before.)

Again, the Facebook arrangement is just one part of the Texas case. More broadly, the complaint accuses Google of taking advantage of its control over each step of the online advertising chain—from the tool businesses use to place ads, to the platform publishers use to make their ad space available, to the exchange where the two sides meet—in ways that stifle competition and pad Google’s bottom line.

Google strongly disputes the allegations. “Attorney General Paxton’s ad tech claims are meritless, yet he’s gone ahead in spite of all the facts,” a spokesperson wrote in an emailed statement. “We’ve invested in state-of-the-art ad tech services that help businesses and benefit consumers. Digital ad prices have fallen over the last decade. Ad 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. We will strongly defend ourselves from his baseless claims in court.” (Facebook did not immediately respond to a request for comment.)

Google, in other words, is arguing that its role in online advertising has been good for everyone. That’s a great argument to make—for the parts of the case brought under Section 2. If Google and Facebook did make a deal to back off of direct competition—which, again, Google denies—none of those other factors will save the company from Section 1. Ever since the first rumblings of an antitrust movement against Big Tech began, the dominant companies have insisted that the sector is competitive, relying on their competitors’ existence to rebut the claim that they’re too big or powerful. Google may turn out to have relied on its competitors a little too much.

Updated 12-16-20, 7:33 pm ET: This story has been updated with additional comment from Google.

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