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Facebook and Google accused of ‘secret agreement’ to corner advertising market

Meta chief Mark Zuckerberg and his counterpart at Google, CEO Sundar Pichai, secretly made a 2018 agreement to split the digital advertising market between the two IT giants, according to recently revealed allegations by senior US government officials.

Published: January 19, 2022, 9:00 am

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    It was reported that the agreement was signed by Zuckerberg’s closest subordinate, Facebook’s COO Sheryl Sandberg, who changed jobs to the social network after a period as head of Google’s online advertising sales team, according to the allegations in a lawsuit filed by a group of public prosecutors.

    But according to recent court documents, Zuckerberg and Pichai also approved the behind-the-scenes deal in 2018, which is said to have guaranteed that Meta’s subsidiary Facebook would both bid for – and win – a fixed percentage of ad auctions, according to the documents.

    The original report claimed that Google contacted Facebook in 2017 after the social network proved to be a strong competitor in the online advertising market. The two IT giants are then alleged to have entered into an “illegal agreement” to give Facebook “information, speed and other benefits” in the advertising auctions in which they participated, in exchange for the social network backing away from its competition threats.

    The recently revised, unreported version of the lawsuit, which was resubmitted on Friday, also specifically claims that Sandberg helped negotiate the agreement before taking it to Zuckerberg, who approved the agreement. Sandberg is said to have lobbied for her boss to approve the agreement and called it “strategically important”.

    “We are almost ready to sign and need your approval to proceed,” Sandberg and her team told Zuckerberg in an email quoted in the report.

    The names Zuckerberg and Sandberg have been edited out, but their titles are not.

    “Facebook’s CEO [Edited] wanted to meet COO [Edited] and his other executives before he made a decision,” the report states.

    The agreement from September 2018 between Google and Facebook is alleged to have been signed by Sandberg and one of Google’s vice presidents.

    “Google CEO Sundar Pichai also personally signed the terms of the agreement,” according to the lawsuit.

    Google deceives advertisers

    The report also claims that Google deceived publishers and advertisers for years about how they price and conduct their ad auctions, creating secret algorithms that raised prices for buyers while squeezing the revenue of some advertisers.

    Similarly, Google used the extra revenue it received from inflated advertising prices to illegally expand its monopoly, according to the report, which cites internal correspondence from Google employees. Some Google workers said the methods involved using “insider information” to increase sales, according to the lawsuit.

    The allegations were made by the Attorney General of Texas, 14 other states, and Puerto Rico, which is now suing Google in federal court for antitrust violations. Facebook and its parent company Meta Platforms are for some reason not responding.

    As early as December 2020, Texas Attorney General Ken Paxton took the initiative by filing a lawsuit against Google, accusing the company of using anti-competitive means to gain dominance over the digital advertising space.

    Both tech giants shrug off complaints

    Both companies have previously denied that the agreement was illegal to the news site Politico. A Google spokesman, Peter Schottenfels, said the lawsuit was “full of inaccuracies”.

    The spokesman further said that the company plans to file its own lawsuit next week to request that the trial be dismissed.

    “Despite Justice Paxton’s three attempts to rewrite his lawsuit, it is still full of inaccuracies and lacks legal credentials,” said Schottenfels.

    “Our advertising technology helps websites and apps fund their content and enables small businesses to reach customers around the world.”

    “There is strong competition in online advertising, which has reduced advertising technology fees and expanded the opportunities for publishers and advertisers.”

    Meta Platforms also released a statement defending their deal with Google.

    “Meta’s non-exclusive bidding agreement with Google and similar agreements we have with other bidding platforms have helped increase competition for ad placements,” said Meta’s spokesperson Christopher Sgro.

    “These business relationships enable Meta to deliver more value to advertisers while compensating publishers in a fair way, resulting in better results for everyone.”

    The noose is tightening

    The original lawsuit from December 2020 was filed around the same time as the US Department of Justice filed its own antitrust complaint against Google. It has been claimed that Google has long violated the law in its quest to remain the “gateway to the internet” and has disadvantaged competitors in its attempts to sell more search ads online.

    Last month, more than 200 newspapers filed a lawsuit against Facebook and Google, which were accused of unfairly manipulating the advertising market and undermining their revenue.

    Both Facebook and Google face legal challenges from regulators who claim that they have become too powerful in the technology field by gaining an unfair advantage over other companies.

    Earlier last week, the Federal Trade Commission was allowed to proceed with a lawsuit against Facebook after a judge rejected the company’s request to write off allegations that it is a monopoly.

    In June, the states of New York, Tennessee, Utah and North Carolina joined forces to file an antitrust lawsuit against Google for its handling of its mobile app store.

    Foreign governments also attacked the two technology companies: Earlier this month, French regulators decided to fine them to the tune of $238 million for allegedly violating European GDPR law by not allowing users to reject data tracking cookies.

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