Google and Facebook allegedy working together to combat antitrust lawsuits

AppleInsider

A lawsuit claims Google and Facebook were planning to work together to combat any investigations into their online advertising relationship, an agreement where the two tech giants would attempt to fend off antitrust lawsuits by helping each other out.

The lawsuit was jointly filed by attorneys general in ten states against Google on Wednesday, accusing Google of "engaging in market collusion to rig auctions" in online advertising. While that lawsuit was redacted, a draft version free from censorship reveals Google could have received some help from Facebook on the matter.

The redacted draft version seen by The Wall Street Journal mentions a deal between Google and Facebook to "cooperate and assist one another" in the event either became part of an investigation over their online advertising businesses. The redacted sections refer to internal company documents, which went into more detail about the attorneys' findings.

The lawsuit alleges Google and Facebook made a deal in September 2018, where Facebook would not compete against Google in online advertising, so long as the social network received special treatment when it used Google's tools. The agreement was known as "Jedi Blue," a codename influenced by "Star Wars."

As part of the agreement, the draft version of the lawsuit mentions how Google and Facebook were aware of the possibility there could be antitrust investigations because of the agreement and how to work together to conquer them. This includes language where the companies would "cooperate and assist each other in responding to any Antitrust Action" and "promptly and fully inform the Other Party of any Governmental Communication Related to the Agreement."

There is also mention of the deal being signed by Facebook COO Sheryl Sandberg, who also emailed CEO Mark Zuckerberg in claiming "This is a big deal strategically." The draft also refers to how Facebook would be locked into spending at least $500 million each year in Google-run ad auctions by the deal's fourth year, and that Facebook was to "win a fixed percent of those auctions."

The deal was also seen by Facebook to be "relatively cheap" to go through with, compared to directly competing against Google. The Facebook team negotiating with Facebook emailed Zuckerberg as well, suggesting the alternatives were to "invest hundreds more engineers" and to spend billions on locking up inventory, exit the advertising business, or to make a deal with Google.

Meanwhile, a Google mentioned that if it couldn't "avoid competing with" Facebook, instead it would work together to "build a moat."

Google executives were apparently worried about competition from Facebook, as well as rival advertising firms working on "header bidding," a method for buying and selling online advertising. A 2016 Google presentation discussed a need to "stop these guys from doing HB," and that Google had to "consider something more aggressive."

The added redacted allegations offer an extra dimension to the antitrust lawsuit, as current US law prevents agreements to fix prices with competitors in such a way. This is also potentially easier for the attorneys to prove than accusations Google is running an illegal monopoly.

Both Google and Facebook have disputed the allegations. A Google spokesperson said the agreements over antitrust threats are common but that the "claims are inaccurate. We don't manipulate the auction." There was also "nothing exclusive" about Facebook's involvement, "and they don't receive data that is not similarly made available to other buyers."

Facebook responded to the allegations by saying "any allegation that this harms competition or any suggestion of misconduct on the part of Facebook is baseless."

The new allegations arrive at a time when Facebook is actively campaigning to convince Apple against implementing new privacy features in iOS 14 that would limit the effectiveness of advertising tracking systems, an effort declared by the EFF to be "laughable."

gatorguy

Great article! So much goes on between competitors and things are almost never as they seem. Certainly seems to play in favor of the antitrust actions against both companies. Assuming there's other behind-the-scenes agreements between companies like Apple and Google, and Microsoft and Apple would be a safe bet. Nice work on the reporting. Well done. 

EsquireCats

gatorguy said:

Great article! So much goes on between competitors and things are almost never as they seem. Assuming there's other behind-the-scenes agreements between companies like Apple and Google, and Microsoft and Apple would be a safe bet. Nice work on the reporting. Well done. 

If anyone is looking for an example on the meaning of “whataboutism” - see this comment. 

heli0s

The duopoly of online advertising coordinating efforts to maintain their power over the marketplace kind of makes the government's case, doesn't it?

DAalseth

heli0s said:

The duopoly of online advertising coordinating efforts to maintain their power over the marketplace kind of makes the government's case, doesn't it?

Oh yeah.
{makes popcorn} This is getting good.

lightvox88

There should be a law preventing giant behemoth monopolies from combining resources and working together against antitrust lawsuits. Just seems like logic and common sense considering that some of these companies and bigger and more powerful than many entire countries.

karmadave

Seems like a pretty compelling case of collusion and price-fixing. Don't these people take their own Compliance training? 

Rayz2016

gatorguy said:

Great article! So much goes on between competitors and things are almost never as they seem. Certainly seems to play in favor of the antitrust actions against both companies. Assuming there's other behind-the-scenes agreements between companies like Apple and Google, and Microsoft and Apple would be a safe bet. Nice work on the reporting. Well done. 

Sad to see you driven to such desperation so close to Christmas  

rotateleftbyte

Google and Facebook working together? Now that is a marriage made in hell.

Beats

lightvox88 said:

There should be a law preventing giant behemoth monopolies from combining resources and working together against antitrust lawsuits. Just seems like logic and common sense considering that some of these companies and bigger and more powerful than many entire countries.

No no no!! You've got it all wrong!! Facebook and Epic are fighting for the little guy!!!!!!111111

Beats

gatorguy said:

Great article! So much goes on between competitors and things are almost never as they seem. Certainly seems to play in favor of the antitrust actions against both companies. Assuming there's other behind-the-scenes agreements between companies like Apple and Google, and Microsoft and Apple would be a safe bet. Nice work on the reporting. Well done. 

Supposedly there's a contract between Apple and Google that says Apple can steal any ideas from Google to add to iPad/iPhone for Google developing knockoff Apple devices.

glennh

lightvox88 said:

There should be a law preventing giant behemoth monopolies from combining resources and working together against antitrust lawsuits. Just seems like logic and common sense considering that some of these companies and bigger and more powerful than many entire countries.

There is a law on the books! It’s call the Sherman Act and was signed into law by Theodore Roosevelt aka “Teddy Bear”. If what this article says is true and there are actual written documents communication between the companies  to use in a court of law as evidence, both Facebook and Google can kiss their duopoly online ads days goodbye! Hell with the above stated evidence even a first day law student could use this evidence to prove a violation of Sherman’s Anti-Trust Prohibitions!

flydog

heli0s said:

The duopoly of online advertising coordinating efforts to maintain their power over the marketplace kind of makes the government's case, doesn't it?

No.  Monopoplies and duopolies are not per se illegal.  What is illegal is using the lack of competition in ways prohibited under antritrust law, for example, conspiring to fix prices and tying the sale of products to other products.  The government also needs to prove that consumers were harmed by the illegal conduct.  Since no one pays for FaceBook, the government has to establish some other kind of harm, and that's where the case is a bit weak. 

flydog

glennh said:

lightvox88 said:

There should be a law preventing giant behemoth monopolies from combining resources and working together against antitrust lawsuits. Just seems like logic and common sense considering that some of these companies and bigger and more powerful than many entire countries.

There is a law on the books! It’s call the Sherman Act and was signed into law by Theodore Roosevelt aka “Teddy Bear”. If what this article says is true and there are actual written documents communication between the companies  to use in a court of law as evidence, both Facebook and Google can kiss their duopoly online ads days goodbye! Hell with the above stated evidence even a first day law student could use this evidence to prove a violation of Sherman’s Anti-Trust Prohibitions!

The Sherman Act does not prohibit companies from working to defend lawsuits or criminal constitution. Such a law would be plainly unconstitutional (at least it was when I was a first year law student).  Moreover, it's not as uncommon as the article implies. 

If the Sherman Act did prohibit such an arrangement (it doesn't) the government would have alleged so in the complaint (it didn't).

The likely reason the arrangement was mentioned in the complaint was to establish that FaceBook was aware that the conduct constituted an illegal use of monopoly power, and to rebut the argument that the government can't go back on its approval of the merger with Instagram and WhatsApp.

davidw

flydog said:

heli0s said:

The duopoly of online advertising coordinating efforts to maintain their power over the marketplace kind of makes the government's case, doesn't it?

No.  Monopoplies and duopolies are not per se illegal.  What is illegal is using the lack of competition in ways prohibited under antritrust law, for example, conspiring to fix prices and tying the sale of products to other products.  The government also needs to prove that consumers were harmed by the illegal conduct.  Since no one pays for FaceBook, the government has to establish some other kind of harm, and that's where the case is a bit weak. 

But the "consumers" in this scenario are the advertisers. By fixing the price it cost to advertise with Facebook or Google, they were harmed by the lack of competition with online advertising. Ultimately, this affects the price the consumers has to pay for products and services that are advertised online. 

It can also go the other way. Google and FaceBook can combine to keep the price of online advertising so low, that no other competitors can get in and make a profit selling advertising online. The consumers are not really harmed by this but it's still a violation of anti-trust laws. Microsoft giving away IE for free using the monopoly they have with Windows and crushing Netscape ability to make a profit, for example. (Not to mention MS making it difficult for other browsers to be on or to work properly with Windows.) Ultimately, over 80% of computer users were using the free IE, that came pre-installed with Windows. 

Being "free" has nothing to do with determining whether the consumers were harmed. Limiting consumers choice does. And the "consumers" in anti-trust can either be users of a product or other businesses that wants to market a similar product. 

baconstang

How many different ways can you spell 'conspire'?

glennh

flydog said:

glennh said:

lightvox88 said:

There should be a law preventing giant behemoth monopolies from combining resources and working together against antitrust lawsuits. Just seems like logic and common sense considering that some of these companies and bigger and more powerful than many entire countries.

There is a law on the books! It’s call the Sherman Act and was signed into law by Theodore Roosevelt aka “Teddy Bear”. If what this article says is true and there are actual written documents communication between the companies  to use in a court of law as evidence, both Facebook and Google can kiss their duopoly online ads days goodbye! Hell with the above stated evidence even a first day law student could use this evidence to prove a violation of Sherman’s Anti-Trust Prohibitions!

The Sherman Act does not prohibit companies from working to defend lawsuits or criminal constitution. Such a law would be plainly unconstitutional (at least it was when I was a first year law student).  Moreover, it's not as uncommon as the article implies. 

If the Sherman Act did prohibit such an arrangement (it doesn't) the government would have alleged so in the complaint (it didn't).

The likely reason the arrangement was mentioned in the complaint was to establish that FaceBook was aware that the conduct constituted an illegal use of monopoly power, and to rebut the argument that the government can't go back on its approval of the merger with Instagram and WhatsApp.

“The most common violations of the Sherman Act and the violations most likely to be prosecuted criminally are price fixing, bid rigging, and market allocation among competitors (commonly described as “horizontal agreements”).  - U.S. Department of Justice Archives..