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Google sued by Texas and 9 other states accusing it of 'antitrust evils'

Daniel Howley
·Technology Editor
·4 min read

Google (GOOG, GOOGL) was hit with a lawsuit from Texas and 9 other states Wednesday accusing it of anticompetitive behaviors related to its ad tech business, which has faced scrutiny due to its unrivaled size and volume.

The suit claims that internal documents show that Google tried to crush competition with exclusionary tactics, including by striking a deal with Facebook (FB) — its biggest competitor — to manipulate advertising auctions.

“The Supreme Court has warned that there are such things as antitrust evils. This litigation will establish that Google is guilty of such antitrust evils, and it seeks to ensure that Google won’t be evil anymore,” the 130-page lawsuit stated.

The suit comes less than two months after the Department of Justice and 11 U.S. states, including Texas, filed an antitrust lawsuit accusing Google of engaging in anticompetitive behavior in its search and search advertising businesses. Texas is leading the latest suit focusing on the ad tech business, joined by Arkansas, Idaho, Indiana, Kentucky, Mississippi, Missouri, North Dakota, South Dakota, and Utah.

As with the Texas-led suit, the DOJ’s lawsuit included mention of an agreement between Google an another Big Tech firm. In that instance it was Apple (AAPL), which the DOJ alleges joined with Google to make the company’s search engine the default for its various products including Siri, its Safari browser, and its Spotlight search.

“Google repeatedly used its monopolistic power to control pricing, engage in market collusion to rig auctions, in a tremendous violation of justice,” Attorney General Ken Paxton said in a video posted on Twitter. “...If the free market were a baseball game, Google positioned itself as the batter, the pitcher, and the umpire.”

On Tuesday, the Wall Street Journal reported that Texas had hired prominent lawyers to work on its case against Google, including the Lanier Law Firm, home to Kenneth Star, who famously led the Whitewater investigation into Bill Clinton.

Google’s digital advertising business has faced scrutiny due to its unrivaled size and volume. The company controls some of the most important pieces of the online advertising marketplace, its Google Marketing Platform, formerly DoubleClick, is a premier tool for online publishers, helping them create, manage, and track online marketing campaigns.

‘Hallmarks of a highly competitive industry’

Critics of Google’s dominance of the online ad industry point to the fact that their web traffic would take a severe hit if they left the company’s platform as proof that it is too powerful.

On Wednesday, a Google spokesperson issued the following statement:

“Attorney General Paxton’s ad tech claims are meritless, yet he’s gone ahead in spite of all the facts. 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.”

Google CEO Sundar Pichai is sworn in prior to testifying at a House Judiciary Committee hearing “examining Google and its Data Collection, Use and Filtering Practices” on Capitol Hill in Washington, U.S., December 11, 2018. REUTERS/Jim Young
Google CEO Sundar Pichai is sworn in prior to testifying at a House Judiciary Committee hearing “examining Google and its Data Collection, Use and Filtering Practices” on Capitol Hill in Washington, U.S., December 11, 2018. REUTERS/Jim Young

In the suit filed Wednesday, the states alleged Google lie to publishers using its ad server to favor Google’s ad exchange and that the company entered into an illegal agreement with Facebook that benefited both companies by flattening competition in so-called “header bidding,” a method of ad bidding that was developed to circumvent Google’s grip on advertisement exchange markets.

What’s more, the suit claims that Google violated users’ privacy by signing a 2015 agreement with Facebook that gave Google access to millions of Americans’ end-to-end encrypted WhatsApp messages, photos, videos, and audio files.

The October suit filed by the Justice Department and 11 states targets deals that Google has with device makers like Apple (AAPL), browser developers, and wireless carriers like Yahoo Finance parent Verizon (VZ) to make Google the default search engine. Those agreements effectively shut out competition for search, the suit alleges.

On Thursday, Google is expected to face a third antitrust lawsuit, this one spearheaded by a bipartisan coalition of states led by the attorneys general of Colorado and Nebraska, Politico reported Tuesday. That lawsuit will reportedly allege that Google designs its search engine to disadvantage rivals.

-Additional reporting by Alexis Keenan and Erin Fuchs

Got a tip? Email Daniel Howley at dhowley@yahoofinance.com over via encrypted mail at danielphowley@protonmail.com, and follow him on Twitter at @DanielHowley.

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