Ten states led by Texas Attorney General Ken Paxton (R) filed an antitrust lawsuit against Google on Wednesday, alleging the tech giant illegally sought to suppress competition and reap massive profits from targeted advertisements placed across the Web.
The lawsuit — filed in a court and backed exclusively by Republicans — strikes at the heart of Google’s lucrative business in connecting those who seek to buy online ads with the websites that sell them. Paxton and his GOP allies contend that Google relied on a mix of improper tactics to force its ad tools on publishers and solidify its pole position as a “middleman” in the invisible transactions that power much of the Web.
Online advertising is expected to generate $42 billion in revenue this year for Google, which captures a third of all digital ad spending, according to an October projection from the firm eMarketer. Google’s vast reach led Texas and other state attorneys general to conclude in their lawsuit that the tech giant essentially had built the “largest electronic trading market in existence,” operating ad systems that are not unlike trades on a stock exchange. In that analogy, though, Texas said Google essentially acted as both the financial broker and the stock trading floor itself, holding dual roles that grant it an unfair advantage over competing for ad services and an unrivaled store of data from which to refine targeted advertisements. The attorneys general said the arrangement, in the end, harmed average Americans, as the revenue Google generated from fees on those ads amounted to a “monopoly tax” on popular apps and websites, which passed their costs down to consumers. “The actions harm every person in America,” Paxton said in a video statement preceding the case, which asked a judge to consider “structural” remedies that could theoretically include forcing a breakup of the company. Paxton and his peers also faulted Google for failing to protect the privacy of millions of Web users and engaging in allegedly improper dealings with one of its chief rivals, Facebook. In one heavily redacted portion of the complaint, state officials said that Google in 2015 signed an agreement with Facebook that granted Google “access to millions of Americans’ end-to-end encrypted WhatsApp messages, photos, videos, and audio files.” Facebook purchased WhatsApp in 2014. The company did not immediately respond to requests for comment about the allegation. Texas attorney general, Google’s new competition cop, says everything is ‘on the table’ Google immediately sought to rebut Paxton’s case as “meritless,” stressing in a statement that it will “strongly defend ourselves from his baseless claims in court.” “We’ve invested in state-of-the-art ad tech services that help businesses and benefit consumers,” added Julie Tarallo McAlister, a spokeswoman for the company. The lawsuit marks the latest legal salvo to challenge Google — one of the most popular, profitable companies to emerge from Silicon Valley — over allegations that it expanded its vast footprint in search and advertising at the cost of competition and consumers. The Department of Justice sued Google in October, taking aim over special arrangements it struck to ensure its dominance in an online search. Other Democratic and Republican attorneys general are set to file their own lawsuit as soon as Thursday that is expected to focus on the way in which Google displays search results, giving preferential treatment to its own products and services over rivals’ offerings. Together, the heightened scrutiny represents a dramatic turn of fortunes for Google, after federal investigators previously probed the company for antitrust violations but concluded the matter in 2013 without taking it to court. Since then, U.S. regulators have grown only more attuned to Google’s business practices — and more skeptical of Silicon Valley writ large. The reckoning has triggered a wide array of new antitrust enforcement, including two lawsuits filed against Facebook last week. The Justice Department is suing Google — but it’s the government’s power to police Big Tech that’s on trial The Google lawsuit comes at a perilous time for Paxton, in particular. The Texas attorney general has spent years under indictment for alleged securities fraud, and his top deputies recently reported him to the FBI over allegations of bribery. Paxton, meanwhile, filed an ill-fated lawsuit this month to challenge votes cast in Pennsylvania, Wisconsin, Michigan, and Georgia in favor of President-elect Joe Biden in a case the Supreme Court ultimately refused to hear. With Google, the 10 Republican attorneys general trained their attention on the hidden economy that powers much of the Internet — the instant transactions that determine which ads appear when a Web user accesses their favorite site or service. For years, Google has owned the critical technical architecture that powers the entire advertising process, state officials said. The tech giant runs the servers that websites use to handle their open ad inventory, the tools that ad buyers use to purchase those spots, and the little-known, invisible exchanges where many of these transactions take place every time a user loads a webpage. Google honed its ad business through its purchase of DoubleClick, an advertising technology company, in a 2007 deal that regulators reviewed and blessed. Since then, the attorneys general contend, Google built an unlawful monopoly in no small part because it requires publishers to use its full suite of tools. Google’s policies essentially ensure its continued dominance, Paxton and his allies allege, while allowing the tech giant to collect lucrative fees during each stage of the advertising sale process. Google, for its part, pointed Wednesday to the existence of other advertising technology companies as it sought to make the case that the marketplace remains competitive. McAlister said ad fees had fallen in recent years in further illustration of a “highly competitive industry.” But the state attorneys general said that Google actually had sought to limit competition through “exclusionary tactics,” including what they called an “unlawful agreement with Facebook” over advertising auctions. Redacted portions of the states’ complaint — citing emails and other company documents — suggest that Facebook curtailed the launch of an ad service that might have competed with Google as part of a deal in 2017 that appeared to give Facebook a “leg up” in advertising. “Every American suffers when Google imposes its monopoly pricing on the sale of targeted advertising,” the attorneys general said.