Google and Facebook are alleged to have made a deal to limit competition in advertising, according to documents obtained by the New York Times.
The documents, uncovered during a Texas’ antitrust lawsuit, provide details on ‘Jedi Blue’, a reported sweetheart deal between the two tech giants.
The agreement involved Google providing Facebook with favourable terms when bidding for advertising. In return, Facebook would back Google’s Open Bidding approach to selling adverts.
Header bidding is one of the main methods for buying advertising, where advertising space is auctioned among multiple ad exchanges. According to Google, header bidding auctions have drawbacks, such as causing webpages to take longer to load and batteries to drain faster, in addition to risking fraud and billing discrepancies.
Open Bidding was created by Google as an alternative, which the company says is simpler as it removes complex code that slows down websites.
Facebook gained several advantages from the deal – it had more time to bid for adverts and could make direct billing deals with the sites hosting the ads. Google also used its data to help the social media giant better understand and target audiences.
In turn, Facebook agreed to bid on at least 90% of ad auctions when it could identify users, and promised a minimum spend of $500 million per year.
The New York Times spoke with six executives from some of the partners involved in the same advertising alliance with Google, who said that the agreements they made with Google did not include many of the terms that Facebook received.
According to the complaint filed by Texas Attorney General Paxton, the deal provided Facebook with an unfair advantage over other advertisers, with Facebook almost guaranteed to win a consistent number of adverts.
In addition, the deal contains a clause requiring the two companies to “cooperate and assist” in the event of an investigation into their practices.
Google has published a statement protesting the claims made by the documents.
“Our agreement with Facebook Audience Network (FAN) simply enables them (and the advertisers they represent) to participate in Open Bidding,” said Google Director of Economic Policy Adam Cohen.
“Of course we want FAN to participate because the whole goal of Open Bidding is to work with a range of ad networks and exchanges to increase demand for publishers’ ad space, which helps those publishers earn more revenue.
“AG Paxton inaccurately claims that we manipulate the Open Bidding auction in FAN’s favour. We absolutely don’t. FAN must make the highest bid to win a given impression. If another eligible network or exchange bids higher, they win the auction.
“FAN’s participation in Open Bidding doesn’t prevent Facebook from participating in header bidding or any other similar system. In fact, FAN participates in several similar auctions on rival platforms.”
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The Texas lawsuit comes at a time of increased scrutiny of the big tech companies, especially from governments keen to curb their growing and unchecked power.
Both Google and Facebook have been subject to ongoing antitrust cases. Recently, Google finalised its purchase of fitness tech firm Fitbit, despite three investigations into its business practices.
Facebook and Google’s CEOs were joined by the head of Twitter before the US Senate before the US election over claims they were contributed to misinformation and censoring right-wing views.
On the other side of the Atlantic, a French-Dutch proposal called for EU powers to break up the big tech companies.