Antitrust suit targets Google’s ad business

Arkansas part of case filed by Texas AG

Texas Attorney General Ken Paxton, joined by Arkansas and eight other states, filed an antitrust lawsuit against Google on Wednesday, alleging the tech giant illegally sought to suppress competition and reap huge profits from targeted advertisements placed across the web.

The lawsuit, filed in a Texas federal 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 position as a “middleman” in the invisible transactions that power much of the web.

“If the free market were a baseball game, Google positioned itself as the pitcher, the batter and the umpire,” Paxton said in a video on Twitter announcing the plans to sue.

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 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.

Besides Texas and Arkansas, the suit includes Idaho, Indiana, Kentucky, Mississippi, Missouri, North Dakota, South Dakota and Utah, according to the complaint released by Paxton’s office.

“Attorney General Paxton’s ad tech claims are meritless, yet he’s gone ahead in spite of all the facts,” said Google spokeswoman Julie McAlister. “We will strongly defend ourselves from his baseless claims in court. We’ve invested in state-of-theart ad tech services that help businesses and benefit consumers.”

Paxton and his peers also accused Google of failing to protect the privacy of millions of web users and engaging in 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 2015. The company did not immediately respond to requests for comment about the allegation.

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.

MORE LAWSUITS

The Department of Justice sued Google in October, taking aim over special arrangements it struck to ensure its dominance in online searches. Other Democratic and Republican attorneys general are set to file a lawsuit as soon as today that is expected to focus on the way Google displays search results themselves, giving preferential treatment to its own products and services over rivals’ offerings.

Together, the heightened scrutiny represents a turn of fortunes for Google, after federal investigators previously investigated the company over antitrust allegations but concluded the matter in 2013 without taking it to court. Since then, U.S. regulators have grown more attuned to Google’s business practices — and more skeptical of Silicon Valley in general.

The reckoning has triggered an array of new antitrust enforcement, including two lawsuits filed against Facebook last week.

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 web page. 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 has 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.