Class Action Lawsuit Filed Against Google Related to Fixing Ad Rates With Facebook Deal

On Tuesday, August 4, 2021, SkinnySchool LLC and Mint Rose Day Spa LLC filed a class action lawsuit against Google LLC in the U.S. District Court, Northern District of California. The lawsuit claims that Google retained its dominance by control in online advertising when it made a deal with Facebook that gave Facebook an advantage in virtual auctions related to ad rates, thus limiting revenue for online publishers.

Google generated more than $116 billion in digital advertising in 2018, accounting for 85% of its revenue that year. Publishers of online advertising on Google rely on Google to sell ad space in ad exchanges, “the centralized electronic trading venues where display ads are bought and sold.” The complaint paints Google as a “middleman” from whom publishers rely upon to purchase display ads from Google’s ad exchange. In addition to representing both buyers and sellers of display ads, Google operates the largest ad exchange.

The complaint accuses Google of violating federal antitrust laws in order to unlawfully exclude competition. Specifically, the complaint cites two forms of anticompetitive conduct by Google: (1) Forcing publishers to trade in Google’s ad exchange and (2) header bidding. Prior to 2009, Google operated an ad-buying tool used by small advertisers. However, in 2009, Google acquired a publisher ad server and launched its ad exchange, thereby forcing small advertisers “to transact in both Google’s ad network and Google’s ad exchange.” Google then “forced large publishers desiring bids from the advertisers who used Google’s ad buying tool” to participate in it’s own ad exchange and ad server. The specific anticompetitive conduct occurred when “Google restricted publishers from selling their inventory in more than one exchange at a time, started routing publishers’ inventory to Google’s exchange, and blocked publishers from accessing and sharing information about their heterogeneous inventory with exchanges.”

In 2014, publishers devised of header bidding in an attempt to reinject competition and to bypass Google in the marketplace. Header bidding returned the highest bid for the inventory by “rout[ing] ad inventory to multiple neutral exchanges each time a user visited a web page.” About 70% of major online publishers in the U.S. adopted header bidding by 2016. Header bidding “threatened Google’s margins on its exchanges and disrupted Google’s practice of front running and trading on ‘inside’ information,” thus threatening Google’s market power. In response, Google “secretly routed publishers’ inventory back to Google’s exchange, even though another exchange had returned a higher bid.” Google was thereby able to charge participants a 5-10% fee on winning bids by inserting its own exchange into the header bidding process. Google then introduced Accelerated Mobile Pages, which made these new mobile pages “essentially incompatible with JavaScript and header bidding.”

The complaint also alleges that Google made an unlawful deal with Facebook in order to protect its market power. Facebook publicly announced in March 2017 that it would support header bidding. “Facebook was helping publishers and advertisers match two to three times more users in auctions and increase third-party publishers’ revenue by 10 to 30 percent.” After months of negotiation between Google and Facebook, the two companies entered into “the Facebook Agreement,” whereby “Facebook agreed to limit its program in return for preferred treatment in the Google advertising business system.” In return, Google provided Facebook with preferential treatment “by ensuring Facebook received special information, a speed advantage to assist Facebook in succeeding in the auctions, and a guaranteed win rate.” The complaint states that this agreement is anticompetitive since it has “increased advertisers’ costs to advertise and reduced the effectiveness of their advertising, thereby harming businesses’ return on investment in delivering their products and services and reducing output.”

The complaint cites Section I of the Sherman Act, 15 U.S.C. § 1, claiming that “Google and Facebook unreasonably restrained trade and harmed competition through an unlawful agreement to allocate auction wins and to fix prices.” The complaint seeks equitable relief and monetary damages.

Additional Reading

Google Accused in Suit of Fixing Ad Rates With a Facebook Deal, Bloomberg (August 3, 2021)

SkinnySchool LLC et al v. Google LLC (Case No. 3:2021cv06011)

Complaint in SkinnySchool LLC et al v. Google LLC

Photo Credit: Koshiro K /