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10 states accuse Google of abusing monopoly in online ads

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Ten attorneys general on Wednesday accused Google of illegally abusing its monopoly on technology that delivers online advertising, compounding the company’s legal troubles with a case that hits the very heart of its business.

Prosecutors said Google overcharged publishers for the ads they ran on the internet, crowding out rivals trying to challenge the company’s dominance. They also said that Google had an agreement with Facebook to limit the social network’s own efforts to compete with Google for advertising money. Google said the lawsuit was “baseless” and would fight the case.

“If the free market were a baseball game, Google would position itself as the pitcher, batsman, and referee,” said Texas attorney general Ken Paxton in a video on Twitter announcing plans for the lawsuit.

The lawsuit, filed in the US District Court for the Eastern District of Texas, is adding to the fierce bipartisan backlash against one of the largest tech companies in the country. Regulators in the United States and Europe have focused on the paramount roles of Amazon, Apple, Facebook and Google in the modern economy, influencing everything from the way we shop to the information and entertainment we do see.

In October, the Justice Department and eleven states announced that Google had illegally maintained a monopoly over online search engines and the ads that appear in users’ results. Another case against Google is expected shortly, which is being initiated by various states. Last week, the Federal Trade Commission and more than 40 states accused Facebook of illegally breaking the competition by acquiring younger rivals, arguing that the company should be wound up. Apple and Amazon are also the subject of federal antitrust investigations.

The lawsuit filed on Wednesday is the first by regulators in the United States to focus on the tools that connect ad space buyers with publishers who sell them. Ads generate a large part of company profits. The Justice Department has its own antitrust investigation into advertising technology, said one person with knowledge of the investigation.

Prosecutors asked for fines and structural changes in the company, but did not add any details.

The prosecutors who signed the lawsuit are all Republicans and they are not expected to be part of the Justice Department’s proceedings against the company. The other states’ lawsuit against Google, which could come as early as Thursday, is expected to be signed by Republicans and Democrats and could be linked to the federal agency’s case.

Google’s proprietary system for selling ads on the web has been in development for over a decade. In 2007, Google bought DoubleClick, which offered advertising technology and acted as a marketplace, in a deal that has since been criticized as being central to Google’s dominance. Google now controls the software at every step of the ad sales process.

The company says it competes with a wide variety of competitors when it comes to offering advertising technology, and its services work alongside those of its competitors. In recent years, companies like AT&T and Amazon have been trying to break into the online ad sales market.

“Attorney General Paxton’s claims in the field of advertising technology are unfounded, but he has carried on despite all the facts,” said a Google spokeswoman, Julie McAlister. “We will vigorously defend ourselves against his unfounded claims in court.”

Publishers like Rupert Murdoch’s News Corporation have long claimed that Google’s dominance allows the company to get a higher share of every sale without sharing the cost of content creation. The success of Google stands in sharp contrast to shrinking editorial offices and the closure of many local newspapers. This year, Google announced it would pay news publishers more than $ 1 billion over the next three years through a new licensing program.

After gaining monopoly, Google was able to force publishers to take a high percentage of every ad sold on its platforms, prosecutors said.

“The monopoly tax that Google imposes on American companies – advertisers such as clothing brands, restaurants and brokers – is a tax ultimately borne by American consumers through higher prices and lower quality of the goods, services and information these companies offer” they said in the lawsuit.

The lawsuit argues that Google used a variety of tactics to become the dominant player in online advertising, harming publishers, competitors, and consumers.

Prosecutors said that after buying DoubleClick, Google “quickly began to use its new position to put pressure”.

Google then tried to destroy a process developed by publishers to create more competition in the online advertising market. This system enabled publishers to sell ad space on more online marketplaces at the same time, reducing their reliance on Google’s ad technology.

States said Google maintained its dominance in part through an agreement with Facebook to limit the social network’s involvement in the process. In return, Google gave Facebook an advantage in other advertising auctions, the public prosecutor said.

“The companies’ efforts to avoid competition have been successful,” says the lawsuit. Facebook, which did not immediately comment, is not named as a defendant in the lawsuit. Ms. McAlister, the Google spokeswoman, said the allegations against Facebook were inaccurate. A representative from Facebook declined to comment.

With the data behind many of the most popular services on the Internet, the two companies sit together on a treasure trove of data about what people care about, where they are going, and who they are interacting with. This information will help advertisers reach the right audience for marketing. Both companies also sell ads for their own websites.

According to research firm eMarketer, the two companies accounted for around 54 percent of digital advertising in the US in 2019, with Google accounting for around 31 percent and Facebook 23 percent.

The publicly released version of the complaint is heavily edited and obscures important evidence that prosecutors relied on to bring their case forward. However, the document refers to internal documents from Google and Facebook. In several places it is said that Google codenamed projects inspired by the Star Wars series, but the names themselves are blackened out on the page.

The complaint widens the focus of the lawsuits to include Google’s business, said Charlotte Slaiman, director of competition policy at Public Knowledge, an advocacy group that has pushed for more regulation for Google.

“The strong market position that Google has in search has also helped them develop that strong market position in advertising technology, and that is part of this lawsuit,” said Ms. Slaiman. “It’s also an indication of how broad the competitive challenges are in big tech.

Mr Paxton led the investigation against Google despite allegations of abuse of power in his office. Seven of Mr. Paxton’s attorneys said that year that he had done a friend and donor a favor and committed a bribe. The employees have since left Mr. Paxton’s office, or have been on leave or dismissed outright.

Mr. Paxton was also charged with securities fraud in 2015. He has denied these allegations as well as recent allegations from his own employees.

He’s also a prominent ally of President Trump, leading some critics to view his investigation into Google as part of a larger conservative campaign against the tech giants.

However, Ms. Slaiman said that she believed there would ultimately be bipartisan support for the concerns raised in the lawsuit.

She said she hoped Washington lawmakers could respond to the concerns by passing laws to contain businesses, rather than leaving the job entirely to prosecutors.

“Antitrust enforcement is really important,” she said, “but much more is needed.

Maurice Stucke, a law professor at the University of Tennessee and co-author of “Competition Overdose,” said the online advertising industry is a place for regulators to look and noted that it is also attracting the attention of regulators in Australia has drawn to France and Great Britain.

“In no other market is there a unit that represents most buyers and sellers and controls the leading exchange,” he said. “You can create a system that looks robustly competitive on the surface, but it really isn’t.”

The allegations of collusion with Facebook were noticed, Stucke said, because such examples of anti-competitive behavior are usually viewed as the linchpin of strong antitrust proceedings – the kind of evidence that should interest more states and even the Justice Department.

Cecilia Kang contributed to the coverage.

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