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.
“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.
This internet Goliath used its power to manipulate the market, destroy competition, and harm YOU, the consumer. Stay tuned… pic.twitter.com/fdEVEWQb0e
— Texas Attorney General (@TXAG) December 16, 2020
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.
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 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.
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.