Facebook and Google accused of ‘secret deal’ to carve up ad empire

Facebook boss Mark Zuckerberg and his counterpart at Google, CEO Sundar Pichai, secretly struck a deal in 2018 to carve up the digital advertising market between the two tech giants, according to newly revealed allegations from top state law-enforcement officials.

Previously, it was reported that the deal was signed by Zuckerberg’s No. 2, Facebook COO Sheryl Sandberg, who moved over to the social network after a stint heading up Google’s online ad sales team, according to the allegations in a lawsuit by a group of state attorneys general.

But according to newly unredacted court filings, Zuckerberg and Pichai also signed off on the backroom deal in 2018, which allegedly guaranteed Meta subsidiary Facebook would both bid in — and win — a fixed percentage of ad auctions, according to court papers.

The original complaint had alleged that Google reached out Facebook after the social media company emerged as a powerful online ad rival in 2017. The two tech behemoths then allegedly struck “an unlawful agreement” to give Facebook “information, speed, and other advantages” in the ad auctions it ran in exchange for the social network backing down from its competitive threats.

The newly revised, unredacted version of the lawsuit, which was refiled on Friday, also specifically alleges that Sandberg helped negotiate the agreement before bringing it to Zuckerberg, who approved the deal. Sandberg is said to have lobbied her boss to okay the agreement, calling it a “big deal strategically.”

“We’re nearly ready to sign and need your approval to move forward,” Sandberg and her team told Zuckerberg in an email cited by the complaint.

While the names of Zuckerberg and Sandberg are redacted, their titles are not.

“Facebook CEO [REDACTED] wanted to meet with COO [REDACTED] and his other executives before making a decision,” says the complaint.

Sandberg, who headed up Google’s ad sales team before being hired by Facebook, reportedly brokered the deal.
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The September 2018 agreement between Google and Facebook allegedly bears the signatures of Sandberg and a Google senior vice president.

“Google CEO Sundar Pichai also personally signed off on the terms of the deal,” according to the lawsuit.

The states updated the original complaint in November. The revised version included many redactions. But a federal judge in New York ordered the states to undo most of the redactions, saying that it was in the public interest to have the information revealed.

The newly unredacted suit also claims that Google duped publishers and advertisers for years about how it prices and executes its ad auctions, creating secret algorithms that hiked prices for buyers while deflating revenue for some advertisers.

Likewise, Google used the extra cash it got from inflated ad prices to improperly expand its monopoly, according to the complaint, which cites internal correspondence from Google employees. Some Google workers said the practices amounted to using “insider information” to grow the business, according to the suit.

The allegations were made by the attorneys general for Texas, 14 other states, and Puerto Rico, who are suing Google in federal court for antitrust violations. Facebook and its parent company, Meta Platforms are not defendants in the lawsuit.

In December 2020, Texas Attorney General Ken Paxton took the lead in filing a lawsuit against Google, accusing it of using anti-competitive means to gain dominance over the digital ad space.

The Post has reached out to Alphabet-owned Google as well as Meta Platforms for comment.

Both companies earlier denied to Politico that the arrangement was illegal. A Google spokesperson said that the lawsuit was “full of inaccuracies.”

UKRAINE - 2022/01/08: In this photo illustration, Google logo seen displayed on a smartphone. (Photo Illustration by Igor Golovniov/SOPA Images/LightRocket via Getty Images)
Both companies insist there is nothing illegal about the agreement.
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A Google spokesperson told Politico the company plans to file a motion in court next week seeking a dismissal of the lawsuit.

“Despite Attorney General Paxton’s three attempts to re-write his complaint, it is still full of inaccuracies and lacks legal merit,” Google spokesperson Peter Schottenfels said.

“Our advertising technologies help websites and apps fund their content, and enable small businesses to reach customers around the world.”

“There is vigorous competition in online advertising, which has reduced ad tech fees, and expanded options for publishers and advertisers.”

Meta Platforms, Inc. also released a statement defending the arrangement with Google.

“Meta’s non-exclusive bidding agreement with Google and the similar agreements we have with other bidding platforms, have helped to increase competition for ad placements,” Meta spokesperson Christopher Sgro said.

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“These business relationships enable Meta to deliver more value to advertisers while fairly compensating publishers, resulting in better outcomes for all.”

POLAND - 2022/01/03: In this photo illustration a Meta logo seen displayed on a smartphone with Facebook logo in the background. (Photo Illustration by Omar Marques/SOPA Images/LightRocket via Getty Images)
Both Facebook and Google have come under scrutiny from regulators in the US and abroad who allege they have become monopolies.
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The original December 2020 lawsuit was filed at around the same time that the Department of Justice submitted its own antitrust complaint against Google. The DOJ claimed Google has long broken the law in its quest to remain “the gateway to the internet,” and has disadvantaged competitors in an effort to sell more online search ads.

Last month, more than 200 newspapers filed suit against Facebook and Google, who were accused of unfairly manipulating the advertising market and siphoning away their revenue.

Both Facebook and Google face legal challenges from regulators who allege that they have grown too powerful in the tech space by gaining an unfair advantage over other companies.

Earlier this week, the Federal Trade Commission was allowed to proceed with a lawsuit against Facebook after a judge rejected the company’s request to throw out claims that it is a monopoly.

In June, New York State, Tennessee, Utah, and North Carolina banded together to file an antitrust lawsuit against Google over its management of its mobile app store.

Foreign governments also have the two tech firms in their sights.

Earlier this month, French regulators imposed fines totaling $238 million on Google and Facebook for allegedly violating European privacy laws by not allowing users the chance to reject data-tracking cookies.

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