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USA: CEOs of Google & Facebook knew about unfair advertising deal

Facebook, Google and other well-known tech companies regularly face legal consequences within the EU. The reason for this is their lax approach to data protection and competition law. Now, however, news has reached us from the U.S. that could also cause a lot of problems for Facebook and Google in their home country. The CEOs of both companies are said to have known about an illegal advertising cartel and even approved it.

Favoritism of the social network

The focus of the advertising cartel that has come to light is probably two of the largest Internet corporations in the world, Facebook and Google. The search engine giant is said to have preferentially placed online advertising on the social network as part of a prohibited advertising deal. The whole thing takes on a special “flavor” when one realizes that it was by no means only the marketing departments of the two companies that were supposed to have known about it. According to insider information, even the two CEOs, Pichai (Google) and Zuckerberg (Facebook), have given their approval for the collaboration.

US states defend themselves

That the two tech corporations have engaged in illegal collusion was not thrown into the room by some insignificant person. A total of 15 U.S. states, in addition to Puerto Rico, now want to take legal action against the machinations of Google and Facebook. As part of an existing competition lawsuit, the states accuse both companies of having negotiated an internal advertising deal. The content of the alleged deal was preferential treatment of Facebook by Google. In particular, the search engine giant is said to have given Facebook an advantage in the awarding of advertising auctions on the Internet. If this proves to be true, both groups are likely to face serious consequences.

There is also competition law in the USA

Protecting healthy competition is the goal of any economic region. In doing so, one tries to prevent monopolies or oligopolies. While Facebook, Google and other U.S. tech giants in our climes have repeatedly come into conflict with EU law and its protection of competition, the U.S. has been happy to turn a blind eye. But now it seems that even in the land of unlimited opportunity, the sky’s the limit. The corresponding lawsuit filed by the 15 US states and Puerto Rico was not filed just now, but already at the end of 2020. Ken Paxton, Attorney General and Attorney General of Texas, is extremely annoyed by the lawsuit that has been filed.

He is not only angry about the gigantic advertising deal of the two tech giants. Rather, he is frightened by the entire actions of Facebook and Google. In addition to the deal that has now been indicted, other illegal activities are also on the daily agenda of both corporations. For years, he said, the concept of both companies has been based on lies and technical tricks. The so-called “Jedi Blue” project, which has now come to light, seems to have been the straw that broke the camel’s back. Here Google committed itself to Facebook to be involved in the allocation in the context of advertising auctions to a firmly assured share.

The advertising giant

When laypeople think of Google, they often only have its activity as a search engine in mind. But the corporation has long been so much more. And we are not talking about the smartphone market and AndroidOS. Google earns a gigantic part of its revenue from online advertising. Its self-developed algorithms provide users with exactly the advertising that suits their gender, age and interests. This approach, known as programmatic advertising, costs companies a lot of money. After all, Google filters out exactly the right target group for them, which enables targeted advertising.

Both Google and Facebook have perfected their approach to such an extent that they offer their users extensive services for free. But this only feels like that to the users. After all, they don’t pay with money, but with data. This data is then used as the basis for personalized advertising. The cooperation between the two companies, which has now become known, should ensure that other competitors no longer stand a chance in the field of online advertising. If the court also sees it this way, there would be no question of a competition violation.

Zuckerberg and Pichai knew

As already mentioned at the beginning, the action was signed off by both CEOs. This was initially questionable when it became known in 2020. After all, all that was known was that two senior executives, Philipp Schindler (Chief Business Officer at Google) and Sheryl Sandberg (Chief Operating Officer at Facebook), were bagging the deal. That both executives put their signatures under the advertising agreement is also clear from the published statement of claim. As reported, for example, by the well-known “Wall Street Journal”, it is not possible to read the names of the two employees, but their position is clear from the agreement. Accordingly, a responsibility can be assigned without further ado.

According to the statement of claim, however, Zuckerberg and Pichai already got their fingers dirty at that time. Thus, the plaintiff states accuse the Facebook CEO of having received an e-mail with a request for consent. After all, according to Sandberg herself, the advertising deal was a “strategically important business”. The Google CEO was also asked for a “go” in view of the implications. The lawsuit states, “Google CEO Sundar Pichai also personally approved the terms of the agreement.”

Google defends advertising move

Both Facebook and Google have now been able to gather plenty of experience in the field of legal disputes. It is all the less surprising that the two corporations are now defending themselves against the accusations. Google in particular is almost snubbed by the now published statement of claim. Unlike a version that already caused a stir in November 2021, this one is now far less censored. In the sections made readable in the meantime, the entire advertising procedure of Google is pilloried. Thus one could infer from the writing that Google had already carried out other questionable advertising strategies in the past.

In particular, the so-called “Project Bernanke” is said to have resulted in additional revenues of a whopping 230 million US dollars (2013). The company probably achieved this by favoring itself and thus gaining a decisive competitive advantage. Google continues to justify its advertising practices, however, and expressed itself through a spokesperson as follows:

“Our advertising technologies help websites and apps fund their content”

Furthermore, the search engine giant now seems to be fed up with being pushed into a special role. Thus, Google points out that contrary to the assumption of the lawsuit side in the field of Internet advertising is very much a strong competition. This even has:

“lowered ad tech fees and expanded options for publishers and advertisers.”

Facebook and Google claim to have known nothing about advertising deal

According to the two tech companies, the collusion that has come under criticism is not supposed to have happened. Accordingly, they want to ensure that the court dismisses the lawsuit filed as early as next week. Google takes thereby also CEO Pichai directly in protection.

“We sign hundreds of agreements every year that do not require the approval of the CEO, and this was no different.”

Facebook also clearly distances itself from the competition violation. Thus, the social network calls the arrangement with Google as a company-standard “non-exclusive bidding agreement”. This procedure is not only quite normal vis-à-vis Google. According to the spokesperson, Facebook has probably also made similar agreements with other companies. As is often the case, Facebook and Meta justify their actions by saying that they are acting in the interest of the users. After all, it is precisely this approach that ensures:

“to increase competition for ad placements”.

Simon Lüthje

I am co-founder of this blog and am very interested in everything that has to do with technology, but I also like to play games. I was born in Hamburg, but now I live in Bad Segeberg.

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Facebook, Google and other well-known tech companies regularly face legal consequences within the EU. The reason for this is their lax approach to data protection and competition law. Now, however, news has reached us from the U.S. that could also cause a lot of problems for Facebook and Google in their home country. The CEOs … (Weiterlesen...)

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