Last Week’s Criminal Antitrust Accusations Were All About Google ⇥ wired.com
Last week, in two separate lawsuits, Google was sued on antitrust grounds — first by the attorney general of Texas and nine other states, then by the attorneys general of Colorado and Nebraska plus thirty-six other states. Both lawsuits are, I assure you, wild rides but I feel that it is important to warn you that none of these accusations have yet been tested in court and likely won’t be for another three years.
Let’s start in Texas. Fresh off blowing a “repugnant stunt” to undermine democracy, Ken Paxton, the attorney general, accused Google in a lawsuit of rigging the online ad marketplace and striking an illegal deal with Facebook. Gilad Edelman, Wired:
As described in the complaint, the scheme between Google and Facebook has its roots in 2017, when Facebook announced it would start supporting something called “header bidding.” The details are too wonky to get into here. Basically, Google, which runs the biggest online ad exchange, likes to make publishers give it first dibs on bidding to place an ad. (“Publisher” just means any website or app that runs ads.) Header bidding was a technical hack that allowed publishers to earn higher prices by soliciting bids from multiple exchanges at once. Google hated this, because it created more competition. When Facebook declared that it would work with publishers that used header bidding, it was seen as a provocation. The millions of businesses that advertise with Facebook don’t just advertise on Facebook; through the Facebook Audience Network, the company also places ads across the web, making it one of the biggest ad buyers on the internet. If it began supporting header bidding, that could cause Google’s ad platform to lose a lot of business.
Drawing on internal documents uncovered during its investigation, however, the Texas attorney general claims that Facebook’s leaders didn’t actually want to compete with Google; they wanted Google to buy them off. This seems to have worked. In September 2018, the companies cut a deal. Facebook, the complaint says, agreed to “curtail its header bidding initiatives” and send the millions of advertisers in its Facebook Audience Network to bid on Google’s platform. In return, Google would give the Facebook Audience Network special advantages in ad auctions, including setting aside a quota of ad placements to Facebook, even when the company didn’t make the highest bid. The agreement, the complaint says, “fixes prices and allocates markets between Google and Facebook.”
Paxton’s suit is heavily redacted, especially in its juiciest claims, so it is not an easy read. But enough is revealed about this allegedly illegal deal to indicate two things: it is alarming, and it appears to be at least partially based on an incorrect interpretation of backups. From the suit (PDF):
For instance, shortly after Facebook acquired WhatsApp, in 2015, Facebook signed an exclusive agreement with Google, granting Google access to millions of Americans’ end-to-end encrypted WhatsApp messages, photos, videos, and audio files.
This sounds like an alarmist way to write that you could back up WhatsApp to Google Drive beginning in 2015, but it also indicates that Google may be crawling WhatsApp backups for its own purposes. If that is the case, any supporting evidence in the lawsuit is currently redacted. However, according to a report in the Information, the agreement allowed Google to train its facial recognition software on users’ personal WhatsApp photos and video, which are not encrypted at rest in backups, if the user backed-up their WhatsApp account to their Google Drive account. At the very least, this strikes me as a violation of users’ expectations and trust over how the WhatsApp backup mechanism works. You might expect photos you drop into a cloud photos service to be used to improve that service; you probably don’t expect your backed-up conversations from a third-party app to be used for that.
Paxton’s suit also makes big claims about Google’s AMP page format: that it was developed in response to header bidding as a means of exercising greater control over publishers’ ads, and that AMP was just a precursor to total control. From page 84 of the suit:
Google’s control of publisher monetization will allow it to build a version of one giant walled garden that is particularly advantageous to Google. A walled garden where publishers own the property and bear the cost and risk of providing content but Google captures the benefit by extracting a high share of advertising revenues as the sole ad tech services provider. The following internal Google document summarizes Google’s future plans for the internet:
We are this close to seeing Larry Page’s plans for a hollowed-out volcano full of servers.
I have long maintained that AMP is a unique threat to an open web, and have been told by Reddit and Hacker News types — not to mention several people who work on AMP — that I am overreacting. If the allegations in this suit are correct, consider this a metaphorical bullhorn announcement that I told you so.
Let’s move on to the second suit; Shannon Bond, NPR:
The AGs accuse Google of giving its own products priority in search results over more specialized rivals, such as Yelp, which focuses on local businesses, and Tripadvisor, for travel listings. And they allege Google gives itself an unfair advantage over rival search engines, such as Microsoft’s Bing, in the ads that appear in search results.
The states’ complaint echoes one filed by the U.S. Justice Department in October. Both object to deals that, they allege, Google struck to ensconce itself in users’ lives. Notably, both suits point to a pact that made Google’s search engine the default on Apple devices.
The AGs go further, however, warning that Google is trying to lock in similar deals to dominate search on newer technologies such as smart speakers, voice assistants and connected cars. The states are asking for their complaint to be consolidated with the Justice Department’s suit and litigated together.
Google responded to this by saying that all it is doing is making it faster and easier to see relevant information, which it demonstrated by a search for “bread” returning recipes, local bakeries, and an information panel in addition to the standard ten blue links. It compares this to Bing, which looks pretty much the same.
But, notably, Google does not have a product that has anything to do with bread. If you search “music” with Google, the first result is YouTube Music; if you search “spreadsheet”, the first result is for Google Sheets; if you search “photos”, the first result is for Google Photos; and, if you search “domain registration”, the first non-ad result is Google Domains. Notably, even if you clicked on one of the ads to register a domain through a different company, Google would get paid for your click.
These factors combined — Google’s vertical integration, its prioritization of its own products, the positioning of advertising that displaces search results, and contracts with companies like Apple and Microsoft — are illegal, according to the Colorado and Nebraska attorneys general (PDF, page 36):
Google’s conduct has entrenched and solidified its monopoly positions against competition in three ways that individually and cumulatively harm competition. First, Google has put into place a series of artificially-restrictive contracts that have guaranteed it de facto exclusivity in the vast majority of distribution channels (like browsers and voice assistants), thus limiting the ability of consumers to reach general search competitors through search access points. Second, and notwithstanding Google’s pledge to operate its search advertising tool in a neutral fashion, Google operates its SA360 tool to harm advertisers by denying interoperability to important, competitive features, thereby harming what limited choice in general search services remains for advertisers in the wake of its exclusionary distribution contracts. Third, Google’s discriminatory conduct on its search results page has impaired the ability of specialized vertical providers to reach consumers, thereby thwarting their ability to lower barriers to expansion and entry for general search engine competitors.
Many of its claims echo a 2012 analysis by the Federal Trade Commission, part of which was inadvertently disclosed to the Wall Street Journal, as well as the October suit filed by the Department of Justice.
These suits will undoubtably take years to be resolved. But they indicate a crumbling of trust in large tech companies with plenty of evidence from internal documents and analyses.
It would be a shame if this newfound zeal for investigations into possibly criminal anticompetitive behaviour were limited to tech companies.