In 2017 Facebook tested a new way of selling online ads, which was a huge threat for Google’s domination in this market. This led Google to offer Facebook a secret deal…
Both Facebook and Google have already been accused of violation of antitrust law many times in the past. Quite recent court cases include one form October 20, 2020, when The US Department of Justice with 11 state Attorneys General filed a civil antitrust lawsuit claiming that Google “unlawfully maintain monopoly through anticompetitive and exclusionary harms” – that referred to various operations in the search and search advertising markets, and one from December 9, 2020 when Facebook has been sued by the FTC (Federal Trade Commission) for maintaining a “years-long course of anticompetitive conduct” in social networking which results in customers having fewer choices (if any) and deprives advertisers of benefits of competition.
Facebook’s attempts to establish a new way of online advertising in 2017 have not been completed, but, interestingly, they instead, in 2018, joined an alliance of companies doing the same, but with the help of Google. This agreement between Facebook and Google is a part of further mentioned court case form October, 2020 and was called by the state attorneys general illegal price-fixing deal. The New York Times found out that, according to executives of 6 out of 20 partners in the alliance, Facebook was given special terms of contract resulting in a significant advantage over the other companies. However, Google and Facebook deny to these reports and even state that deals like that “help increase competition in ad auctions” (Christopher Sgro, Facebook’s spokesman). This mysterious agreement is believed to be coded as Jedi Blue inside the companies.
What is it exactly about?
Part of the online advertising involved in the deal is called programmatic advertising – process of automatically buying and selling digital advertising space. Basically, when a user is clicking a link to a website, there is a bid for ads that will show up. Google, having one of the most dominant ad exchanges, often directed straight to their own exchange. That is why a method of header bidding was developed which mixed exchanges from different platforms at once, which resulted in bigger competition and better prices. It is no surprise that Google did not “like” it and developed yet another method – open bidding. It enables exchanges other than Google’s at the same time, but Google takes fee for every winning bid. Facebook is one of the biggest ad buyers, so its joining Google’s alliance and having extra conditions is worrying for the whole industry. Those advantages included: speed advantages, direct billing relationships with the ad sites and better understanding of who would be shown the ads.
Jedi Blue can be used to support lawsuits that have already been initiated against Facebook and Google as well as to trigger new ones. This case is a clear example of why tech giants need more law regulations.