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Texas leads multi-state antitrust lawsuit against Google over ad tech

The lawsuit alleges Facebook was a "co-conspirator" with Google to manipulate advertising auctions.

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Google was hit with another antitrust lawsuit.

Angela Lang/CNET

A group of ten states led by Texas Attorney General Ken Paxton on Wednesday filed an antitrust lawsuit against Google for allegedly anticompetitive practices in online advertising.

The lawsuit accuses the tech giant of harming competitors by engaging in "false, deceptive, or misleading acts" while operating its buy and sell auction system for digital ads. The complaint also alleges Facebook was a "co-conspirator" to Google, as the two tech giants struck an unlawful agreement to manipulate advertising auctions.

Google's online advertising operation is the cornerstone of its business, generating the vast majority of its $160 billion in annual revenue. The company has been criticized because it owns every step in a complicated system that connects ad sellers and buyers. Rivals say the process gives Google an unfair edge over the market. Much of the company's advertising prowess comes from acquisitions, including the 2008 buyout of the ad tech firm DoubleClick.

The other nine other states joining Texas in the case are Arkansas, Idaho, Indiana, Kentucky, Mississippi, Missouri, North Dakota, South Dakota and Utah. All of them are led by Republican attorneys general.

"This Goliath of a company is using its power to manipulate the market, destroy competition and harm you, the consumer," Paxton said in a video posted to Twitter. "Google repeatedly used its monopolistic power to control pricing, engage in market collusions to rig auctions in a tremendous violation of justice." 

Google on Wednesday denied it engaged in anticompetitive behavior. "Attorney General Paxton's ad tech claims are meritless, yet he's gone ahead in spite of all the facts. We've invested in state-of-the-art ad tech services that help businesses and benefit consumers," a spokesman said in a statement. "We will strongly defend ourselves from his baseless claims in court."

An alleged deal with Facebook

In the complaint, the attorneys general claim Google illegally teamed up with Facebook, its fiercest competitor in the digital advertising market. Three years ago, Facebook threatened to go after Google's dominance in the market by backing an ad buying technique called "header bidding." 

"Google understood the severity of the threat to its position if Facebook were to enter the market and support header bidding," the complaint reads. "To diffuse this threat, Google made overtures to Facebook."

In the end, Facebook backed off after Google agreed to give the social network "information, speed, and other advantages" in auctions run by Google, the complaint claims. The lawsuit the codename for the agreement was named after a character from Star Wars, though the specific name is redacted.

A Google spokesman said the allegation in the complaint is inaccurate. He said Facebook is part of a group of more than 25 other companies that participates in a Google program called Open Bidding, in which Google works with other ad networks and exchanges. Facebook doesn't receive any special data, the spokesman said. 

Facebook didn't return a request for comment.

The lawsuit follows a landmark antitrust case filed against Google in October by the US Department of Justice. That complaint narrowly targets Google's contracts with other companies, like Apple and Samsung, to be the default search engine on their devices, a move that allegedly boxes out competitors. 

The announcement from Paxton comes as the Texas Republican has drawn controversy of his own. Paxton faces accusations that he used his office to illegally interfere with an FBI investigation into a campaign donor. The FBI is reportedly probing those claims. Paxton has denied any wrongdoing.

More antitrust scrutiny could be coming for Google. A different coalition of states is expected to file yet another lawsuit against the company as soon as Thursday, focusing on its handling of search results and how they could harm competitors.

See also: Google One FAQ: Everything to know about the cloud storage subscription

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