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US lawmakers want an investigation into secret Google – Facebook Jedi Blue deal

The secret deal had led to Facebook backing off from competing against Google in the ad space.

US lawmakers sent a letter dated August 31 to the U.S. Attorney General Merrick Garland requesting that the Department of Justice’s Antitrust Division investigate the secret Google – Facebook deal codenamed Jedi Blue. The result of such an investigation could have ramifications in other parts of the world such as the EU and India where Google is under regulatory scrutiny as well.

What was the secret Jedi Blue deal?

In December 2020, a lawsuit filed by ten US states led by Texas against Google for anticompetitive conduct alleged that Google reached an illegal deal with Facebook in 2018 to maintain its control over the digital advertising market.

According to the lawsuit, Facebook backed off from competing against Google in the ad space with an innovative technology called header bidding after Google offered Facebook special information and speed advantages to help the company succeed in the auctions, New York Times reported.

“The disclosure of the deal between the tech giants has renewed concerns about how the biggest technology companies band together to close off competition. The deals are often consequential, defining the winners and losers in various markets for technology services and products. They are agreed upon in private with the crucial deal terms hidden through confidentiality clauses,” the NYT report added.

Both Google and Facebook said that there is no foul play here and such deals are common in the digital advertising industry.

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You can read more about the Jedi Blue deal here and here.

What does the letter sent by lawmakers say?

The lawmakers, Senators Elizabeth Warren and Richard Blumenthal and Representatives Pramila Jayapal and Mondaire Jones contended that the Google-Facebook deal violated the Sherman Act.

Courts have recognized certain anticompetitive actions — such as price fixing, bid rigging, and market allocation — as “per se” violations that have no legitimate justification and should be considered unlawful without additional analysis of the actions’ net effect on competition under the so-called “rule of reason.” If Google and Facebook executives in fact agreed that Facebook “would win a mutually determined, fixed share of Google’s ad auctions,” then the agreement would appear to be an example of bid rigging, a clear violation of Section 1 of the Sherman Act, which provides that any “contract … or conspiracy, in restraint of trade
or commerce … is declared to be illegal.” This section imposes criminal penalties on persons who violate the law, including up to $100 million for guilty companies and up to $1 million in fines and 10 years in prison for guilty individuals. – Letter sent by US lawmakers

“This highly problematic Jedi Blue agreement was signed by Google’s Senior Vice President and Chief Business Officer Philipp Schindler and Facebook’s Chief Operating Officer Sheryl Sandberg. Even more troubling, it included ‘a provision governing the parties’ options to terminate the agreement in the event of certain government investigations of the agreement,’” the letter stated.

“Given the egregiously anticompetitive nature of the alleged agreement here, we ask that you investigate this matter to uncover any criminal behavior that may have transpired in violation of the Sherman Act,” the letter concluded.

A few days after the letter was sent, Bloomberg reported that the Justice Department was already preparing a second lawsuit against Google over the company’s digital advertising business and it covers the Jedi Blue deal. The first lawsuit by the department was filed in October 2020 in relation to Google’s search practices.

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