(Reuters) – Texas and nine other states sued Google on Wednesday accusing it of partnering with Facebook in an illegal manner in violation of antitrust laws to fuel the already dominant online advertising business.
The states called on the Alphabet company, which controls a third of the world’s online advertising industry, to compensate them for damage, and called for “structural relief,” usually interpreted as forcing a company to divest some of its assets to sell.
The Texas lawsuit is the second major regulatory complaint against Google and the fourth in a series of federal and state lawsuits aimed at curbing the alleged bad behavior of big tech platforms, which have grown significantly over the past two decades.
Google called the lawsuit in Texas “unfounded”. Facebook did not immediately respond to a request for comment.
According to a source familiar with the matter, the action on Wednesday will increase the legal stakes for Google, which is expected to have a third antitrust lawsuit from more than 30 attorneys general on Thursday.
Online publishers, including Genius Media Group and news website The Nation, said in a separate antitrust lawsuit on Wednesday that they had lost revenue due to Google’s dominance of online ads. They are demanding that Google divest part of its advertising business.
In its lawsuit, Texas calls on a judge to find Google guilty of antitrust violations and to order the cessation of the violations. It accuses Google of abusing its monopoly on the digital ad market by allowing its own exchange to win ad auctions even when others bid higher and overwhelming publishers for ads.
It also accused Google of working with Facebook. The two companies compete fiercely in Internet ad sales, and together they represent more than half of the global market.
“As internal Google docs show, Google tried to kill competition through a number of exclusionary tactics, including an illegal agreement with Facebook, the greatest potential threat to competition,” the lawsuit said.
The lawsuit, which was filed in the Eastern District of Texas, is also closely related to concerns Rupert Murdochs News Corp and other media outlets have publicly raised with regulators in the US and Europe over the past two years. Google cut its fees to near zero to gain dominance among publishers, used misleading tricks to mediate transactions between publishers and advertisers, and withdrew high fees from both parties for playing arbitrators.
In a video posted on Twitter, Texas Attorney General Ken Paxton said, “If the free market were a baseball game, Google would position itself as the pitcher, batsman and umpire.”
Paxton, who faces allegations that he abused his office power and committed bribery, also recently denied the results of the November 3 US presidential election in several battlefield states. The Supreme Court denied this lawsuit.
A Google spokesman said the company would defend itself against “unfounded claims by the Texas court”. She added, “Digital ad prices have fallen over the past decade. The ad tech fees also fall. Google’s ad tech fees are below the industry average. These are the hallmarks of a highly competitive industry. “
Paxton, along with ten other attorneys general, joined a US Justice Department lawsuit against Google in October that charged the $ 1 trillion California-based company of illegally using its market power to hobble rivals.
The nine states that joined Texas on Wednesday are Arkansas, Indiana, Kentucky, Missouri, Mississippi, South Dakota, North Dakota, Utah, and Idaho. They all have Republican prosecutors.
Google Ads sales account for over 80% of Alphabet’s sales. However, most of Alphabet’s sales and profits come from Google’s high-margin operation, which places text ads above search results.
The business targeted on Wednesday – serving ads on partner apps and websites – is far less important to Google.
Alphabet in its latest financial report reported quarterly digital advertising revenue of $ 37.1 billion. And Alphabet stock fell 0.2% on Wednesday to $ 1,757.19. Facebook shares, which briefly went negative after the details of the Texas lawsuit were released, reversed losses and ended up little changed.
(Reporting by Diane Bartz and Paresh Dave in Oakland, California. Writing by Nandita Bose in Washington. Editing by Sonya Hepinstall and Christopher Cushing.)