Google antitrust probe will soon broaden beyond adtech business, Texas AG's office says

11 February 2020 2:58pm
Google sign close

6 February 2020. By Mike Swift.

While the multistate antitrust investigation of Google is initially focused on its powerful and central position in the advertising technology business, the probe will soon broaden into other aspects of Google's business, the Texas attorney general's office has informed the Internet giant.

"So, at the outset, this litigation is about AdTech, and I don't think Google would dispute that this AdTech investigation involves the majority of where Google derives its revenue," Darren McCarty, a Texas deputy attorney general, told a Texas state judge during a recent court hearing involving a dispute between Google and the Office of the Attorney General over its use of consultants.

This investigative subpoena "involves AdTech, but other CIDs [served on Google] won't necessarily involve AdTech," McCarty told Travis County District Court Judge Jan Soifer, according to an official transcript of the hearing obtained by MLex. "In fact, we've told Google that there are other areas that the States are interested in and will be pursuing. So it's going to broaden."

In a description of the early focus of the Google probe, McCarty told the judge Texas and the 51 other states and territories involved in the investigation are focused on Google's dominant role in the split-second blind computer auction that is a centerpiece of its search-keyword advertising business. That computer auction determines whether a searcher sees a digital ad based on the relevance of the ad and the amount the advertiser bids for the position of their ad.

"Google is essentially present in every step of this chain," McCarty told Soifer as he showed the judge a slide presentation illustrating Google's central role in the Adtech market. "They are — they are a market leader. And, in fact, the auction itself, which is represented by the big square in the middle, is — Google is the largest player in that marketplace. Very significant. We don't know what the percentage is specifically, but it's very significant."

Google and the Texas attorney general are battling over the state's plan to hire several expert consultants, who Google says are biased and could weaponize sensitive information obtained in the states' investigation to aid its competitors. All states but California and Alabama are part of the probe, with other participants including the District of Columbia, Guam, and Puerto Rico.

At the conclusion of a Jan. 22 hearing in the Texas state capital, which hasn't been previously reported, Soifer gave lawyers for Google and the Texas attorney general until this Monday to work out the details of a protective order to guide how Texas will employ consultants Cristina Caffarra and Eugene Burruss.

McCarty said the consultants the attorney general wants to use are among the few people qualified to understand both the economic and technological aspect of Google's business. "We need to hear from Dr. Caffarra because she is one of the few people, and frankly leading folks in the field, that understand well the technology — the technology in a broad sense and the economic implications of it," added McCarty, who is deputy attorney general for civil litigation of the Texas Office of the Attorney General.

Google wants advance notice of third-party access to its sensitive information, a rule prohibiting the third-party consultants from simultaneously working for a Google competitor while they provide consultant service for the multi-state probe, and for the consultants to agree to a one-year "cooling off" period in which they would not work for a competitor.

Soifer expressed skepticism about those proposed limits, suggesting that she thought Texas antitrust law will prohibit the consultants from sharing any proprietary information with competitors such as News Corp., Microsoft or Yandex — Google competitors that Caffarra or Burris have worked for in the past.

"But don't you agree that the other thing that Texas law does is that it doesn't tell you you can't go to work for a competitor; it tells you you can't give them the competitive information?" Soifer asked Google lawyer Paul Yetter.

"What you're asking me to do, in some ways, looks like restraint in advance of there being any indication that they will misuse this information," she added. The judge pointedly suggested that the two sides should try to independently negotiate an agreement by Feb. 10 with her view in mind.

"Y'all know, from some of my questions and comments, what some of my thoughts are," she said. "I'm going to encourage you to make one last try to see if you can reach an agreement on these things, because whatever agreements y'all can reach are likely to be more palatable than what I may end up doing because y'all know so much more about this than I do."

Soifer, who normally hears civil and family law cases, was a deputy chief of the Consumer Protection Division with the Office of the Texas Attorney General in the 1990s. After going into private practice, she also represented companies that were targets of antitrust probes by the Texas attorney general.

"So I've been on both sides, and I'm pretty familiar with CIDs," the judge said, interrupting Google's lawyer at one point, when he was attempting to explain to her what a CID is.

Texas Attorney General Ken Paxton was among a group of state attorneys general or their staff who met with the US Department of Justice in Washington this week to discuss how state and federal regulators could cooperate. In a television interview today, Paxton said Google's motive in the fight over consultants aims to undermine the probe.

"They're pushing us towards a fight," Paxton told CNBC. "We don't necessarily want one. But we won't back off if they're not going to cooperate."

At the Jan. 22 hearing, Yetter denied that was Google's intent. "Google is not trying to obstruct this investigation. It has been cooperating in this investigation," he told Soifer, and had already turned over nearly 100,000 documents to Texas investigators, with more due to be provided soon.

McCarty acknowledged to the judge that the investigation remains in its early stages. There is much that investigators don't know, even as the advertisers and publishers have no view into how the auction brokered by Google matches digital ads to consumers' eyeballs.

"Mr. Yetter talked about pricing and our inquiries related to pricing," McCarty told the judge.

"That's important," McCarty said, because advertisers don't know what publishers are paid, and publishers don't know what advertisers pay.

"What happens in that box in the middle is completely opaque, but yet they participate in this market because in many ways and oftentimes it is the only way to go," he told the judge. "They have no choice."