Google, Facebook executives should face criminal US bid-rigging probe over 'Jedi Blue' deal, Democrats tell DOJ

Google and Facebook executives should face criminal antitrust scrutiny from the US Department of Justice and federal prosecutors over whether their “Jedi Blue” advertising agreement broke bid-rigging laws, a group of Democratic lawmakers have said in a letter to the enforcer.

The 2018 deal, details of which were revealed in a landmark state-led antitrust lawsuit against Google over its alleged illegal monopolization of digital advertising, was allegedly signed by Facebook Chief Operating Officer Sheryl Sandberg and Google Senior Vice President and Chief Business Officer Philipp Schindler.

Senator Elizabeth Warren, one of the leading voices in Congress calling for stronger antitrust enforcement — particularly against large tech companies — is among those now calling for the DOJ to conduct its own criminal investigation.

The letter, dated yesterday, is addressed to US Attorney General Merrick Garland and Nicholas Ganjei, acting US attorney for the Eastern District of Texas. US Federal Trade Commission Chair Lina Khan and DOJ Acting Assistant Attorney General for Antitrust Richard Powers were copied.

The letter is signed by Warren, of Massachusetts, Connecticut Senator Richard Blumenthal, Washington Representative Pramila Jayapal and New York Representative Mondaire Jones.

MLex in April was the first news outlet to report improper redactions of court documents filed by Google that revealed details of the 'Jedi Blue' deal (see here and here).

“If Google and Facebook executives in fact agreed that Facebook ‘would win a mutually determined, fixed share of Google’s ad auctions,’ " the lawmakers said, quoting MLex's description of the documents, "then the agreement would appear to be an example of bid rigging, a clear violation of Section 1 of the Sherman Act.”

There are no Section 1 violations alleged in the civil suit filed by 17 attorneys general against Google, and Facebook was not named a defendant.

Violations of Section 1 can be criminally prosecuted under US law. “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,” the lawmakers said in their letter.

As MLex reported at the time, in the improperly redacted documents, Google confirmed the Jedi Blue deal’s existence, revealed some of the names of the executives who allegedly signed the agreement, and said the deal included provisions whereby the agreement would be terminated if it drew attention from regulators.

“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 lawmakers told Garland and Ganjei.

Under the terms of the Jedi Blue agreement, Facebook is alleged to have agreed not to bypass Google's digital advertising technology network in exchange for favorable treatment in Google ad auctions.

In their civil complaint, the states said this amounted to market allocation between Google and Facebook, who would otherwise work as “competing bidders in the auctions for publishers’ web display and in-app advertising inventory.”

Regardless of the civil action against Google, the Democratic lawmakers asked that “criminal antitrust activity be prosecuted to the fullest extent of the law,” with both companies probed.

A Google spokeswoman referred MLex to a January blog post by Adam Cohen, Google’s director of economic policy, which said the allegations by Texas and other states regarding Jedi Blue were an “inaccurate portrayal.”

“AG Paxton inaccurately claims that we manipulate the Open Bidding auction in [the Facebook Audience Network’s] favor,” Cohen said. “We absolutely don’t. FAN must make the highest bid to win a given impression. If another eligible network or exchange bids higher, they win the auction.”

A spokesperson for Facebook did not have a comment on the letter, but the company has previously said that the arrangement it has with Google is common in the industry, and that such agreements actually help increase competition in ad auctions to the benefit of advertisers and websites or apps that publish ads.

The Department of Justice is still awaiting a confirmation hearing on Jonathan Kanter, President Biden’s nominee for its top antitrust position.

Of the four biggest tech firms, the DOJ is understood to be prioritizing Google and Apple, while the other federal antitrust enforcer, the Federal Trade Commission, is focusing on Facebook and Amazon. Unlike the DOJ, the FTC doesn't have criminal enforcement powers. The DOJ regularly prosecutes individuals for bid-rigging in other sectors.