An advertising deal struck between Facebook and Google, itself only revealed to the public because of a late 2020 antitrust lawsuit, will be subject to antitrust probes in the European Union and United Kingdom going forward. The secret “Jedi Blue” deal involves Facebook refraining from engaging in “header bidding,” a practice that tends to take money out of Google’s coffers, in exchange for better ad rates and placement in Google’s own advertising system.
Antitrust probes focus on secret agreement between Google and Facebook
“Jedi Blue” only came to be known outside the halls of Facebook and Google due to a 2020 lawsuit filed by a number of US states against Google for anticompetitive practices in the advertising market, one that came on the heels of a similar lawsuit filed by the Department of Justice (DOJ). Details of the secret deal did not come out until late 2021 as a judge unsealed documents from the lawsuit that described it.
Header bidding became a big deal in the digital advertising world around the mid-2010s, and it threatened Google more than anyone else in the ecosystem. It is a means of ensuring that everyone bidding on ad space places their one and only bid at the same time via a snippet of JavaScript placed in the header of a publisher’s page. It was essentially a hack of Google’s DoubleClick for Publishers ad system, granting end bidders direct access to information that had previously been prioritized and filtered by Google’s own internal systems. The end result was better placement and prices for the businesses looking to display ads and lower revenue for Google.
Facebook made a public statement of support for header bidding in early 2017, indicating it was going to implement its principles in its own Audience Network ad system. By 2018, Facebook had quietly dropped these plans. No one was really sure why this had happened until the materials from the antitrust probe began being unsealed in 2021.
It turned out that Facebook and Google quietly came to the “Jedi Blue” agreement behind the scenes beginning at that time in September 2018. In return for Facebook dropping its header bidding plans and agreeing to not build any competing ad technologies, Google offered the social media giant priority placement in its search results and better-than-usual ad rates. The lawsuit revealed the two companies had detailed discussions about this arrangement, even breaking down the potential risk and cost should it be made public.
The European Commission and the UK Competition and Markets Authority (CMA) will be conducting separate but parallel antitrust probes into the workings of Jedi Blue, with the existing US lawsuits continuing on in the background. The EU Commission said that Google’s strategy of freezing out header bidding with the implementation of its own Open Bidding system may have constituted an attempt to “exclude adtech services” and thus “restrict or distort competition in markets for online display advertising” in a way that is damaging to both publishers and consumers. The lead UK privacy watchdog also said that Google’s conduct in relation to header bidding could constitute a restriction and distortion of competition in the adtech market.
In a response to the media, Google characterized the Jedi Blue deal as a simple agreement to allow Facebook access to the Open Bidding system along with “dozens” of other companies. Meta’s statement to the press claimed the header bidding arrangement was non-exclusive and that it had “similar agreements” with other platforms.
Google may have gone too far with attempts to stamp out header bidding
The primary focus of the antitrust probes appears to be on Google’s actions, though the court documents make clear that Facebook Chief Operating Officer Sheryl Sandberg was aware of the deal and that the company was considering the risks of it. The probes appear to be focusing on the concrete actions taken by each company, and it seems that Google had taken more clear action than Facebook had based on current information available.
Google stands to lose potentially hundreds of billions of dollars in the US if the lawsuit brought by nearly a dozen states comes down against its Open Bidding system, which Google has stated was developed to counter the “problems” of header bidding. This current set of antitrust probes and lawsuits is far from the company’s only legal issues of this nature, however. The actions in the EU are only a part of an ongoing broad investigation of Google’s advertising technology, something prompted by a 2019 enforcement action against Google Adsense that led to a massive fine (which remains under appeal).
Google has already paid some $8.8 billion in prior EU fines related to antitrust probes. The laws under which it and Meta are presently being investigated are different from the General Data Protection Regulation (GDPR) and allow for larger fines, potentially 10% of annual global turnover if the maximum penalty is levied.
