The proverbial noose has been tightening around the necks of big tech for a while now. With mounting pressure from both sides of the aisle to create some sort of big tech regulatory framework, major companies have been hit by a number of lawsuits all around the world. However, a new lawsuit filed by ten separate states last week revealed something potentially quite startling. According to these documents, Google (NASDAQ: GOOG) and Facebook (NYSE: FB) had secretly agreed to “cooperate and assist each other” if they ever faced an investigation into their online advertising practices.
This kind of agreement, between two of the largest players in the online advertising world, would represent a major violation of antitrust law. The legal documents in question, which remain heavily redacted, for the most part, were provided to the Wall Street Journal on Monday afternoon. The ten attorney generals in charge of the suit claimed that the two tech giants had made a secret deal back in 2018, in which Facebook wouldn’t compete with Google’s online advertising tools in exchange for privileged treatment when the social media giant used them.
This included, among other things, relatively cheap access to Google’s advertising services. According to documents from Facebook, this deal was considered quite cheap in comparison to what competitor companies were getting for comparable services from Google. At the same time, the lawsuit added that both companies were well aware that their agreement could be illegal and had worked on ways to protect each other from possible investigations.
The legal documents said that both companies will “cooperate and assist each other in responding to any Antitrust Action,” as well as “promptly and fully inform the Other Party of any Governmental Communication Related to the Agreement.” One Google representative responded by saying that “There’s nothing exclusive about [Facebook’s] involvement and they don’t receive data that is not similarly made available to other buyers.”
Both companies responded to the news almost immediately, denying the claims made by these attorney generals. However, considering the amount of scrutiny and suspicion that both tech companies have garnered over the past years, it’s pretty much certain that investors are going to look at these two companies with even more suspicion now than ever.
While shares of Google didn’t respond much to the news, Facebook was inching down around 1.7% on Wednesday, followed by an additional dip in pre-market trading. While many of the other ongoing cases against Google and Facebook might be harder to prove in court, such as the claims that they are running a legal monopoly, price-fixing is a much easier charge to fix on a company like Google.
Google Company Profile
Alphabet is a holding company, with Google, the Internet media giant, as a wholly owned subsidiary. Google generates 99% of Alphabet revenue, of which more than 85% is from online ads. Google’s other revenue is from sales of apps and content on Google Play and YouTube, as well as cloud service fees and other licensing revenue. Sales of hardware such as Chromebooks, the Pixel smartphone, and smart homes products, which include Nest and Google Home, also contribute to other revenue. – Warrior Trading News