It looks like Google is being sued by state Attorneys General for deceptive practices in its advertising business. (You can see writing about this, mostly about Facebook, here, though searching for "advertising" and "fraud" generates a fair number of other posts.)
Of course, there are two sorts of fraud here: One exaggerates the effectiveness of advertising, which has been done since time immemorial, and rigging the advertising markets, which Google and Facebook have already been shown to have done.
Google misled publishers and advertisers for years about the pricing and processes of its ad auctions, creating secret programs that deflated sales for some companies while increasing prices for buyers, according to newly unredacted allegations and details in a lawsuit by state attorneys general.
Meanwhile, Google pocketed the difference between what it told publishers and advertisers that an ad cost and used the pool of money to manipulate future auctions to expand its digital monopoly, the newly unredacted complaint alleges. The documents cite internal correspondence in which Google employees said some of these practices amounted to growing its business through “insider information.”
The unredacted filing on Friday in the U.S. District Court of the Southern District of New York came after a federal judge ruled this past week that an amended complaint filed last year could be unsealed.
The lawsuit was first filed in December 2020, with many sections of the complaint redacted. Since then, the redactions have been stripped away in a series of rulings, providing fresh details about the states’ argument that Google runs a monopoly that harmed ad-industry competitors and publishers.
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In addition to detailing some of Google’s programs, the new complaint says that Alphabet and Google Chief Executive Sundar Pichai and Meta Platforms Inc. Chief Executive Mark Zuckerberg signed off on a 2018 business agreement that allegedly guaranteed Meta subsidiary Facebook would both bid in—and win—a fixed percentage of ad auctions. It has previously been reported that the agreement was signed by Google Chief Business Officer Philipp Schindler and Facebook Chief Operating Officer Sheryl Sandberg.
As an aside here, it should be noted that these sorts of anti-competitive agreements are not just illegal, they are actually criminal, and in the past people have been sent to jail for this sort of behavior.
And then there is the flat out fraud:
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In the first version, Google misled publishers and advertisers to believe they were participating in a “second-price auction,” where the winner pays the price of the second-highest bid, when using its advertising exchange, AdX, according to allegations from the complaint. However, under Google’s Bernanke program, AdX would at times knock out the second-highest bid, allowing the third-highest bid to win, thus depriving the publisher of revenue, according to the complaint. At the same time, Google would charge advertisers the price of the second-highest bid and pocket the difference, the complaint said.
Google pooled the advertisers’ overpayments and used the money to manipulate auctions on its systems, at times boosting bids from advertisers bidding through its ad-buying tools to ensure it would win an auction it otherwise wouldn’t have, the complaint said.
We need to have a serious criminal investigation of the whole online advertising industry, with aggressive prosecutions and the possibility of real jail time for senior executives.
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