The European Commission and the U.K. have announced parallel formal antitrust investigations into Google and Facebook in relation to their online display ad businesses.
The twin probes, announced today by the EU’s competition division and the U.K.’s Competition and Markets Authority (CMA), are focused on allegations of collusion between Google and Facebook (aka Meta) via a September 2018 internal agreement known as “Jedi Blue,” which stands accused of undermining a competing ad system (header bidding) in favor of Google’s Open Bidding system.
Details of Jedi Blue previously emerged through an antitrust lawsuit led by the U.S. state of Texas against Google’s ad business, which alleges that Google and Facebook forged a quid pro quo agreement to rig the market in their favor — by Google giving Facebook preferential rates and priority choice of prime ad placements in return for the social networking giant supporting its ad system and not building competing ad technologies or using the publisher rival system, header bidding.
The U.S. lawsuit is ongoing, but the EU said today it’s similarly concerned that the Jedi Blue agreement “may form part of efforts to exclude adtech services competing with Google’s Open Bidding programme, and therefore restrict or distort competition in markets for online display advertising, to the detriment of publishers, and ultimately consumers.”
Speaking to the Financial Times, the EU’s EVP and competition chief, Margrethe Vestager, suggested the bloc’s investigation will also look to determine whether Meta was an active participant in the suspected scheme — or whether Google acted alone.
“We have not concluded yet if it’s a Google thing alone or if they were in it together. It’s not a given that Meta was conscious of the effects of the deal and that’s what we have to investigate,” she told the newspaper.
“Many publishers rely on online display advertising to fund online content for consumers,” Vestager also said in a statement. “Via the so-called ‘Jedi Blue’ agreement between Google and Meta, a competing technology to Google’s Open Bidding may have been targeted with the aim to weaken it and exclude it from the market for displaying ads on publisher websites and apps. If confirmed by our investigation, this would restrict and distort competition in the already concentrated adtech market, to the detriment of rival ad serving technologies, publishers and ultimately consumers.”
The U.K.’s watchdog said its parallel probe will “consider whether an agreement between Google and Meta (previously Facebook) — which Google internally codenamed ‘Jedi Blue’ — broke the law… [and] also scrutinis[e] Google’s conduct in relation to header bidding services more widely to see if the firm abused a dominant position and gained an unfair advantage over competitors trying to provide a similar service.”
“We’re concerned that Google may have teamed up with Meta to put obstacles in the way of competitors who provide important online display advertising services to publishers,” CMA CEO Andrea Coscelli said in a statement. “If one company has a stranglehold over a certain area, it can make it hard for startups and smaller businesses to break into the market — and may ultimately reduce customer choice.”
The European regulators are playing catch up on this specific ad probe — and more widely on enforcement against the adtech duopoly.
The EU finally opened a wide-ranging investigation of Google’s adtech last summer — a couple of years after a 2019 enforcement against Google’s AdSense product, when it fined the tech giant around $1.7 billion for violations specifically related to its search ad brokering business, a decision Google is appealing.
The CMA, meanwhile, kicked off a deep-dive market study of the online ad sector back in 2019 — which went on to flag a range of harms and conclude in summer 2020 that a new regulatory approach and dedicated oversight is needed to address what its report summarized as “wide-ranging and self-reinforcing” concerns attached to the market power of Google and Facebook. So it has been holding solid concerns about the shape of the online ad market for well over a year.
“The concerns we have identified in these markets are so wide-ranging and self-reinforcing that our existing powers are not sufficient to address them,” it wrote in July 2020, when it urged “a new regulatory approach — one that can tackle a range of concerns simultaneously, with powers to act swiftly to address both the sources of market power and its effects, and with a dedicated regulator that can monitor and adjust its interventions in the light of evidence and changing market conditions.”
However, at the time of that final report, the CMA shied away from taking any enforcement against Google and Facebook to fix the systemic issues it had identified. Instead, it deferred action in favor of pushing for a “pro-competition” reform of the country’s competition regulations — to ensure “concerns can be dealt with swiftly, before irrevocable harm to competition can occur,” as it rather ironically put it then, as well as pressing for the dedicated Digital Markets Unit (DMU) to have powers “to increase interoperability and provide access to data, to increase consumer choice and to order the breakup of platforms where necessary.”
That U.K. competition reform is still pending the necessary legislation to empower the DMU — which likely explains why the CMA has decided to forge ahead and open an investigation into Jedi Blue under existing competition rules.
“We will not shy away from scrutinizing the behavior of Big Tech firms while we await powers for the Digital Markets Unit, working closely with global regulators to get the best outcomes possible,” Coscelli said in today’s statement.
The EU has a similar ex-ante competition reform — the Digital Markets Act — which is set to impose operational and behavioral conditions on so-called “gatekeeper” platforms and will very likely apply to both Google and Facebook. But that, too, isn’t fixed in place yet. The EU has had a detailed proposal available since December 2020, but the draft legislation is still making its way through trilogues, and even when adopted by all the EU institutions, there will be an implementation period before the new regime applies, so, again, legal reform of a systemically broken market isn’t going to arrive overnight.
It is therefore notable that the EU and U.K. are coordinating their announcements of formal probes of this shared competition concern — which implies a degree of joint working that may help expedite their parallel investigations, such as if they’re able to find ways to share findings or undertake other types of supportive work.
Both emphasized today, however, that their respective investigations remain separate and independent, with the EU noting: “As customary, the Commission has been in contact with the CMA and intends to closely cooperate on this investigation following the applicable rules and procedures.”
“The CMA will seek to work closely with the EC as the independent investigations develop,” the U.K.’s watchdog added.
One thing to watch here will be how quickly the two investigations conclude.
Under Vestager, the EU has been speeding up competition probes of Big Tech — with a string of enforcement decisions against Google under her watch: Google Shopping (2017), Android (2018) and AdSense (2019).
The CMA has also been tooling up to tackle tech ahead of the expected competition reforms. And has — recently — been closely engaged with Google over an investigation of its Privacy Sandbox proposal.
Smarter collaboration between international regulators — including between European watchdogs and attorneys general in the U.S., who have been pursuing Google over this issue since 2020 — may also help speed up scrutiny of a tech area that cuts right across the digital sphere, affecting consumers and businesses alike and which has been allowed to cloak itself in obfuscating complexity for far too long.
That said, it will be months, at least, before we see any conclusion to these latest investigations.
The CMA’s probe of Facebook’s acquisition of Giphy, for example, took from June 2020, when its inquiry launched, until November 2021, when it ordered the deal to be undone — and an M&A review is likely a more straightforward piece of work than an antitrust probe of business dealings around adtech.
When reached for comment on the dual antitrust investigations into Jedi Blue, Google denied that the agreement with Meta provides Facebook’s Audience Network with an advantage in Open Bidding auctions, and also rejected any suggestion that the arrangement has restricted header bidding, claiming that since its Open Bidding system launched, header bidding’s popularity has continued to grow.
The tech giant also sent this statement from a Google spokesperson:
“The allegations made about this agreement are false. This is a publicly documented, procompetitive agreement that enables Facebook Audience Network (FAN) to participate in our Open Bidding program, along with dozens of other companies. FAN’s involvement is not exclusive and they don’t receive advantages that help them win auctions. The goal of this program is to work with a range of ad networks and exchanges to increase demand for publishers’ ad space, which helps those publishers earn more revenue. Facebook’s participation helps that. We’re happy to answer any questions the Commission or the CMA have.”
Meta also denied any wrongdoing and sent this statement:
“Meta’s non-exclusive bidding agreement with Google and the similar agreements we have with other bidding platforms have helped to increase competition for ad placements. These business relationships enable Meta to deliver more value to advertisers and publishers, resulting in better outcomes for all. We will cooperate with both inquiries.”
This report was updated with additional comment