Texas Attorney General Ken Paxton said he will sue Alphabet Inc. (Google) on behalf of a coalition of states alleging that the company manipulated online advertising, thereby violating antitrust laws.
“This Internet Goliath has used its power to manipulate the market, destroy competition, and hurt YOU, the consumer,” the AG said on his Twitter account Wednesday.
The Texas-led case was joined by the states of Idaho, Indiana, Kentucky, Mississippi, Missouri, North Dakota, Utah and South Dakota.
The Texas lawsuit joins that of the Department of Justice, which on October 20th sued Alphabet for using anti-competitive tactics to preserve its monopoly on Internet searches. The Department pointed out that the company paid up to $10 billion a year to cellphone manufacturers such as Apple or Samsung to keep Google as the default search engine on cell phones.
Alphabet raised $34 billion in profits during 2019. Virtually all of that income comes from digital advertising both from Google and its platforms such as YouTube. According to the prosecutor, the company is not only profiting from Internet traffic, but also has abused its position with a web of complicated agreements that guarantee the company a profit regarding buying internet advertising.
According to the lawsuit, Google also signed an agreement with Facebook in which the social media company would reduce its competitive movements in exchange for special treatment in auctions of ads managed by the tech giant.
Additionally, the state’s lawsuit identified new potential victims: popular and viral creators of YouTube content. Because Google limits YouTube advertisers to using certain of the company’s tools to buy video ads, the lawsuit says that Google restricted potential advertisers from bidding and therefore reduced demand and revenue for content creators, who get a cut from the ads sold.
The company has denied incurring in any monopolistic behavior and maintains its position that its strategy responds to the fact that the company is in a highly competitive market.
“Attorney General Paxton’s ad tech claims are meritless, yet he’s gone ahead in spite of all the facts,” a Google spokesperson said in a statement. “We’ve invested in state-of-the-art ad tech services that help businesses and benefit consumers,” a Google spokesperson said in a statement.
“We will strongly defend ourselves from his baseless claims in court.”
The technology giant also said that its services such as search engine, Gmail or Maps help Americans to be more productive and keep them at the forefront of technological innovation.
The company had invested $26 billion by 2019 in research and development in technologies such as self-driving cars, machine learning and quantum computing, an expensive research that online advertising revenues help fund.
In response to the Justice Department’s suit, in October the head of Google’s legal office said that users use the company’s search engine because they chose to, not because there are no alternatives on the Web. According to the Justice Department, Google has or controls available search channels, monopolizing 80% of Americans’ search queries.