Jedi Blue: The Secret Agreement

With Facebook currently embroiled in an ever-increasing number of scandals, including whistleblowers, censorship accusations, a buried report on mental health issues, and endless data leaks, they’ve chosen to rebrand as “Meta”. But this new name doesn’t change the fact that they are becoming more and more powerful.

There have been a number of demands through the years to break up some of these big tech monopolies. Facebook/Meta now own Facebook, WhatsApp, and Instagram, Alphabet are the proprietors of Google and YouTube, and Amazon have basically sown up the web hosting world.

However, there is a need to not confuse monopolies with popularity. Alan Reynolds of the Cato Institute explains:

“Facebook, likewise, is not a monopoly because it has more users than Snapchat or Twitter. Amazon is not a monopoly because its online sales — but not total sales — are larger than Walmart’s. Apple is not a monopoly because its cellphone operating system is more popular than Google’s in the U.S. (but not the world). And the Google Chrome browser is not a monopoly because it is currently more popular than Microsoft Edge (my personal favorite) or Apple Safari. You get the picture.”

However, a series of court filings have revealed to the world that Facebook and Google may have been rigging the online advertising market for themselves. Naturally, a Google spokesperson said the claims in the suit are “baseless” and riddled with inaccuracies.” So what exactly have they been doing?

In March 2017, Facebook announced that it was going to back “header bidding” – it’s a third party advertising technology which was attempting to challenge Google’s adtech dominance. But within a year, Facebook had done a U-turn. Google and Facebook had discreetly agreed that they would use Google’s system for managing online ads – they would also not pursue competing ad technologies or to use header bidding. In return, Google would give Facebook preferential rates and first dibs on prime ad placement.

Google and Facebook had cornered the market, allowing them to continue to reap billions in annual revenue – they both got what they wanted from the deal and were keeping out pesky competitors. Facebook even agreed to try to win 10% of the ad auctions in which it participated – potentially worth hundreds of millions of dollars for Google – whilst they saved hundreds of millions in development costs for a competitor program.

But, there’s a fair chance this is illegal. According to Section 2 of the Sherman Act, “Every person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several States, or with foreign nations, shall be deemed guilty of a felony.” 

To monopolize something means “the willful acquisition or maintenance of that power as distinguished from growth or development as a consequence of a superior product, business acumen, or historic accident.” 

Sounds rather similar to what Facebook and Google were up to in agreeing to dump header bidding and give preferential treatment to each other. The word Antitrust is mentioned more than 20 times in the contract. The intent is pretty clear: they wanted to cut off a competing technology before it threatened their market domination. In the newly unsealed documents, a Google employee states that they wanted to “kill” header bidding. All this was done under the name Jedi Blue – not exactly what Luke Skywalker would have wanted.

Jason Kint, CEO of Digital Content Next, savaged the two companies for these practices:

“Under the cute label of Jedi Blue, the two largest advertising companies, who were already capturing most of the market and nearly all of the growth in the industry, had a secret deal between the top executives to allegedly rig the market,” said Kint. “Even non-techies can see that is a massive abuse of power.”

Only time will tell if Google and Facebook will face prosecution for these actions – though it could be a big turning point if some of these Silicon Valley giants actually face consequences under antitrust legislation.

By Josh Hamilton