Facebook Inc and Alphabet's Google allegedly colluded to manipulate auctions for online advertising through a series of deals to fortify their market power illegally.
According to an antitrust lawsuit filed by Texas and nine other states against Google on Wednesday, the two players did this to have a stranglehold over the moneymaking digital advertising market.
The litigation case alleged Google played a central role in buying and selling of display ads across the web. It claimed that Google and Facebook concurred in a publicised deal in 2018 to start giving Facebook's advertiser clients the choice to place ads within Google's network of publishing partners.
Executives at the highest levels of the companies signed off on the deal, according to the complaint, according to a Reuters report.
For example, a sneaker blog that uses software from Google to sell ads could end up generating revenue from a footwear retailer that bought ads on Facebook.
Google entered similar partnerships with other advertising companies as part of an effort to maintain market share that was internally codenamed Project Jedi, a source with direct knowledge of the matter said.
But what Google did not announce publicly is that it gave Facebook preferential treatment, the complaint alleged.
Facebook agreed to back down from supporting competing software, which publishers had developed to dent Google's market power, the complaint said.
"Facebook decided to dangle the threat of competition in Google's face and then cut a deal to manipulate the auction," it said, citing internal communications.
In exchange, the states said, Facebook received various benefits, including access to Google's data and policy exceptions that enabled its clients to unfairly get more ads placed than clients of other Google partners could.
Google spokesman Peter Schottenfels described the states' accusations about the ongoing partnership as inaccurate and said that Facebook did not receive special data.
The complaint also alleged that Google and Facebook engaged in fixing the prices of ads and have continued to cooperate, though the section was heavily redacted and left it unclear just how and when the companies allegedly used their "market allocation agreement".
However, it said that "given the scope and extensive nature of cooperation between the two companies, Google and Facebook were highly aware that their agreement could trigger antitrust violations. The two companies discussed, negotiated, and memorialised how they would cooperate with one another."
The states, however, did not accuse Facebook of wrongdoing in the complaint. The US Department of Justice has also been investigating the agreement between the companies as part of its antitrust probe into Google, six people familiar with the investigation told the news agency.
But the Justice Department, which sued Google over separate conduct in October, is yet to bring any allegations related to the 2018 deal.