Texas Attorney General Ken Paxton filed an antitrust lawsuit against Google (Alphabet Inc.) on Wednesday, based on a bold claim: Google colluded to exploit online advertisement markets with a major rival, Facebook Inc. The global online ad sales business is dominated by these two firms.
“Any cooperation between two competitors of this magnitude should raise strong concerns about compliance with antitrust laws.” the Texas complaint says. Google denied the claim, and Facebook refused to comment.
Obviously, this may entail significant liability on the part of the antimonopoly authorities if the charges are verified.
The lawsuit relates to an automated advertising technology that guides an online ad to digital advertising. It is intended to raise the fees for putting advertisements that web services, such as news agencies, will earn. The more apps come from a wide variety of sources, the higher the cost.
In advertisement sales, Google is accused of developing software that gives the social network Facebook advantages. Google may have inflated the cost of ads for its other users due to the proposed contract.
To judge the prospects of the trial, it is too early. The arrangement referred to in the lawsuit could be presented as a cooperative agreement between the two Internet giants in which Facebook receives from Google services that are required for the functioning of the advertisement network if the specifics of the charges are inconclusive.
It is very likely that the proceedings will affirm Google’s stance, according to the company, that during the ad sales Facebook does not receive any special data.
Shares of both businesses respond with high uncertainty, as on Wednesday, nine states entered the Texas lawsuit. More than 80% of Alphabet Inc’s (GOOGL) revenue is accounted for by Google’s ad sales. The latest financial report by Alphabet shows that digital advertising revenue is more than $37 billion per year. Stocks will remain under pressure, but despite this the target of Google (GOOGL) stock will be to hit $1925 per share in the medium term, and Facebook (FB) is $300 per share in the medium term.