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`Case 5:20-cv-04130 Document 1 Filed 06/22/20 Page 1 of 27
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`Tina Wolfson, SBN 174806
`twolfson@ahdootwolfson.com
`Theodore W. Maya, SBN 223242
`tmaya@ahdootwolfson.com
`Christopher E. Stiner, SBN 276033
`cstiner@ahdootwolfson.com
`AHDOOT & WOLFSON, PC
`10728 Lindbrook Drive
`Los Angeles, California 90024
`Telephone: (310) 474-9111
`Facsimile: (310) 474-8585
`
`Attorneys for Plaintiffs
`
`
`
`UNITED STATES DISTRICT COURT
`NORTHERN DISTRICT OF CALIFORNIA
`SAN JOSE DIVISION
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`
`
`MICHAEL DEVANEY, NICHOLAS
`ARRIETA, and SARA YBERRA,
`individually and on behalf of all others
`similarly situated,
`
` Plaintiffs,
` v.
`
`GOOGLE LLC and ALPHABET INC.,
`
` Defendants.
`
`
`
`
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`
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`Case No. 5:20-cv-04130
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`CLASS ACTION COMPLAINT
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`DEMAND FOR JURY TRIAL
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`CLASS ACTION COMPLAINT, CASE NO. 5:20-cv-04130
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`Case 5:20-cv-04130 Document 1 Filed 06/22/20 Page 2 of 27
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`Plaintiffs Michael Devaney, Nicholas Arrieta, and Sara Yberra (collectively,
`“Plaintiffs”), acting individually and on behalf of all others similarly situated, bring this
`action for damages and equitable relief under the Sherman Act, 15 U.S.C. § 2, and the
`Unfair Competition Law, Cal. Bus. & Prof. Code § 17200 et seq. against Defendants
`Google LLC and Alphabet Inc. (collectively, “Google”).
`NATURE OF THE CASE
`1.
`Google has achieved an illegal monopoly by eliminating competition in
`digital display advertising. Specifically, Google gained dominance in the display
`advertising ad tech stack through acquisition of competitors, exclusivity provisions,
`interoperability/compatibility design choices, and development of its analytics services.
`With its ability to track millions of users across millions of sites and apps, other
`publishers cannot compete with Google’s informational advantage.
`2.
`Google’s market power in search and display has allowed it to charge supra-
`competitive prices to advertisers. Although online ad auctions can be designed to drive
`prices to competitive levels, Google’s role in running the auctions on behalf of both
`buyers and sellers (including when Google itself is the seller, as it is for its Google search
`supply and for YouTube and its other properties) gives it the incentive and ability to bias
`auction prices.
`3.
` In the digital advertising market, it is nearly impossible to advertise online
`except through Google’s advertising services. Resulting harms include higher advertising
`prices, higher consumer prices, decreased revenue for online newspapers and other web
`publishers, and overall reduced competition in the buying and selling of digital
`advertising. Consumers, of course, ultimately suffer the consequences of any abuse of
`market power by Google. When Google charges supra-competitive prices to advertisers,
`those excessive payments lead to an increase in the price consumers pay for goods and
`services throughout the economy.
`4.
`Plaintiffs, like other class members placed advertisements online through
`Google as an intermediary. Like other class members, Plaintiffs overpaid and suffered
`
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`economic loss resulting from Google’s monopoly in relevant markets, and therefore seek
`damages and injunctive relief.
`
`PARTIES
`5.
`Plaintiff Michael Devaney is a Sarasota, Florida resident who purchased
`digital advertisements from Google during the class period for his supermarket website
`and photography business.
`6.
`Plaintiff Nicholas Arrieta is a Miami, Florida resident who purchased digital
`advertisements from Google during the class period for his online website selling bicycle
`hardware and related retail.
`7.
`Plaintiff Sara Ybarra is a Spokane, Washington resident who purchased
`digital advertisements from Google during the class period for her moving business.
`8.
`Defendant Google LLC is a limited liability company organized under the
`laws of Delaware with its principal place of business in Mountain View, California.
`Google LLC is a technology company that provides internet-related services and
`products, including online advertising technologies and a search engine
`9.
`Defendant Alphabet Inc. is a corporation organized under the laws of
`Delaware with its principal place of business in Mountain View, California. Google LLC
`is a wholly owned subsidiary of Alphabet.
`JURISDICTION AND VENUE
`10. This Court has original jurisdiction over Plaintiffs’ federal antitrust claim
`under Clayton Act, 15 U.S.C. § 15. The court also has jurisdiction over this action under
`the Class Action Fairness Act (“CAFA”), 28 U.S.C. § 1332(d) because at least one class
`member is of diverse citizenship from Defendants, there are more than 100 class members
`nationally, and the aggregate amount in controversy exceeds $5,000,000.
`11. This Court may exercise jurisdiction over Google because Google’s
`principal place of business is located within this District. Google has established
`sufficient contacts in this District such that personal jurisdiction is appropriate.
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`12. Venue is proper in this District under 28 U.S.C. § 1391. Google’s principal
`place of business is in this district and it regularly conducts business here. A substantial
`part of the events or omissions giving rise to Plaintiffs’ claims occurred in this District.
`13. Assignment is proper to the San Jose Division of this District under Local
`Rule 3-2(c)-(e), as a substantial part of the events or omissions giving rise to Plaintiffs’
`claims occurred in Santa Clara County.
`FACTUAL ALLEGATIONS
`A. Digital Advertising Background
`14. Advertising campaigns used to be planned and managed by media buyers.
`If that media buyer needed to help a toy manufacturer reach parents of children, she might
`place an ad in Parents Magazine, or in the family section of the local newspaper.
`Advertising used to be something that could be placed, counted, then seen in the front
`cover spread of a magazine.
`15. This is not how digital advertising works today. Digital advertising is
`automated and data-driven, involving data scientists, mathematicians, and computer
`programmers who, behind the scenes, use advanced statistical tools to optimize
`advertising campaigns, by micro-targeting users and constantly tweaking algorithms.
`16.
`In the US, $125 billion was spent on digital advertising in 2019, accounting
`for over half of total ad spending.1
`17. The two big contenders in digital advertising are search and display
`advertising.
`18. Search advertising is a service that businesses pay for to show up in search
`results on search engine result pages, predominately Google Search. Because the
`audience is targeted to those who are actually searching for a product or service, an
`
`
`1See https://www.iab.com/wp-content/uploads/2020/05/FY19-IAB-Internet-Ad-Revenue-
`Report_Final.pdf.
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`advertiser only pays when the user clicks on the ad. For example, if a user searches for
`sandwich delivery, the search advertising results looks something like this2:
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`19. Search advertising is designed to reach customers who have already shown
`an interest in purchasing a product or service and may be close to making a purchasing
`decision. Search advertising is attractive to local or small businesses not seeking to reach
`a broad audience. For example, if a citizen finds himself in need of a plumber, and
`searches for plumbers on Google, search advertising will place ads for local plumbers
`above the organic search results.
`20. The downside to search advertising for advertisers themselves is that they
`have to wait for someone to search for their product or service in order to direct
`prospective customers to their business.
`
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`2See https://www.disruptivestatic.com/wp-content/uploads/2018/02/sandwich-delivery-google-
`search.jpg.
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`21. Suppliers of display advertising are known as publishers (e.g. online
`newspapers and other content creators). Publishers employ third party tools to find
`advertisers and sell advertising space available on their websites.
`22. Display advertising is the advertising that appears alongside content on
`publishers’ websites. For example, an ad for Dove might appear on a cooking website,
`“myrecipes” as a banner or a side bar3:
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`23.
`In display advertising, an active search for the particular product by the
`internet user is not required; but the key to effective display ads is that they are placed on
`websites likely to be viewed by the advertiser’s target audience and/or those most likely
`to purchase the advertised products or services.
`24.
`$38.1 billion was spent on display advertising in 2019 in the US,
`representing a 13.8% increase from 2018.4 In 2020, spending on display media is
`
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`3 See https://www.disruptiveadvertising.com/adwords/google-display-network.
`4 See https://www.iab.com/wp-content/uploads/2020/05/FY19-IAB-Internet-Ad-Revenue-
`Report_Final.pdf.
`
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`expected to hit $41.9 billion, with a 15.1% year-over-year increase, again outpacing
`search advertising.5
`25. Outside of Google, Facebook, and a few others, the rest of the market, which
`includes thousands and thousands of independent news publishers (that depend on digital
`advertising as their primary source of revenue), will shrink by 11 percent.6
`26. Search advertising and display advertising serve different purposes.
`Advertisers do not regard them as substitutes for each other. The Interactive Advertising
`Bureau separates display and search categorically for annual revenue analysis purposes.
`B. Google Dominates Both Search and Display Online Advertising Services
`27. Alphabet’s total ad revenue in 2019 was $133 billion, making up 82% of
`total revenue.7 Google is estimated to have captured 37.2% of all U.S. digital ad spend in
`2019.8
`28. Google’s revenue from display ads comes from ads placed on Google’s own
`properties (Google Maps, Gmail, etc.) and ads placed with third party publishers (digital
`versions of newspapers, online content creators, etc.). Google sells ad space on third party
`websites to advertisers as an intermediary.
`29. When an ad is viewed through a third-party publisher, for example, The
`Washington Post, Google pays the publisher a portion of the price that the advertiser paid
`to Google for its ad placement services. The portion Google keeps is the “take rate”, or
`difference between what advertiser pays and publisher receives. Google’s take rate is
`estimated to be about 40%.9
`30. Google has an incentive to increase ads placed on its own property sites
`because Google does not have to share the collected price of the ad with a third-party
`publisher.
`
`
`5 See https://www.marketingcharts.com/advertising-trends/spending-and-spenders-111801.
`6 See https://app.hubspot.com/documents/4934439/view/35422028?accessId=bc7916.
`7 See https://abc.xyz/investor/static/pdf/2019Q4_alphabet_earnings_release.pdf.
`8 See https://www.emarketer.com/content/google-maintains-wide-lead-in-net-us-search-ad-revenues.
`9 See https://www.gov.uk/cma-cases/online-platforms-and-digital-advertising-market-study#interim-
`report.
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`1. Google’s Search Advertising Practices and Market Share
`31. Google by far holds the highest share of search advertising revenue in the
`U.S. In 2019, its share was 73%.10
`32. Google makes space on its search result pages available to advertisers
`through an auction process that occurs each time a user runs a search. Google starts the
`auction by first finding all the ads with keywords matching the search. Google then only
`displays ads with sufficiently high “rank” based on factors like the advertiser’s bid,
`quality of the ad, user location, and type of device user is using. The auction process is
`repeated for every search performed on Google Search, so different searches may lead to
`different auctions, which may lead to different advertisements being displayed.
`33. Although Google claims its prices are set via auction, Google controls and
`frequently raises the price of its search advertising by setting a high reserve price. (An ad
`will not sell if it does not meet the reserve price.) A majority of winning bids are just at
`the reserve price.
`2. Google’s Dominance in the Ad Tech Stack and Display Advertising
`34. Google is a major supplier of display advertising and owns multiple products
`that supply it such as YouTube, Google Maps, and Google Play.
`35. When an internet user visits a website, in the milliseconds that it takes for
`that page to load, there are real-time auctions running in the background that determine
`which ads to display on that particular user’s page. These auctions are run by SSPs and
`DSPs in the ad tech stack as described below.
`36. Suppliers (online publishers) of display advertising employ publisher ad
`servers (PAS) to accept, store, and manage ads, choose where and when ads appear, and
`track the effectiveness of ad campaigns. The placement of ads is determined based on
`bids from advertisers and/or arrangements publishers have with the advertisers.
`
`10 See Id.
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`37. Suppliers of ad space/publishers rely on supply side platforms (SSP) to run
`auctions, interface directly with advertisers, and optimize available supply ad-space
`inventory.
`38. The advertisers (or market demand side) rely on advertiser ad servers (AAS)
`to store ads, deliver them to publishers, and records transactions. Advertisers also employ
`demand side platforms (DSP) to purchase digital advertising by bidding in auctions.
`39. Together, the PAS, SSP, AAS, and DSP comprise the ad tech stack. By
`connecting publishers and advertisers, an ad tech provider functions as an intermediary,
`similar to a broker.
`40. Until fairly recently, different firms provided various services in the ad tech
`stack, and intermediaries did not own the publisher or advertise. This is no longer the
`case – After a series of acquisitions, Google now dominates and controls the ad tech
`stack. Since 2007, Google has made at least nine key acquisitions in the interest of
`gaining control of the entire ad tech stack.
`41. Google purchased a publisher ad server in 2007 called DoubleClick, for
`example; the technology from that company served as the basis for Google’s current
`publisher ad server. It acquired AdMob in 2009; AdMob owned technology for serving
`ads on apps. It purchased Invite Media in 2010, which Google developed into its main
`demand side platform. In 2011, it purchased AdMeld, a supply side platform that it
`integrated into AdX, the Google exchange. And in 2014, Google bought Adometry, an
`analytics and attribution provider it then integrated into Google Analytics. Together,
`these acquisitions reveal a sustained effort to occupy the entire ad tech stack as well as
`the related analytics market through mergers.
`42.
`In the supply of advertising space, Google now holds at least 90% of the
`PAS market through multiple products such as Google Ad Manager and Google Double
`Click for Publishers. Google’s AdX product alone holds about 50% of the SSP market.
`
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`43. Likewise, on the advertiser-demand side, Google controls a substantial
`majority of the DSP market (reportedly over 62%) and holds a substantial share of AAS
`market.
`44. By consolidating key portions of the ad tech stack for display advertising,
`Google can now readily broker transactions on both sides and steer advertisers to its own
`digital display platforms. Google’s acquisitions and access to every level of display
`advertising service industry have enabled Google to eliminate competition through a
`variety of anticompetitive policies and activities.
`45. Publishers and advertisers have little choice but to go through Google’s
`services.
`46. For example, Nexstar Media Group Inc., the largest local news company in
`the U.S., tested what would happen if it stopped using Google’s technology to place ads
`on its websites. Over several days, the company’s video ad sales plummeted. “That’s a
`huge revenue hit,” said Tony Katsur, senior vice president at Nexstar. After its brief test,
`Nexstar switched back to Google.11
`C. Google Has Used its Dominance as a Search Engine and Other Products to
`Create and Maintain a Monopoly for Display Advertising Services
`1. Google’s Dominance as a Browser and the Significance of User Data
`47. Google has an enormous advantage over advertisers and publishers due to
`sheer volume of information it obtains about consumers. As former CEO Eric Schmidt
`boasted, “We know where you are. We know where you’ve been. We can more or less
`know what you’ve been thinking about.”12
`48. Online advertising is more effective when it is targeted, displaying products
`or services a user is likely to want. Accordingly, user data including gender, age, location,
`and browsing history influences not just the type of ads a user will see, but also price
`advertisers are willing to pay. “The exact same ad, on the same website, at the same time,
`
`11 See https://www.wsj.com/articles/how-google-edged-out-rivals-and-built-the-worlds-dominant-ad-
`machine-a-visual-guide-11573142071.
`12 See https://techcrunch.com/2010/09/07/eric-schmidt-ifa.
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`could be worth vastly different amounts to two different buyers depending on how much
`they know about the consumer being targeted,” explains Ari Paparo, now founder and
`CEO of advertising company Beeswax and a former Google executive “User data is
`everything.”
`49. The prices that any company is able to fetch for its ads depend on two crucial
`factors: the ability to identify who is loading the page, and the ability to then connect the
`user’s identity with more information about the user.
`50. The targeting of display ads begins the moment a reader visits any website.
`Typically, the reader’s IP address, location, and the URL of the page the reader visits are
`swiped from the reader’s browser without their explicit knowledge. This information is
`used to run these ad auctions. The goal is to build as specific a portrait about the reader
`as possible—by linking their device with their identity—and cookies are a common tool
`for doing so.
`51. Google has acted to make it harder for its competitors to obtain similar
`information. In early 2020, for instance, Google announced that it would “phase out”
`third-party cookies that helped advertisers target consumers based on demographics, past
`browsing history, and other information. Without third-party cookies, it is much harder
`for advertisers and competitors to efficiently bid on ads. That is not true for Google,
`which continues to have other sources for gleaning robust data on consumers.
`52.
`If a company that sells online ads can know what their readers are reading
`on other sites, then they can target the users based on that information when the user
`returns to their own site. To illustrate the supreme advantage of Google over any other
`publishers, let’s consider two hypothetical online publishers, CNBC and The New York
`Times. For example, say Michael visits CNBC’s website in the mornings and reads about
`the markets, but visits The New York Times in the evenings and only reads the book
`review section. CNBC knows Michael is someone who follows the markets and might
`monetize his view at a $30 CPM (cost per thousand). The Times knows that Michael is
`someone who likes to read books so might only monetize Michael at a $10 CPM. If
`
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`the Times can somehow find out that Michael is reading CNBC in the mornings, then
`when Michael visits the Times book section in the evening, the Times can target him as
`someone who follows the markets and monetize him at $30, too.
`53. Would CNBC want to share with the Times what Michael reads on
`cnbc.com? Of course not. The two are competitors on the advertising side of the market.
`If CNBC is selling its audience of financial readers at a cost of $30, and the Times can
`copy CNBC’s readers and their reading patterns, then the Times could theoretically
`undercut CNBC and sell ads targeted to CNBC financial readers for, say, $20 instead of
`$30.
`
`54. But publishers like the Times and CNBC have no choice but to share this
`information with Facebook and Google.
`55. Google, which now tracks users on over 70 percent of the top one million
`sites, also uses its ability to track users across the internet to extract an advantage in
`advertising markets.13 Google tracks users via its analytics and ad-serving products,
`which Google consolidated and rebranded as the Google Marketing Platform.
`56. Google runs auctions through which publishers now sell their own
`advertising. Unlike in finance, there are several auction markets where digital ads trade.
`Anyone can create one. But Google ensures its own advertising inventory (e.g. YouTube)
`can only be bought through their own, proprietary auctions. Google made almost $20
`billion last year from selling other companies’ ads.14 This is why Google today is the
`largest seller of advertising, globally, period.
`2. Google’s Unfair Practices in Search Products
`57. Google operates the default internet search platform in the United States; at
`least 90% of all internet searches are conducted through Google Search. Consequently,
`Google is the dominant source for search advertising. Companies seeking to promote
`their products or services online are de facto required to purchase search advertising space
`
`13https://www.cs.princeton.edu/~arvindn/publications/OpenWPM_1_million_site_tracking_measurem
`ent.pdf.
`14 See https://abc.xyz/investor/static/pdf/20180204_alphabet_10K.pdf?cache=11336e3.
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`from Google. Google has taken advantage of this dominance in the search advertising
`market to drive out competition in the separate market for display advertising services.
`58. When a Google Ads account is established for use in placing search
`advertisements, Google Ads is set as the default account for placing both search and
`display advertisements. And to disadvantage rivals, Google restricts access to data
`concerning web searches performed on Google Search.
`59. When consumers run Google searches, Google collects and retains data
`related to the searches. DSPs and advertisers use this information to craft more effective
`advertising campaigns. Google, however, withholds this information from rival DSPs and
`advertisers using rival service providers. The result of this policy is that, in order to gain
`access to the search data over which Google has monopoly control, an advertiser must
`agree to use Google’s products in the separate display advertising services market.
`60. For example, GoogleAds, (a DSP) relies on algorithms that match keywords
`selected by advertisers to user search terms in order to determine which searches would
`be good matches for which search ads.
`61. Google similarly uses its dominance in the video-ad publishing market
`segment to coerce advertisers to use Google’s display advertising services. Google-
`owned YouTube runs up to 50% of all video display ads not appearing on Facebook and
`Amazon. After Google purchased YouTube, it initially made YouTube’s inventory of
`display advertisements available to any advertising service provider. But in 2015, Google
`prevented non-Google advertising service providers from purchasing advertising space
`on YouTube. As a result, if an advertiser wants to purchase any of the valuable
`advertising space on YouTube, it must use Google’s advertising services and cannot use
`any of Google’s rivals’ advertising services.
`62.
`In addition to its ad tech stack services, Google offers Ads Data Hub (ADH)
`which allows advertisers to view data from ad campaigns, which users were reached by
`search ad campaigns, and combine the data with third party data to adjust display ad
`
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`Case 5:20-cv-04130 Document 1 Filed 06/22/20 Page 14 of 27
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`strategy. However, ability to use the data has a built-in restriction in that the data can only
`be sent to another Google service and cannot otherwise be exported.
`63. By conditioning advertiser access to Google search data and YouTube’s
`advertising platform on the purchase of Google’s advertising services, Google effectively
`forces advertisers to use Google for all aspects of their campaigns.
`D. Other Forms of Anticompetitive Conduct
`64. Google conceals key information from publishers and advertisers in acting
`as an intermediary. Parties on both sides of the transaction are not aware of the price
`actually paid to Google for an ad placement. Studies have shown that about 15% of
`advertising transaction costs are unaccounted for.15
`65. Google generally maintains a culture of secrecy around its services, an
`indication of market power. Service providers in competitive markets generally must
`provide to their customers detailed accounts of services they provide to justify the prices
`they charge.16
`66.
`In 2016 Google launched AMP for the stated purpose of loading webpages
`faster on mobile devices. AMP pages are listed first in a search, encouraging publishers
`to use them. AMP sends users to content on pages hosted by Google, thereby denying
`content providers as much access to, and data about, their own users as they would
`normally get. This weakens the content providers in the long run, allowing Google’s own
`properties to slowly gain a greater share of consumer attention. Although one might begin
`by characterizing content providers as complements, this creeping strategy by Google to
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`15 PricewatershouseCoopers recently concluded a study in which it attempted to track various
`advertisers’ payments through the ad tech stack. It concluded that a remarkable 15% of ad spend
`simply went missing somewhere between the advertisers and publishers: “15% of advertiser spend –
`an “unknown delta”, representing around one-third of supply chain costs – could not be attributed.”
`See Abi Gibbons, Time for change and transparency in programmatic advertising, ISBA MEMBER
`PORTAL (May 6, 2020), https://www. isba.org.uk/news/time-for-change-and-transparency-in-
`programmatic-advertising/. This study did not focus exclusively on Google’s intermediation services
`but it nonetheless reflects the difficulty advertisers face when trying to understand where their money
`goes, which itself indicates the market is not working efficiently.
`16 https://www.omidyar.com/sites/default/files/Roadmap%20for%20a%20Case%20Against%20Google.pdf.
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`Case 5:20-cv-04130 Document 1 Filed 06/22/20 Page 15 of 27
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`host content on its own pages—by a variety of methods—demonstrates that Google views
`content providers as competitors in the long run for the capture of ad dollars. Google
`doesn’t want to develop content so that it wins more Pulitzer Prizes than the New York
`Times or the Washington Post; that is an expensive undertaking. Rather, Google wants
`to host that attractive content so it can capture the ad dollars that otherwise would go to
`those publishers. That is the reason it steers consumers to Google properties and away
`from content providers. That conduct constitutes foreclosure of horizontal competitors.
`E. Government Investigations into Google’s Monopolistic Conduct
`67.
`In July 2019, the U.S. Department of Justice announced that it had opened
`an investigation into whether Google is committing illegal monopolistic acts. The DOJ
`stated that its probe would focus on whether and how Google and other leading online
`platforms “have achieved market power and are engaging in practices that have reduced
`competition, stifled innovation, or otherwise harmed consumers.”
`68.
`In September 2019, 48 state attorneys general, led by Texas Attorney
`General Ken Paxton, disclosed their own probe into whether Google is violating the
`antitrust laws. In announcing the investigation, Paxton referred to “evidence that
`Google’s business practices may have undermined consumer choice, stifled innovation,
`violated users’ privacy, and put Google in control of the flow and dissemination of online
`information.”
`69. On May 15, 2020, the Wall Street Journal reported—based on information
`from “people familiar with the matter”—that both the DOJ and the state attorneys general
`likely will file antitrust lawsuits against Google as soon as the summer and are well into
`planning for such litigation. The Journal reported that “all signs point toward [the DOJ]
`bringing a case” and that “[m]uch of the states’ investigation has focused on Google’s
`online advertising business. The company owns the dominant tool at every link in the
`complex chain between online publishers and advertisers.”17
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`17 See https://www.wsj.com/articles/justice-department-state-attorneys-general-likely-to-bring-
`antitrust-lawsuits-against-google-11589573622?mod=searchresults&page=1&pos=17.
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`70. Google has also faced regulatory action in Europe. The European
`Commission fined Google $2.7 billion in 2017 for rigging search results to favor its own
`online shopping portal and $1.7 billion in 2019 for dictating to other websites how they
`can display search results from Google’s competitors.
`71. The U.K. is also considering limiting Google’s ability to set self-serving
`defaults and enforcing data sharing and/or feature interoperability to help rivals compete
`in re