`
`UNITED STATES DISTRICT COURT
`EASTERN DISTRICT OF TEXAS
`SHERMAN DIVISION
`
`4:20cv957
`Civil Action No. ___________
`
`JURY TRIAL DEMANDED
`
`12/16/20
` FILED:
`U.S. DISTRICT COURT(cid:3)
`EASTERN DISTRICT COURT(cid:3)
`DAVID (cid:36)(cid:17)(cid:3)(cid:50)(cid:10)(cid:55)(cid:50)(cid:50)(cid:47)(cid:40), CLERK
`
`§§§§§§§§§§§§§§§§§§§§§§§§§§§§§§§§§§§§§§§
`
`THE STATE OF TEXAS
`By Attorney General Ken Paxton
`
`THE STATE OF ARKANSAS
`By Attorney General Leslie Rutledge
`
`THE STATE OF IDAHO
`By Attorney General Lawrence G. Wasden
`
`THE STATE OF INDIANA
`By Attorney General Curtis Hill
`
`COMMONWEALTH OF KENTUCKY
`By Attorney General Daniel Cameron
`
`THE STATE OF MISSISSIPPI
`By Attorney General Lynn Fitch
`
`STATE OF MISSOURI
`By Attorney General Eric Schmitt
`
`STATE OF NORTH DAKOTA
`By Attorney General Wayne Stenehjem
`
`STATE OF SOUTH DAKOTA
`By Attorney General Jason R. Ravnsborg
`
`and
`
`STATE OF UTAH
`By Attorney General Sean D. Reyes
`
`GOOGLE LLC,
`
`Plaintiffs,
`
`vs.
`
`Defendant.
`
`COMPLAINT
`
`
`
`Case 4:20-cv-00957-SDJ Document 1 Filed 12/16/20 Page 2 of 130 PageID #: 2
`
`TABLE OF CONTENTS
`I. NATURE OF THE CASE ............................................................................................................ 1
`II. PARTIES .................................................................................................................................. 8
`III.
`JURISDICTION ..................................................................................................................... 9
`IV.
`VENUE ................................................................................................................................. 9
`V.
`INDUSTRY BACKGROUND ..................................................................................................... 10
`A. Online Display Advertising Markets ................................................................................ 11
`1.
`Publishers’ Inventory Management Systems (Ad Servers) .......................................... 12
`2.
`Electronic Marketplaces for Display Advertising: Exchanges and Networks .............. 16
`Display Ad Exchanges .............................................................................................. 16
`i.
`ii. Ad Networks for Display and Ad Networks for Mobile In-App Inventory ............. 19
`3. Ad Buying Tools for Large and Small Advertisers ...................................................... 21
`THE RELEVANT MARKETS AND GOOGLE’S MARKET POWER ....................................... 26
`VI.
`A. Publisher Inventory Management: Publisher Ad Servers ................................................. 26
`1.
`Publisher ad servers in the United States are a relevant antitrust market. .................... 26
`2. Google has monopoly power in the publisher ad server market. .................................. 28
`B. Display Ad Exchanges ...................................................................................................... 29
`1. Display ad exchanges in the United States are a relevant antitrust market. ................. 29
`2. Google has monopoly power in the display ad exchange market. ................................ 31
`C. Display Ad Networks ........................................................................................................ 33
`1. Display ad networks in the United States are relevant antitrust market. ...................... 33
`2. Google has monopoly power in the display ad network market. .................................. 34
`D. Display Ad Buying Tools for Large and Small Advertisers ............................................. 35
`1. Display ad buying tools for small advertisers in the United States is a relevant antitrust
`market. .................................................................................................................................. 35
`2. Display ad buying tools for large advertisers in the United States is a relevant antitrust
`market. .................................................................................................................................. 36
`3. Google has monopoly power in the ad buying tool market for small advertisers. ....... 36
`VII. ANTICOMPETITIVE CONDUCT .......................................................................................... 38
`A. Google forces publishers to license Google’s ad server and trade in Google’s ad
`exchange. .................................................................................................................................. 38
`B. Google uses its control over publishers’ inventory to block exchange competition. ....... 43
`1. Google blocks publishers from sending their inventory to more than one marketplace at
`a time. .................................................................................................................................... 44
`2. Google gives itself preferential treatment by routing publisher inventory to its own ad
`exchange and blocks competition from other exchanges. .................................................... 45
`3. Google restricts information to foreclose competition and advantage itself. ............... 47
`i.
`Information asymmetry causes advertisers to trade on non-Google exchanges at their
`own risk. ............................................................................................................................ 49
`ii. Google forecloses competition by using inside information to win auctions. .......... 49
`iii.
`Google uses privacy concerns to advantage itself. ............................................... 53
`
`i
`
`
`
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`Case 4:20-cv-00957-SDJ Document 1 Filed 12/16/20 Page 3 of 130 PageID #: 3
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`4. Google prevents competing exchanges from accessing publishers’ high value inventory
`and reaps the benefits for itself. ............................................................................................ 56
`C. A new industry irmovation called “header bidding” promotes exchange competition;
`Google wants to kill it............................................................................................................... 58
`1. Header bidding facilitates competition among ad exchanges. ...................................... 58
`2. Google creates an alternative to header bidding that secretly stacks the deck in
`Google’s favor. ..................................................................................................................... 61
`D. Facebook helps Google kill header bidding with an unlawful agreement. ....................... 63
`E. Google forces market participants to re-route trading through Google. ........................... 74
`1. Google trades ahead of bid orders to foreclose exchange competition. ....................... 75
`2. Google deceives exchanges to forgo header bidding.................................................... 75
`3. Google deceives publishers to disable exchanges in header bidding. .......................... 76
`4. Google cripples publishers’ ability to measure the success of exchanges in header
`bidding. ................................................................................................................................. 77
`5. Google obstructs publishes’ use of header bidding through caps ................................. 78
`6. Google uses its search monopoly to punish publishers that use header bidding. ......... 78
`7. Google cuts off data to publishers that do not stop using header bidding. ................... 81
`8. Google excludes competition throu
`“nontrans arent
`ricing.” ................................. 82
`9.
`The emerging new network of
`.......................................... 84
`10.
`Google excludes competition though unified pricing rules. ..................................... 87
`F. Google forces advertisers to use Google’s ad buying tools for large advertisers. ............ 89
`1.
`Conduct that excludes competition in the exchange market also excludes competition
`in the ad buying tools market................................................................................................ 89
`2. Google excludes competition in the market for large advertiser buying tools. ............ 90
`
`VIII.
`
`ANTICOMPETITIVE EFFECTS .................................................................................... 92
`
`A. Anticompetitive Effects in the Publisher Ad Server Market ............................................ 94
`B. Anticompetitive Effects in the Exchange Market ............................................................. 95
`C. Anticompetitive Effects in the Markets for Display Ad Buying Tools for Small
`Advertisers and Display Ad Buying Tools for Large Advertisers ............................................ 96
`D. Harm to Innovation ........................................................................................................... 97
`E. Harm to Consumers .......................................................................................................... 98
`
`IX.
`
`CLAIMS ........................................................................................................................... 100
`
`A. COUNT I — MONOPOLIZATION 1N VIOLATION OF SECTION II OF THE
`
`SHERMAN ACT, 15 U.S.C. § 2 ............................................................................................ 100
`B. COUNT H — ATTEMPTED MONOPOLIZATION IN VIOLATION OF SECTION II
`
`OF THE SHERMAN ACT, 15 U.S.C. § 2 ............................................................................. 102
`C. COUNT IH — UNLAWFUL TYING IN VIOLATION OF SECTION H OF THE
`
`SHERMAN ACT, 15 U.S.C. § 2 ............................................................................................ 104
`D. COUNT IV — UNLAWFUL AGREEMENT 1N VIOLATION OF SECTION I OF THE
`
`SHERMAN ACT, 15 U.S.C. § 1 ............................................................................................ 106
`E. COUNT V — SUPPLEMENTAL STATE LAW ANTITRUST CLAIMS ..................... 107
`
`F. COUNT VI — SUPPLEMENTAL STATE DECEPTIVE TRADE LAW CLAIMS ...... 110
`
`X.
`
`PRAYER FOR RELIEF .......................................................................................................... 114
`
`XI.
`
`DEMAND FOR A JURY TRIAL .......................................................................................... 116
`
`ii
`
`
`
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`
`1.
`
`The States of Texas, Arkansas(cid:15) Idaho, Indiana, Mississippi,(cid:3) Missouri,(cid:3) North
`
`Dakota,(cid:3) South Dakota, Utah, and the Commonwealth of Kentucky, by and through their
`
`Attorneys General (collectively, the “Plaintiff States”), bring this action against Google LLC
`
`(“Google”) under federal and state antitrust laws and deceptive trade practices laws and allege as
`
`follows:
`
`I. NATURE OF THE CASE
`
`2.
`
`The halcyon days of Google’s youth are a distant memory. Over twenty years ago, two
`
`college students founded a company that forever changed the way that people search the internet.
`
`Since then, Google has expanded its business far beyond search and dropped its famous “don’t be
`
`evil” motto. Its business practices reflect that change. As internal Google documents reveal,
`
`Google sought to kill competition and has done so through an array of exclusionary tactics,
`
`including an unlawful agreement with Facebook, its largest potential competitive threat, to
`
`(cid:80)(cid:68)(cid:81)(cid:76)(cid:83)(cid:88)(cid:79)(cid:68)(cid:87)(cid:72) advertising auctions. The Supreme Court has warned that there are such things as
`
`antitrust evils. This litigation will establish that Google is guilty of such antitrust evils, and it
`
`seeks to ensure that Google won’t be evil anymore.
`
`3.
`
`Google is an advertising company that makes billions of dollars a year by using
`
`individuals’ personal information to engage in targeted digital advertising. Google has extended
`
`its reach from search advertising to dominate the online advertising landscape for image-based
`
`web display ads. In its complexity, the market for display ads resembles the most complicated
`
`financial markets: publishers and advertisers trade display inventory through brokers and on
`
`electronic exchanges at lightning speed. As of 2020, Google is a company standing at the apex of
`
`power in media and advertising, generating over $161 billion annually with staggering profit
`
`margins, almost all of it from advertising.
`
`1
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`
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`4.
`
`Google’s advertising apparatus extends to the new ad exchanges and brokers through
`
`which display ads trade. Indeed, nearly all of today’s online publishers (be they large or small)
`
`depend on one company—Google—as their middleman to sell their online display ad space in “ad
`
`exchanges,” i.e., the centralized electronic trading venues where display ads are bought and sold.
`
`Conversely, nearly every consumer goods company, e-commerce entity, and small business now
`
`depend on Google as their respective middleman for purchasing display ads from exchanges in
`
`order to market their goods and services to consumers. In addition to representing both the buyers
`
`and the sellers of online display advertising, Google also operates the largest exchange AdX. In
`
`this electronically traded market, Google is pitcher, batter, and umpire, all at the same time.
`
`5.
`
`The scale of online display advertising markets in the United States is extraordinary.
`
`Google operates the largest electronic trading market in existence. Whereas financial exchanges
`
`such as the NYSE and NASDAQ match millions of trades to thousands of company symbols daily,
`
`Google’s exchange processes about
`
` online ad spaces each day. In Google’s words,
`
`
`
`
`
` At the same time, Google owns the largest buy-side and sell-side brokers. As one
`
`senior Google employee admitted,
`
`
`
` Or more accurately, the analogy would be if
`
` were a monopoly
`
`financial broker and owned the
`
` which was a monopoly stock exchange.
`
`6.
`
`Google, however, did not accrue its monopoly power through excellence in the
`
`marketplace or innovations in its services alone. Google’s internal documents belie the public
`
`image of brainy Google engineers having fun at their sunny Mountain View campus while trying
`
`to make the world a better place. Rather, to cement its dominance across online display markets,
`
`2
`
`
`
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`Google has repeatedly and brazenly violated antitrust and consumer protection laws. Its modus
`
`operandi is to monopolize and misrepresent. Google uses its powerful position on every side of
`
`the online display markets to unlawfully exclude competition. It also boldly claims that “we’ll
`
`never sell your personal information to anyone,” but its entire business model is targeted
`
`advertising—the purchase and sale of advertisements targeted to individual users based on their
`
`personal information. From its earliest days, Google’s carefully curated public reputation of “don’t
`
`be evil” has enabled it to act with wide latitude. That latitude is enhanced by the extreme opacity
`
`and complexity of digital advertising markets, which are at least as complex as the most
`
`sophisticated financial markets in the world.
`
`7.
`
`The fundamental change for Google dates back to its 2008 acquisition of DoubleClick,
`
`the leading provider of the ad server tools that online publishers, including newspapers and other
`
`media companies, use to sell their graphical display advertising inventory on exchanges. As the
`
`new middleman between publishers and exchanges, Google quickly began to use its new position
`
`to exert leverage. For instance, Google started requiring publishers to license Google’s ad server
`
`and to transact through Google’s exchange in order to do business with the one million plus
`
`advertisers who used Google as their middleman for buying inventory. So Google was able to
`
`demand that it represent the buy-side, where it extracted one fee, as well as the sell-side, where it
`
`extracted a second fee, and it was also able to force transactions to clear in its exchange, where it
`
`extracted a third, even larger, fee.
`
`8.
`
`Within a few short years of executing this unlawful tactic, Google successfully
`
`monopolized the publisher ad server market and grew its ad exchange to number one, despite
`
`having entered those two markets much later than the competition. With a newfound hold on
`
`publisher ad servers, Google then proceeded to further foreclose publishers’ ability to trade in
`
`3
`
`
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`exchanges. Google imposed a one-exchange-rule on publishers, barring them from routing
`
`inventory to more than one exchange at a time. At the same time, Google demanded that sellers
`
`route their ad space to Google’s exchange because doing so would serve the sellers’ best interest
`
`and maximize revenue. As internal documents reveal, however, Google’s real scheme(cid:3) was to
`
`permit its exchange to
`
`.
`
`One industry publication put it succinctly: “[t]he lack of competition was costing pub[s] cold hard
`
`cash.”
`
`9.
`
`In an attempt to reinject competition in the marketplace, publishers devised a new
`
`innovation called header bidding. Header bidding routed ad inventory to multiple neutral
`
`exchanges each time a user visited a web page in order to return the highest bid for the inventory.
`
`At first, header bidding bypassed Google’s stranglehold. By 2016, about 70 percent of major online
`
`publishers in the United States had adopted the innovation. Advertisers also migrated to header
`
`bidding in droves because it helped them to optimize the purchase of inventory through the most
`
`cost-effective exchanges.
`
`10.
`
`Google quickly realized that this innovation substantially threatened its exchange’s
`
`ability to demand a very large—
`
` percent—cut on all advertising transactions. Header
`
`bidding also undermined Google’s ability to trade on inside and non-public information from one
`
`side of the market to advantage itself on the other—a practice that in other markets would be
`
`considered insider trading or front running. As a result, and as Google’s internal communications
`
`make clear, Google viewed header bidding’s promotion of genuine competition as a major threat.
`
`In Google’s words, it was an
`
`
`
`11.
`
`Google responded to this threat of competition through a series of anticompetitive
`
`tactics. First, Google ceded ground and started to allow publishers using its ad server to route their
`
`4
`
`
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`Case 4:20-cv-00957-SDJ Document 1 Filed 12/16/20 Page 8 of 130 PageID #: 8
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`inventory to more than one exchange at a time. However, Google’s program secretly let its own
`
`exchange win, even when another exchange submitted a higher bid. Google’s codename for this
`
`program was —a character name from Star Wars. And as one Google employee explained
`
`internally, Google deliberately designed the program to avoid competition and the program
`
`consequently hurt publishers. In Google’s words, the
`
` program
`
`
`
` Next, Google
`
`tried to come up with other creative ways to shut out competition from exchanges in header
`
`bidding. During one internal debate, a Google employee proposed a
`
`
`
`
`
`. A second employee captured Google’s ultimate aim of
`
`destroying header bidding altogether, noting in response that
`
`
`
`
`
` Google wanted to be more aggressive.
`
`12.
`
`Google grew increasingly brazen in its efforts to undermine competition. In March
`
`2017, Google’s largest Big Tech rival, Facebook, announced that it would throw its weight behind
`
`header bidding. Like Google, Facebook brought millions of advertisers on board to reach the users
`
`on its social network. In light of Facebook’s deep knowledge of its users, Facebook could use
`
`header bidding to operate an electronic marketplace for online ads in competition with Google.
`
`Facebook’s marketplace for online ads is known as “Facebook Audience Network” or FAN.
`
`Google understood the severity of the threat to its position if Facebook were to enter the market
`
`and support header bidding. To diffuse this threat, Google made overtures to Facebook. Internal
`
`Facebook communications reveal that
`
`. As one Facebook executive acknowledged,
`
`
`
`
`
`
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`5
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`
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`Case 4:20-cv-00957-SDJ Document 1 Filed 12/16/20 Page 9 of 130 PageID #: 9
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`13.
`
`Any collaboration between two competitors of such magnitude should have set off the
`
`loudest alarm bells in terms of antitrust compliance. Apparently, it did not. Internally, Google
`
`documented that if it could not
`
`
`
`
`
`
`
` Indeed, Facebook understood Google’s rationale as a monopolist very
`
`well. An internal Facebook communication at the highest-level reveals that Facebook’s header
`
`bidding announcement was part of a planned long-term strategy—an “
`
`
`
`”—to draw Google in. Facebook decided to dangle the threat of competition in Google’s
`
`face and then cut a deal to (cid:80)(cid:68)(cid:81)(cid:76)(cid:83)(cid:88)(cid:79)(cid:68)(cid:87)(cid:72) the auction.
`
`14.
`
`In the end, Facebook curtailed its involvement with header bidding in return for Google
`
`giving Facebook information, speed, and other advantages in the
`
` auctions that Google
`
`runs for publishers’ mobile app advertising inventory each month in the United States. In these
`
`auctions, Facebook and Google compete head-to-head as bidders. Google’s internal codename for
`
`this agreement, signed at the highest-level, was
`
`—a twist on the character name from Star
`
`Wars. The parties agree on
`
` for how often Facebook would
`
` publishers’ auctions—
`
`literally manipulating the auction with
`
` for how often Facebook would
`
`bid and win.
`
`15.
`
`(cid:36)(cid:69)(cid:82)(cid:89)(cid:72)(cid:3) (cid:68)(cid:81)(cid:71)(cid:3) (cid:69)(cid:72)(cid:92)(cid:82)(cid:81)(cid:71) its (cid:88)(cid:81)(cid:79)(cid:68)(cid:90)(cid:73)(cid:88)(cid:79)(cid:3) agreement with Facebook, Google employed a
`
`number of other anticompetitive tactics to shut down competition from header bidding. Google
`
`deceived exchanges into bidding through Google instead of header bidding, telling them it would
`
`stop front running their orders when in fact it would not. Google employees also deceived
`
`publishers, telling one major online publisher that it should cut off a rival exchange in header
`
`bidding because of a strain on its servers. After this misrepresentation was uncovered, Google
`
`employees discussed playing a trick—a
`
`—on the industry to nonetheless get
`
`6
`
`
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`Case 4:20-cv-00957-SDJ Document 1 Filed 12/16/20 Page 10 of 130 PageID #: 10
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`publishers to cut off exchanges in header bidding. Google wanted to
`
`
`
` Google then proceeded to cripple publishers’
`
`ability to use header bidding in a variety of ways.
`
`16.
`
`Having reached its monopoly position, Google now uses its immense market power to
`
`extract a very high tax of
`
` percent of the ad dollars otherwise flowing to the countless
`
`online publishers and content producers like online newspapers, cooking websites, and blogs who
`
`survive by selling advertisements on their websites and apps. These costs invariably are passed
`
`onto the advertisers themselves and then to American consumers. The monopoly tax Google
`
`imposes on American businesses—advertisers like clothing brands, restaurants, and realtors—is a
`
`tax that is ultimately borne by American consumers through higher prices and lower quality on the
`
`goods, services, and information those businesses provide. Every American suffers when Google
`
`imposes its monopoly pricing on the sale of targeted advertising.
`
`17.
`
`From its earliest days, the internet’s fundamental tenet has been its decentralization:
`
`there is no controlling node, no single point of failure, and no central authority granting permission
`
`to offer or access online content. Online advertising is uniquely positioned to provide content to
`
`users at a massive scale. However, the open internet is now threatened by a single company.
`
`Google has become the controlling node and the central authority for online advertising, which
`
`serves as the primary currency enabling a free and open internet.
`
`18.
`
`Google’s current dominance is merely a preview of its future plans. Google has an
`
`appetite for total dominance, and its latest ambition is to transform the free and open architecture
`
`of the internet. Google’s plan is to create a walled garden around the internet in which it controls
`
`websites and mobile applications. Google calls its emerging venture the
`
`, a world in
`
`which publisher content is operated by Google. Internally, it refers to this model as
`
`7
`
`
`
`Case 4:20-cv-00957-SDJ Document 1 Filed 12/16/20 Page 11 of 130 PageID #: 11
`
`. Google’s documented plan is to capture online publishers on the open
`
`internet and transform them into content creators generating revenue for Google on a completely
`
`closed platform—like YouTube content creators.
`
`19.
`
`As a result of Google’s anticompetitive conduct, including its unlawful agreement with
`
`Facebook, Google has violated and continues to violate Sections 1 and 2 of the Sherman Act, 15
`
`U.S.C. §§ 1, 2. Plaintiff States bring this action to remove the veil of Google’s secret practices and
`
`end Google’s abuse of its monopoly power in online advertising markets. Plaintiff States seek to
`
`restore free and fair competition to these markets and to secure structural, behavioral, and monetary
`
`relief to prevent Google from ever again engaging in deceptive trade practices and abusing its
`
`monopoly power to foreclose competition and harm consumers.
`
`II. PARTIES
`
`20.
`
`Plaintiff States, by and through their respective Attorneys General, bring this action in
`
`their respective sovereign capacities and as parens patriae on behalf of the citizens, general
`
`welfare, and economy of their respective States under their statutory, equitable, or common law
`
`powers, and pursuant to Sections 4 and 16 of the Clayton Act, 15 U.S.C. §§ 15 & 26.
`
`21.
`
`Google is a limited liability company organized and existing under the laws of the State
`
`of Delaware, with its principal place of business in Mountain View, California. Google is an online
`
`advertising technology company providing internet-related products, including various online
`
`advertising technologies, directly and through subsidiaries and business units it owns and controls.
`
`Google is owned by Alphabet Inc., a publicly traded company incorporated and existing under the
`
`laws of the State of Delaware and headquartered in Mountain View, California.
`
`8
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`III. JURISDICTION
`
`22.
`
`The Court has jurisdiction over this action under Sections 1 and 2 of the Sherman Act,
`
`15 U.S.C. §§ 1 & 2; Sections 4 and 16 of the Clayton Act, 15 U.S.C. §§ 15c & 26; and under 28
`
`U.S.C. §§ 1331 and 1337.
`
`23.
`
`In addition to pleading violations of federal antitrust law, the Plaintiff States allege
`
`violations of state antitrust and consumer protection laws and seek civil penalties and equitable
`
`relief under those state laws. All claims under federal and state law are based upon a common
`
`nucleus of operative facts, and the entire action commenced by this Complaint constitutes a single
`
`case that would ordinarily be tried in one judicial proceeding.
`
`24.
`
`This Court has jurisdiction over the non-federal claims under 28 U.S.C. § 1367(a), as
`
`well as under principles of pendent jurisdiction. Pendent jurisdiction will avoid unnecessary
`
`duplication and multiplicity of actions and should be exercised in the interests of judicial economy,
`
`convenience, and fairness.
`
`25.
`
`This Court may exercise personal jurisdiction over Google because Google conducts
`
`business in this District. Google has established sufficient contacts in this District such that
`
`personal jurisdiction is appropriate. Google sells the products at issue throughout the United States
`
`and across state lines. Google is engaged in, and its activities substantially affect, interstate trade
`
`and commerce. Google provides a range of products and services that are marketed, distributed,
`
`and offered to consumers throughout the United States, in the Plaintiff States, across state lines,
`
`and internationally.
`
`IV. VENUE
`
`26.
`
`Venue is proper in this District under Section 12 of the Clayton Act, 15 U.S.C. § 22,
`
`and 28 U.S.C. § 1391. A substantial part of the events or omissions giving rise to the Plaintiff
`
`States’ claims occurred in this District. Google transacts business and is found within this District.
`9
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`V.
`
`INDUSTRY BACKGROUND
`
`27.
`
`The internet revolutionized the way people consume content, and along with it, the
`
`types of advertisements that companies can purchase to reach consumers. Online image-based ads
`
`on the web called “display” ads, audio ads, and video ads in the online world have largely
`
`supplanted their traditional print, radio, and television counterparts. In addition, the internet
`
`ushered in completely new advertising formats, including targeted text-based ads on search
`
`engines, shareable ads on social media, and specialized ads inside mobile phone applications.
`
`28.
`
`For online publishers and advertisers alike, the different online advertising formats are
`
`not interchangeable. Online media companies that operate websites and mobile applications
`
`(“online publishers”) are necessarily restricted in the types of ad formats they can sell. A news
`
`website, for example, can generally sell display ads alongside its news articles but cannot generally
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`sell search or audio ads to monetize the same content. At the same time, advertisers on the other
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`end of the transaction purchase one format or another to serve their different goals. For instance,
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`advertisers purchase search ads to reach consumers actively looking to make a purchase, whereas
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`they purchase display ads to increase brand awareness.
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`29.
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`In addition to introducing new advertising formats, the internet changed how online
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`publishers sell their advertising inventory. Online publishers sell their inventory to advertisers
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`either directly or indirectly through ad marketplaces. The “direct” sales method refers to
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`campaigns that the publisher itself sells directly to advertisers, including those campaigns sold by
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`the publisher’s internal sales staff and through the publisher’s private auctions. For example, USA
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`Today, as an online publisher, could negotiate directly with Disney, as an advertiser, to display
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`Disney ads atop the USA Today homepage one million times in a particular month.
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`30.
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`Publishers also use a specialized distribution channel to sell their ad inventory
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`indirectly to advertisers. Large publishers usually sell some inventory directly, then sell their
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`remaining inventory indirectly. A publisher cannot always predict how many ad spaces it has
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`available to sell directly to advertisers because it is dependent on the number of users who visit
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`the publisher’s website; selling inventory indirectly permits publishers to nonetheless sell their
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`surplus impressions. Additionally, some publishers sell the entirety of their inventory indirectly.
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`“Indirect” sales occur through centralized electronic trading venues called “ad exchanges” and
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`through “networks” of publishers and advertisers. In lieu of direct sales, publishers can let ad
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`exchanges auction their inventory in real time on their behalf and keep a portion of advertising
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`proceeds in return.
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`31. Whether online publishers sell their display inventory directly or indirectly, the
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`advertisements can target specific users in real time. When a user views a website or mobile app,
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`advertisers purchase the individual spaces for ads (“impressions”) targeted to that user. Google
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`likes to claim that it will “never sell your personal information to anyone,” but the online ad
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`impressions Google sells to advertisers target individual users based on their personal information.
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`32.
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`Finally, because publishers can target ads to specific users in real time, online
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`publishers manage highly varied, or “heterogeneous,” inventory. One might think that a website
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`with three pages and three different ad slots per page would have a total of nine unique ad units to
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`sell. But because online ads are targeted at individual users, the same site with 1,000,