Texas Leads 10-State Lawsuit: Google-Facebook "Jedi Blue" Collusion

On December 16, 2020, Texas Attorney General Ken Paxton filed an antitrust lawsuit against Google joined by nine other states, exposing secret agreements between Google and Facebook—including the “Jedi Blue” deal—to eliminate competition in digital advertising and maintain Google’s ad exchange monopoly. The complaint revealed CEO-level coordination between the two tech giants to suppress emerging competitive threats.

Header Bidding: The Competitive Threat

To understand Jedi Blue’s significance, it’s crucial to understand header bidding—the technology that threatened Google’s ad exchange dominance.

Traditional Model (Google’s Monopoly)

• Publishers used Google’s ad server (DFP/Ad Manager)
• Ad requests went first to Google’s ad exchange (AdX)
• Google saw all competing bids before deciding
• Google took 30-50% of ad revenues
• Publishers had no ability to simultaneously query multiple exchanges

Header Bidding (Competitive Alternative)

• Publishers could simultaneously query multiple ad exchanges
• All exchanges submitted bids concurrently
• Publisher selected highest bidder
• Increased publisher revenues by 10-40%
• Reduced Google’s monopoly power

By 2017-2018, header bidding was gaining rapid adoption and posed an existential threat to Google’s ad exchange monopoly. If publishers could easily access multiple exchanges, Google would have to compete on price and service rather than maintaining monopoly through vertical integration.

Facebook’s Header Bidding Plans

Facebook Audience Network (FAN) began developing header bidding capabilities in 2017. As one of the few companies with advertiser demand comparable to Google, Facebook’s entry into header bidding could have fundamentally altered ad tech competition:

• Facebook had billions of users and massive advertiser demand
• Facebook header bidding would give publishers real alternative to Google
• Publishers could play Facebook and Google against each other
• Google’s monopoly pricing power would collapse

Internal Google documents showed the company viewed Facebook header bidding as a “Code Red” threat to its business model.

The Jedi Blue Agreement

In September 2018, Google and Facebook struck a deal code-named “Jedi Blue” (after Star Wars’ Force-wielding knights). The agreement’s core elements:

What Google Offered Facebook

1. Preferential auction access: Facebook Audience Network (FAN) received special advantages in Google’s “Open Bidding” system
2. Non-public information: Data and insights unavailable to other advertisers
3. Speed advantages: Faster processing and response times
4. Guaranteed win rates: Assurances that Facebook would win a certain percentage of auctions
5. Inside track: Advance notice of auction changes and preferential treatment

What Facebook Promised Google

1. Abandon header bidding: Facebook would not pursue header bidding development
2. Exclusive use of Open Bidding: Facebook would route publisher inventory through Google’s controlled system
3. Market division: Facebook wouldn’t compete with Google’s ad exchange
4. Coordination on “anti-fraud”: Joint efforts to characterize header bidding as fraudulent

CEO-Level Coordination

Unredacted court filings revealed that the highest levels of both companies knew about and approved Jedi Blue:

Mark Zuckerberg: Signed off on the agreement for Facebook Sundar Pichai: Approved the deal for Google Sheryl Sandberg: Facebook COO involved in negotiations Multiple executives: Both companies’ top leadership coordinated on the competitive restraint

This wasn’t rogue behavior by mid-level managers—it was deliberate coordination between tech industry’s most powerful executives to eliminate competition.

Legal Significance: Market Allocation

The Texas complaint characterized Jedi Blue as an illegal market allocation agreement violating antitrust law:

Sherman Act Section 1 Violation

Agreement between competitors (Google and Facebook both compete for advertiser dollars) to:

• Divide markets (Google keeps ad exchange monopoly, Facebook gets preferential treatment)
• Eliminate competition (killing header bidding as competitive threat)
• Fix terms of trade (guaranteed win rates and preferential access)

Market allocation agreements are per se illegal under antitrust law—meaning they’re presumptively unlawful regardless of purported justifications.

Texas AG Paxton’s Statement

“If the free market were a baseball game, Google positioned itself as the pitcher, the batter and the umpire. Facebook and Google decided to team up to dominate the market. This conduct is per se illegal under federal antitrust law and violates Texas state law.”

How Open Bidding Maintained Google’s Monopoly

Google created “Open Bidding” ostensibly as an alternative to header bidding, but it maintained Google’s monopoly control:

Header bidding (competitive):

• Publishers query multiple exchanges simultaneously
• All exchanges compete on equal terms
• Publisher sees all bids and chooses winner
• Google has no special advantage

Open Bidding (Google-controlled):

• All bids route through Google’s infrastructure
• Google sees bids before publishers
• Google controls auction mechanics
• Google can manipulate outcomes (as shown with Project Bernanke)
• Google still takes monopoly fees

Jedi Blue ensured Facebook would use Open Bidding (giving Google control) rather than header bidding (giving publishers control).

Evidence from Internal Documents

The Texas lawsuit included stunning internal quotes:

Google’s Awareness of Illegality

Internal documents showed Google employees used terms suggesting awareness of antitrust issues:

• Discussions of whether agreement was “kosher”
• Concerns about “optics” of coordination with Facebook
• Deliberately obscuring the relationship to avoid antitrust scrutiny

Google’s Strategic Goals

“The goal is to kill header bidding”—Internal Google communication

Google understood header bidding threatened its monopoly and used the Facebook agreement as part of a broader strategy to eliminate this competitive threat.

Facebook’s Benefits

In Google’s own words, the agreement gave Facebook “information, speed and other advantages in the auction it runs in the US.”

Google acknowledged providing preferential treatment that advantaged Facebook over competing advertisers—precisely the kind of discriminatory dealing antitrust law prohibits.

The “Open Web” Deception

Google marketed Open Bidding as supporting the “open web” and publisher choice. Internal documents revealed this was false:

“The Jedi program generates suboptimal yields for publishers and serious risks of negative media coverage if exposed externally."—Internal Google document

Google knew:

• Jedi Blue harmed publishers by suppressing header bidding competition
• The deal would not withstand public scrutiny
• It needed to be kept secret to avoid antitrust enforcement

The agreement was structured to appear as normal business dealings while actually constituting monopoly coordination.

Publisher Harm

Header bidding typically increased publisher revenues 10-40% by introducing real competition for advertising inventory. By coordinating with Facebook to kill header bidding, Google and Facebook:

• Kept publisher revenues artificially low
• Maintained Google’s monopoly pricing power
• Prevented publishers from accessing competitive alternatives
• Extracted monopoly rents that should have gone to content creators

For struggling news publishers, this coordination directly contributed to journalism’s economic crisis—two of the world’s most powerful companies conspired to suppress publisher revenues for their own benefit.

The Broader Conspiracy

Jedi Blue wasn’t isolated—the Texas complaint detailed Google’s systematic efforts to kill header bidding:

1. Project Bernanke: Manipulated auctions to disadvantage competitors
2. Jedi Blue: Paid Facebook to abandon header bidding
3. Unified Pricing Rules: Changed auction mechanics to make header bidding less effective
4. False “fraud” claims: Characterized legitimate header bidding as fraudulent
5. Aggressive publisher pressure: Threatened to cut off access to Google demand for publishers using header bidding

The coordination represented a multi-year, multi-tactic campaign to eliminate competitive threat to Google’s monopoly.

Other States Join

The lawsuit was filed by attorneys general from:

• Texas (lead)
• Arkansas
• Idaho
• Indiana
• Kentucky
• Mississippi
• Missouri
• North Dakota
• South Dakota
• Utah

All Republican attorneys general, suggesting bipartisan concern (Democratic AGs filed separate Google antitrust suits) about tech platform monopoly abuse.

Google and Facebook’s Defense

Both companies denied wrongdoing:

Google: “The Texas complaint is full of inaccuracies. We never manipulate the auction. Open Bidding and header bidding compete today, and advertisers regularly use both.”

Facebook: “Facebook Audience Network’s participation in Open Bidding is similar to the dozens of other companies. The evidence will show that the claims don’t reflect how online advertising works or the value we provide.”

Both claimed the agreement was ordinary business dealing, not anticompetitive coordination—despite CEO-level involvement and internal documents showing intent to eliminate competition.

Significance for Monopoly Accountability

Jedi Blue represents one of the clearest modern examples of monopolist coordination:

Explicit agreement: Written contract between monopolists CEO involvement: Highest level of both companies approved Competitive harm: Directly suppressed emerging competition Market allocation: Classic illegal division of markets Consumer harm: Kept prices high and competition low

Unlike many antitrust cases involving complex economic analysis, Jedi Blue is straightforward: two dominant platforms coordinated to eliminate competition. The main legal question isn’t whether it happened (internal documents prove it) but whether courts will enforce antitrust law against tech giants as they would against any other industry.

Connection to Broader Tech Antitrust

Jedi Blue influenced other enforcement:

• Demonstrated willingness of tech monopolists to coordinate rather than compete
• Showed CEO-level involvement in anticompetitive practices
• Provided template for investigating platform coordination
• Strengthened calls for structural separation to prevent conflicts of interest

The case illustrated that absent antitrust enforcement, dominant platforms will coordinate to maintain market power rather than compete—making active antitrust enforcement essential for market functioning.

Status and Implications

As of 2024, the case remains in litigation with both companies vigorously defending. However, Jedi Blue has already influenced:

• DOJ’s 2023 ad tech lawsuit citing similar coordination concerns
• EU Digital Markets Act prohibiting such self-preferencing
• Congressional proposals to ban certain platform coordination
• Recognition that platform gatekeepers will coordinate absent legal constraints

The case represents a pivotal moment in tech antitrust: clear documentary evidence of CEO-level coordination between monopolists to eliminate competition—exactly the conduct antitrust law was designed to prevent.