Google’s Reserve Price Optimization Plan Raises Advertising Prices Class Action

Google, LLC and its parent company, Alphabet, Inc., are in the advertising business, acting as brokers between publishers with ad space or impressions and advertisers with display advertising on the advertising exchange AdX. But the complaint for this class action alleges that Google manipulates the ad-space auctions with a program called Reserve Price Optimization that raises the price advertisers must pay to display their ads.

The class for this action is all persons and entities in the US who, between January 1, 2015 and September 5, 2019, used Google’s display advertising services to place an ad on a website operated by another entity.

Those who have ad space or “impressions” to sell (publishers) and those who want to buy impressions (advertisers) engage in real-time bidding (RTB), the complaint alleges: “When an internet user clicks to visit a web page, in the milliseconds that it takes for that page to load, real-time auctions are occurring in the background to determine which ads will display on the web page that a particular user will see.” The publisher may set a floor, or reserve amount, below which it will not sell its space.

In general, auctions are first-price auctions in which the highest bidder wins and pays its bid price. So if Bidder A bids $3, Bidder B bids $5, and Bidder C bids $4, Bidder B wins and pays $5. But this can lead to higher prices, and bidders may not want to reveal their actual highest price.

For this reason, the complaint alleges, Google pretended to run second-price auctions, in which the highest bidder wins, but at only a slight increase over the second-highest bidder. Thus, with the above bids, Bidder B at $5 would still win but would pay just a little more than second-highest Bidder C’s $4 price, for example, $4.01.

However, the complaint alleges Google took advantage of its confidential knowledge of bidders’ highest prices on subsequent auctions through its Reserve Price Optimization (RPO) program. With this plan, the complaint alleges, Google looks back at former bids and overrides the publisher’s reserve price.

For example, if a publisher set a reserve price of $10, and if Bidder A had previously bid $15 for the impression, Google might raise the reserve price for Bidder A to $14.90. According to the complaint, it set a different reserve price for each bidder. Then, if Bidder A bid $15, Bidder B bid $12, and Bidder C bid $11, Bidder A would still win, but instead of paying the second price of just over $12, Bidder A would have to pay $14.90, Google’s inflated reserve price.

The complaint claims, “To guess how much each advertiser would pay for a specific impression, RPO relied on inside information: advertisers’ historic bids into Google’s supposedly second-price exchange auction…” “Google employees privately acknowledged that RPO should be based on ‘smarts and tech’ rather than ‘insider information,’” the complaint asserts, but Google still used the insider information in its possession to charge bidders more.

Article Type: Lawsuit
Topic: Fraud
Tags: Fraud, Fraud by Concealment, Unfair Business Practices, Unjust Enrichment