Odd Couple Unites in Motion In opposition to Large Tech
The duo play a key role in an antitrust lawsuit filed against Google last year on behalf of a group of states alleging that Alphabet had the Inc.
Subsidiary uses its control over ad exchanges to benefit its own businesses and collect fees from websites that rely on it for revenue.
Despite the unrest in Mr. Paxton’s office, the case remains an important part of a wave of bipartisan action against tech giants that sparked comparisons with the trust-breaking era of Theodore Roosevelt.
It grew from the lead of a multi-state investigation by the Texas Attorney General and accelerated after Ms. Srinivasan, an antitrust scientist, discovered one of the groundbreaking documents in the case, a 2018 business agreement between Facebook Inc.
and Google that the lawsuit argues show collusion.
The collaboration between Mr. Paxton and Ms. Srinivasan is a rare commonality in a bipartisan era. “Politics was not in the decision-making block,” Ms. Srinivasan said in an interview. “If there are state governments willing to divest resources to pursue injustices … that was all that matters.”
“I look for the best talent to accomplish a goal and Dina has remarkable skills and abilities and an amazing reputation for what she can accomplish,” said Paxton.
Concerns that big tech is stifling competition have been voiced by state and federal lawmakers, as well as the Trump and Biden administrations. The audit is aimed at companies from multiple business areas, is likely to take years and could fundamentally change the way companies do business.
Facebook, Amazon.com Inc.
and apple Inc.
are accused of having used their dominance in the areas of social media, e-commerce and app sales to use themselves unfairly and to impede competition. Late last month, the House of Representatives Judiciary Committee passed six bills aimed at curbing the dominance of Google, Facebook, Amazon and Apple.
The Justice Department and 38 attorneys general filed separate antitrust proceedings against Google last year in addition to the Texas lawsuit alleging that its search services were blocking competition. Another antitrust lawsuit was filed this month by three dozen attorneys general against Google’s App Store alleging that the company is blocking competition for apps on mobile devices running its Android operating system.
The Texas-led lawsuit could reshape the digital economy as it focuses on Google’s alleged monopoly in a display advertising industry that funds millions of websites.
Google has called the lawsuits flawed, saying that the Texas lawsuit is inaccurate its business deal with Facebook to portray Google’s involvement in the industry as shameful. The company said it charges lower fees for ads than the industry average. Regarding the App Store suit, it is said that its open operating system allows customers to download apps directly from the developers’ websites.
Mr. Paxton conducted an investigation into Google’s advertising business in several states at his Austin office on Wednesday.
Julia Robinson for the Wall Street Journal
Aside from their views on the technology industry, Mr. Paxton and Ms. Srinivasan have few things in common.
A veteran politician who studied law at Baylor University and the University of Virginia, Paxton was first elected to the Texas House of Representatives for a district outside of Dallas in 2002. Amid the 2010 tea party wave, he led an unsuccessful populist campaign to oust the incumbent Republican House Speaker and then won the attorney general race in 2014.
In 2017, Mr. Paxton gained a national profile by engaging the 750 attorneys who occupy one of the largest state judicial agencies in the country to serve more conservative causes such as the challenge to the Affordable Care Act. He also moved into the spotlight after being charged with securities fraud in 2015. He has denied wrongdoing.
When he went for re-election in 2018, voters complained about big tech-related issues, Paxton said. He assembled a team that traveled to California to learn from technology companies, lawyers, and industry experts. Much of the conversation focused on Google’s ad dominance.
In December 2019, attorneys general from 48 states, all but California and Alabama, signed the endorsement of an investigation that Mr. Paxton announced on the steps of the US Supreme Court. They have since split into separate actions, with Mr Paxton citing a lawsuit from 14 states and Puerto Rico.
Shown with District of Columbia Attorney General Karl Racine, Mr Paxton announced the bipartisan investigation in the Supreme Court in 2019.
Andrew Harrer / Bloomberg News
Ms. Srinivasan’s path to the case was very different. Born in Seattle to a Lebanese father and American mother, she grew up in warlike Beirut, where she remembers playing with cousins on a balcony and Prime Minister Rashid Karami’s helicopter exploding nearby to see. She returned to the Pacific Northwest for high school and college, and later enrolled in law school at Yale, where she focused on antitrust law.
She co-founded and sold part of a digital advertising company to WPP Global, where she worked as an executive for some time before leaving in 2017. Worried by the market dominance of Facebook and Google, she began a personal investigation of both companies, which eventually resulted in a 63-page article in the Berkeley Business Law Journal entitled “The Antitrust Case Against Facebook”.
She said she was politically independent but leaned to the left.
At a cartel event in 2019 at La Villa in the Sky, a rooftop restaurant with a floor-to-ceiling glass view of Brussels, she met Darren McCarty, a Conservative Republican and then-deputy to Mr Paxton, who helped put together the case against Google.
They joined because she saw similarities between Google’s digital advertising practices and airline ticket service provider Saber Holdings Corp.
who was sued for excessive booking fees. Mr. McCarty knew the case well, having worked for the American Airlines Group Inc.
“We were a bunch of nerds at an antitrust conference,” McCarty said.
While the Texas team was pursuing his case, Ms. Srinivasan joined an antitrust initiative at Yale called the Thurman Arnold Project, doing research for News Corp.,
The parent company of the Wall Street Journal and an outspoken Google critic. In June 2020 she published a first draft of her second academic paper: “Why Google Dominates Advertising Markets: Competition Policy Should Lean on the Principles of Financial Market Regulation”.
Mr. McCarty saw it and called Mrs. Srinivasan.
“I’ll get to the point in a moment,” he said. “Would you work with us?”
“When?” She asked.
“Immediately,” he said.
In September, Ms. Srinivasan and her family came to a three bedroom Airbnb in Austin. Their role was to help review documents and advise on the complaint.
But at that time, Mr. McCarty and several other Paxton MPs reported to federal authorities that the attorney general had broken the law and abused his office to aid a political donor. Mr Paxton said the allegations were false.
Ms. Srinivasan considered leaving the case, she said, but a legal friend advised her to do the job. Raised during a civil war, she learned to focus in the midst of the chaos, she said.
Ms. Srinivasan, shown working from her home office in Kentfield, Calif., On Tuesday, discovered a document alleging the lawsuit alleged collusion between Google and Facebook.
Christie Hemm Klok for the Wall Street Journal
One afternoon the following week, Ms. Srinivasan was hunched over her laptop on the white couch in her Airbnb, brooding over Google documents the state had collected as part of its investigation. Months earlier, she had seen a Twitter post by a software programmer at an analytics firm that said he had discovered code suggesting that Google and Facebook are working together to share data and help sell ads.
On one of the pages before her, she came across a contract in support of this idea, signed by Sheryl Sandberg, Facebook’s chief operating officer and Philipp Schindler, Google’s chief business officer, people familiar with the matter said. It was part of a secret 2018 deal, codenamed “Jedi Blue,” where Facebook joined – instead of competing – an advertising program called “Open Bidding” in exchange for lower fees.
She called Mr. McCarty. Over dinner at an upscale Mexican restaurant in downtown Austin, she avoided discussing the riots in the attorney general’s office when she detailed her discovery.
“We focused on the breakthrough,” said McCarty.
Mr McCarty resigned days later and joined an exodus of senior staff. The FBI has opened a criminal investigation into Mr. Paxton to determine if he has abused his office.
The allegations played a role in the division of the 48 states that supported the investigation. Some states have also been knocked out by Mr Paxton’s decision to file a lawsuit against four battlefield states who declared President Biden victorious over Donald Trump, according to people familiar with the efforts.
Several of Mr. Paxton’s employees resigned after accusing him of abuse of office and the FBI opened an investigation.
Julia Robinson for the Wall Street Journal
An outside attorney was hired to head the Texas case.
In December, Texas filed a lawsuit against Google in the US District Court in Texas. The Google Facebook project and a program that Google allegedly developed to give preference to its own system for buying ads over its competitors made headlines.
A Google spokeswoman said the case was unfounded and said Mr Paxton moved “despite the facts”. The spokeswoman added, “We have invested in cutting-edge ad tech services that help businesses and benefit consumers.”
Mr. Paxton then called Ms. Srinivasan and thanked her for her work. “The reason we made so much progress is because you played an important role,” he said. “I really appreciate it.”
The process is scheduled to begin in 2023. Mr Paxton’s participation is left to the voters. He is standing for re-election next year.
Write to Tripp Mickle at Tripp.Mickle@wsj.com
Copyright © 2021 Dow Jones & Company, Inc. All rights reserved. 87990cbe856818d5eddac44c7b1cdeb8