Editor’s Note: E&P was the first to break the news about the historic lawsuit on Friday, Jan. 29. Our exclusive story featuring interviews with lawyers and HD Media is below. Plus check out our exclusive E&P Reports video/podcast as E&P Publisher Mike Blinder goes one-on-one with attorney Paul T. Farrell, Jr. and HD Media VP of news and executive editor, Lee Wolverton.
Tech giants Google and Facebook aren’t strangers to antitrust litigation and Congressional scrutiny, but in a first-of-its-kind case, the two companies have been named as defendants in a federal antitrust lawsuit filed by a newspaper publisher.
The plaintiff, HD Media Co., LLC, is the West Virginia-based publisher of seven titles, including the Pulitzer Prize-winning Charleston Gazette-Mail and the Herald-Dispatch, a historically significant newspaper that dates back to 1871.
On Jan. 29, the publisher filed its lawsuit in the Southern District of West Virginia. To small community and regional newspaper publishers across the nation, the action may seem like David squaring off against a two-headed Goliath.
Big Tech is a daunting opponent, so to assist them, HD Media amassed an all-star team of attorneys to plead its case: Wheeling, West Virginia-based Fitzsimmons Law Firm PLLC; Farrell & Fuller LLC in San Juan, Puerto Rico; Robbins Geller Rudman & Dowd LLP in Boca Raton, Florida.; and Atlanta-based Herman Jones LLP.
Co-counsel Paul T. Farrell, Jr. of Farrell & Fuller recounted how he came to represent HD Media in this action. Farrell—the co-lead counsel on the national opioid litigation—recalled initially filing that suit on behalf of local counties in his home state of West Virginia.
He explained: “Part of the reason that case evolved was because in November 2016, the Charleston Gazette-Mail published stories about the ARCOS data that had never been public before. The headlines read, ‘780 million pills were sold into West Virginia, and during that timeframe, 17,000 people overdosed and died.’ Eric Eyre won the Pulitzer Prize, and that sparked the largest mass tort litigation in federal court history. That’s the importance of local journalism.
“When the House Judiciary Committee published its 450-page report last October, about the antitrust and anticompetitive conduct by Google and Facebook, among others, it caught my attention. On behalf of the newspaper and my community—struggling to stay alive—I decided to do something about it. Oftentimes, lawyers are castigated, but there are occasions when we get to wear the white hat.”
The relationship between Google and news organizations wasn’t always contentious. With the advent of the internet, publishers were challenged with creating digital workflows from the ground up, getting their content to the web, and trying to bring their print audiences along with them. Google offered an attractive value proposition: An advertising partner who had deep pockets to develop ad management, distribution and marketplace infrastructure, allowing news organizations to focus on their own core competencies. Over time, that relationship soured, and HD Media’s suit contends that Google acted in bad faith through monopolistic acquisitions and by manipulating the market over which they have absolute control.
“This fight began in 2007, when an online publisher of nudes, Perfect 10, Inc., filed an antitrust case against Google, saying that republication of its thumbnail photos on the Google search engine violated copyright law,” Farrell said. “The analysis from the Ninth Circuit was that Google was not doing so to commercialize its search engine. It was just a pass-through. That was in 2007. Since then, they have completely monetized and commercialized their search engine, and what they’ve also done is create an advertising marketplace in which they represent and profit from the buyers and the sellers, while also owning the exchange.”
Farrell offered the stock market as an analogy. “Google is the broker for the buyer and gets a commission. Google is the broker for the seller and gets a commission. Google owns, operates and sets the rules for the ad exchange. And they are also in the market themselves.”
Though this case may be unprecedented in that it’s the first time a newspaper publisher has taken on massively powerful tech platforms, Farrell said that there are two key pieces of legislation on the books that embolden their case.
“Congress already addressed a remedy for this type of anticompetitive conduct with the Sherman Act of 1890…The monopolies that have crushed our system have been addressed through this vehicle,” Farrell said. “But the important amendment to that was the Clayton Act that came in 1914. What that did was give the industry and people who had been harmed by the conduct, the ability to not only have a voice but to seek compensation for the harm that’s been done.”
Judicial and Legislative Remedies
On Dec. 16, 2020, Texas Attorney General Ken Paxton and the attorneys general for eight other states and the Commonwealth of Kentucky filed a lawsuit against Google in the U.S. District Court, Eastern District Court, for “anticompetitive conduct” related to digital advertising, arguing that Google has adversely affected advertisers, publishers and consumers—essentially, everyone but Google, which saw its digital ad revenues skyrocket in recent years.
The HD Media complaint—like Paxton’s filing—cites “Jedi Blue” among the merits. Documentation about the arrangement between Google and Facebook remain under seal, but the alleged agreement—as reported by The Wall Street Journal and The New York Times—occurred when Google saw Facebook as a threat to its header bidding business. To keep Facebook out of that digital advertising realm, Google allegedly conspired with Facebook. In exchange for standing down, it offered Facebook preferential treatment in digital ad auctions, stacking the deck even more against newspapers.
E&P reached out to both Google and Facebook for reaction to the HD Media filing. As of press time, Facebook has not responded to the request. But Peter Schottenfels, a communications representative for Google, responded, referring to an excerpt from a Jan. 17, 2021 article, “AG Paxton’s misleading attack on our ad tech business,” written by Adam Cohen, Google’s director of economic policy. Schottenfels contends that the HD Media suit is similar to the case Paxton filed in December 2020, and that Google’s response is the same in both cases.
Regarding Google’s Open Bidding, Cohen wrote in the article, “Facebook Audience Network (FAN)’s involvement isn’t a secret. In fact, it was well-publicized and FAN is one of over 25 partners participating in Open Bidding. Our agreement with FAN simply enables them (and the advertisers they represent) to participate in Open Bidding…AG Paxton inaccurately claims that we manipulate the Open Bidding auction in FAN’s favor. We absolutely don’t. FAN must make the highest bid to win a given impression.”
Farrell, who had read the Cohen’s article and learned of Google’s response to E&P, replied, “If Google doesn’t understand what they’ve done to local news and journalism, they can find me pretty easily by their own search engine. They can ‘Google me,’ and I’ll fill them in.”
Beyond the Damages
Lee Wolverton has worked in the news industry for more than 30 years. Today, he serves as HD Media’s vice president of news and executive editor. Though he’s limited by counsel as to what he can say about the case, he did offer some important context about the plight of newspapers across the nation.
To critics who suggest newspapers only have themselves to blame for their precarious position, Wolverton argued that newspapers have done their part to bring audiences with them into the digital space. Recent years have seen record-breaking digital circulation for newspapers across the spectrum, and yet, digital advertising revenues have shockingly declined.
“More people always meant more money, throughout the course of our history,” Wolverton said. “Obviously, that’s why you wanted to drive your circulation up because circulation numbers meant you could charger higher rates and make more money. We’re drawing more and more people than we ever have, and we can’t profit from it. I would challenge everybody out there to look at that and ask yourself: ‘If we can’t get to the place where we can be profitable now, how are we ever going to get there, absent change?’”
Beyond the damages the publisher seeks, the goal is grander and practical, but also profound.
“What needs to be fixed is the digital ad revenue model that siphons revenues away from newspapers and puts it directly into the coffers of Google. That model has to change,” Wolverton said.
If HD Media and its team of lawyers prevail in the case, the admission of wrongdoing and awarding of damages still wouldn’t solve the fundamental inequity in digital advertising, Wolverton points out. There has to be transformative change, or it will accelerate the demise of small and mid-market newspapers.
“I want our company to be successful,” Wolverton said. “I want everybody to succeed. I want Google to succeed, too, just not at our expense… I think of the classic line from the movie "Good Will Hunting": ‘It’s not your fault.’ I think about all the friends who’ve gone out of the business—really bright, talented people. We’ve lost 1,800 papers over 20 years through closures or mergers. There were so many good people, and they’re needed.”
He added, “There are three groups of people mentioned in the Constitution: lawyers, the military, and then there’s the press. It’s pretty remarkable when you think about what the founders were trying to accomplish; a free press was essential to preserving a representative republic and democracy within that republic.”
Farrell shared his client’s resolve to save newspapers. His appeal to a future jury in the HD Media case will demonstrate what’s at stake if newspapers go away and what the nation stands to lose if tech companies like Google and Facebook deprive newspapers of ad revenue.
“I hope to be able to tell this story to the jury: The Department of Justice took on the Sackler family in 2006 and fined them $600 million,” he said. “The Federal Government tried its best—between the DEA and the FDA—to get its arms around the opioid epidemic, but none of that worked. What worked was a small newspaper in West Virginia that broke the story about the ARCOS data, triggering the civil justice system to right the wrong.
Journalism matters, he concluded. “In the absence of that local journalism, the Sackler family would still be running Purdue Pharma.”
Gretchen A. Peck is an independent journalist who has reported on publishing and journalism for more than two decades. She began her reporting career covering municipal government at a suburban Philadelphia daily and also served as an editor-in-chief/editorial director for a magazine publisher. She has contributed to Editor & Publisher since 2010 and can be reached at firstname.lastname@example.org.