February 18, 2010
Google Hit With Another Antitrust Lawsuit. Does It Have Microsoft Ties? Google v. myTriggers
By Eric Goldman
Google, Inc v. myTriggers.com, Inc., 09 CV 14836 (Franklin County Ct. of Common Pleas, Ohio). Google filed its first amended complaint on January 20, 2010. myTriggers filed an answer with counterclaims on February 2, 2010. See both pleadings here.
About a year ago, Google was sued by an obscure company called TradeComet for various antitrust violations. TradeComet’s lawsuit wasn’t the first private antitrust claim against Google; other scrappy claims had arisen over the years. However, none of them were serious challenges or went anywhere.
The TradeComet complaint looked equally low-merit, so I would have probably ignored it except that TradeComet’s counsel was the NYC-based Cadwalader Wickersham & Taft—which also does antitrust work for Microsoft. Those two facts could be completely unrelated, but it’s possible that they aren’t. First, I can’t imagine Cadwalader would jeopardize a lucrative relationship with a Fortune 50 company to take on a low-merit lawsuit for a no-name company. Therefore, either Cadwalader viewed the various antitrust issues as so unrelated that no legal or business conflicts were created—a risky judgment given Microsoft’s sensitivity about both Google and antitrust—or Microsoft approved/acquiesced to Cadwalader’s representation of TradeComet. Second, Microsoft has been engaged in a multi-year, multi-front effort to harass Google on antitrust issues, and Cadwalader’s involvement would be consistent with that campaign.
I checked PACER today, and the TradeComet lawsuit is going nowhere fast. Google filed a motion to dismiss in March 2009, prompting an exchange of memos in April, and the last (non-substantive) PACER entry was in August. It appears that everyone is waiting for the judge to rule on Google’s motion to dismiss from almost a year ago.
Meanwhile, an intriguing and unexpected new antitrust battlefront has opened up. myTriggers is run by NexTag alums and, IMO, has an even worse brand name than TradeComet. Do a search for “mytriggers” and see if you can avoid juvenile giggles. myTriggers’ properties include three shopbots/shopping comparison websites: mytriggers.com, comparisonsearches.com and shopbig.com. A quick review of these websites revealed no obvious reason why I would choose them over better-known shopbots.
As a result, I could see why these sites might have trouble generating organic traffic. Therefore, I wasn’t surprised to learn that myTriggers was a heavy AdWords advertiser. myTriggers said that Google had extended it a $250,000 line of credit, and it incurred $200k in AdWords charges for December 2007. Meanwhile, myTriggers clearly enjoyed its acquired traffic. It did three multi-million rounds of financing (the 2005 initial capitalization and rounds in 2006 and 2007) and leased a big datacenter in March 2008. But just as it was finalizing the lease, the bottom dropped out on myTriggers. Google implemented a change to myTriggers’ quality score, which (according to myTriggers) boosted its minimum bids 10-100X. It’s never good for margins when the price on a key input goes up 10X or more, and myTriggers subsequently fired almost all of its employees and effectively exited the market.
This left the pesky matter of Google’s unpaid bill—to the tune of about $335k, according to Google. I’m not sure how many of myTriggers’ millions haven’t been spent, but clearly Google thought it was worth chasing this money. It hired a (presumably cheap) local Ohio counsel and filed one of the shortest complaints I can recall seeing (2 sentences!) in myTriggers’ local state courthouse—even though the AdWords contract appears to say that contract-related litigation *must* be adjudicated in Google’s home court. Other than the risk that myTriggers didn’t have the money, Google appears to have treated this as a routine and unexciting collections matter.
This is where the story gets weird. Rather than plead poverty to Google or mount a generic but low-cost contract defense, myTriggers retained THREE law firms and also brought a counterclaim under Ohio’s state antitrust law, the Valentine Act. The three law firms are: (1) local Columbus counsel, presumably initially retained to handle the collections matter, (2) a Cincinnati firm that includes Stanley Chesley, Ohio bar #852 (!), a litigator of some renown who has enough gravitas to impress most judges; and (3) the same four-person DC-based antitrust team from Cadwalader that also represents TradeComet.
I am struggling to make sense of myTriggers’ litigation choices. Assuming myTriggers even has the money, writing a $335k check to Google (and I bet Google would have taken less!) is almost assuredly cheaper than paying three law firms to mount an antitrust assault on a $20B/year behemoth. Assuming that myTriggers wants to maximize profits, then either (1) myTriggers thinks its odds are good enough that it will win AND make enough money to pay the 7 lawyers on the counterclaim's signature page plus their teams, or (2) the law firms struck an unbelievably sweet deal on fees.
Either way, how did Columbus-based myTriggers connect with the DC-based Cadwalader team? Did myTriggers independently call up Cadwalader? The TradeComet lawsuit got some press, but that was a year ago. If myTriggers really thought it had a case, it might have preemptively sued Google rather than waiting for Google to sue it. Did myTriggers get connected to Chesley for some reason, who then recommended bringing in Cadwalader? Did Cadwalader reach out to myTriggers? If so, I would like to know more how this happened and how this matter pertains to Cadwalader’s relationship to Microsoft. I’m also confused about the relative roles of Chesley and Cadwalader. It’s not immediately obvious why myTriggers would need both Chesley and Cadwalader or be willing to fund both.
Whatever the case, I suspect the antitrust claims caught Google flat-footed. A simple and low-stakes collections matter has blown up into a potentially significant lawsuit in an undesirable forum. Google chose Ohio state court for the collections matter despite its AdWords contract, so now it will have a tough time extricating itself from that court. But I suspect it would rather have an antitrust case in federal court, not state court—often (but not always) federal judges are more sophisticated than state judges and less susceptible to hometown bias. And I’m sure Google would rather fight antitrust claims on one of the coasts than in the Rust Belt, especially if myTriggers argues that Google’s evilness cost Ohioans jobs. Google probably didn’t mean to offer battle in this venue, but someone did a really good job of seizing the opportunity and forcing Google to fight the battle in a suboptimal setting.
Although myTriggers’ counterclaim is noticeably less well-drafted than the TradeComet complaint, the substance of myTriggers’ antitrust counterclaim is similar to the TradeComet allegations. The basic argument is the same: myTriggers argues that it’s a competitor to Google and that Google raised ad prices on a competitor to squelch it. As a result, I think this counterclaim is about as meritorious as TradeComet’s—in other words, not so much.
That said, the counterclaim had a couple of interesting factual allegations. First, in paragraph 12 of the counterclaim, myTriggers alleges that Google cuts special deals with selected shopbots so that their ads are not subject to the same quality scores as other advertisers. (Compare paragraph 101 of the TradeComet complaint, which wasn’t as clear that Google made these adjustments by agreement). I would love to see one of the Google-shopbot agreements containing such a clause. Could this just reflect some aspect of Google’s standard algorithm that automatically preferences shopbots without any agreement? Or could the NexTag alums know something we don't?
Second, Paragraphs 14-16 allege that Google manually maintains a “whitelist” that means that “neither Google nor its ‘search partners’ will eliminate the company from the market,” and a shopbot not placed on the whitelist “is forever blacklisted by Google and its ‘search partners.’” The TradeComet complaint doesn’t have a directly analogous allegation, and I have no idea what this means. If you have any thoughts or theories, I would welcome them. These allegations should be subject to the Ohio equivalent to Rule 11, so myTriggers should have some evidence in its possession to back this up. I would love to see that evidence.
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