Statement of claim - Cloudinary

Filed on behalf of (name & role of party) Andrew Hamilton, Applicant Prepared by (name of person/lawyer) Andrew Hamilton Law firm (if applicable) Tel +972 54 536 3529 Fax Email [email protected] Address for service (include state and postcode)

11 Canara Ave, Phillip Bay, NSW, 2036

. [Form approved 01/08/2011]

Form 17 Rule 8.05(1)(a)

Statement of claim

No. of 2020 Federal Court of Australia

District Registry: NSW

Division: General

Andrew Paul Stuart Hamilton Applicant

Facebook Inc. and another named in the schedule Respondents

A. SUMMARY OF CORE CLAIM

1) The Applicant brings this proceeding as a representative proceeding pursuant to Part IVA of the Federal Court of Australia Act 1976 (Cth).

2) This proceeding is commenced by the Applicant on his own behalf and on behalf of those Group Members set out in the Originating Application who have suffered loss or damage by reason of the conduct of the Respondents pleaded in this Statement of Claim.

3) The Respondents have “click wrap” standard contracts (“Standard Contracts”) with their users, including persons to whom they supply online advertising services. [Refer Part C of this Statement of Claim “(“SoC”)]

4) Between 30 January 2018 and July 2018 the Respondents introduced into their Standard Contracts provisions prohibiting, or substantially restricting, all advertising related to cryptocurrency (“Ad Ban Provisions”). [Refer SoC Part D]

5) The Respondents supply and acquire online advertising services, both supplying to and acquiring from:

i) each other, as parties under Standard Contracts; and

ii) many other persons who are party to their Standard Contracts, including:

iii) many persons supplying cryptocurrency related goods and services (“Cryptocurrency Industry”) who are impacted by the Ad Ban Provisions. [Refer SoC Part E]

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6) By reason of the allegations in paragraphs 3) and 5) there are numerous contracts between the Respondents and persons who are competitive with the Respondents in relation to the supply and / or acquisition of online advertising services. [Refer SoC Part

H]

7) By reason of the allegations in paragraph 4) a substantial purpose of each of the Ad Ban Provisions is inter alia to restrict or prevent:

i) the supply of online advertising services by the Respondents to members of the Cryptocurrency Industry; and

ii) the acquisition of online advertising services from the Respondents by members of the Cryptocurrency Industry who are party to the Standard Contracts. [Refer SoC Part I]

8) By reason of the allegations in paragraph 6) and 7) the Ad Ban Provisions are cartel provisions under section 45AD (1) of the Competition and Consumer Act 2010 (Cth) (“Act”). [Refer SoC Part J]

9) The Respondents gave effect to the Ad Ban Provisions by:

i) publicly announcing the Ad Ban Provisions;

ii) implementing the Ad Ban Provisions in the software algorithms by which they provide online advertising services;

iii) encouraging and enabling their users to assist in the implementation of the Ad Ban Provisions.

10) By reason of the allegations in paragraph 9) the Respondents gave effect to cartel provisions in contracts in contravention of section 45AK (1) of the Act. [Refer SoC Part K]

11) The giving effect to the Ad Ban Provisions substantially reduced the advertising opportunities available to the Cryptocurrency Industry, which in turn substantially reduced demand for cryptocurrency related goods and services, including demand for:

i) the Listed Cryptocurrencies;

ii) services of Cryptocurrency Exchanges (defined in paragraph 253)); and

iii) online services which rely upon cryptocurrency enabled public blockchain technologies, including social media, content (including video) sharing, search engine and web browser services (“Web 3.0 Services”). [Refer SoC Part M]

12) The substantially reduced demand, and anticipation of substantially reduced demand, for Listed Cryptocurrencies caused by the Respondents giving effect to the Ad Ban Provisions caused the prices of Listed Cryptocurrencies on publicly traded markets to fall:

i) by over 50% in the week following the First Respondent’s announcement and implementation of its Ad Ban Provision;

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ii) by over 30% in the week following the Second Respondent’s announcement of its Ad Ban Provision;

iii) in the cases of many Listed Cryptocurrencies associated with Web 3.0 Services which compete with the Respondents’ offerings, by over 90% during the period in which the Respondents have continued to give effect to the Ad Ban Provisions. [Refer SoC Part M]

13) The value of the Applicant’s and the Group Members’ investments in Listed Cryptocurrencies dropped substantially due to the Respondents giving effect to the Ad Ban Provisions. [Refer SoC Part M]

14) The substantially reduced the advertising opportunities available to the Cryptocurrency Industry reversed the previously rapid growth (on relevant business metrics such as new user acquisition and user engagement) of projects supplying Web 3.0 Services, by preventing them from gaining the attention of potential new users. [Refer SoC Part M]

15) The revenues and current value of the Group Members’ businesses and projects in the Cryptocurrency Industry are substantially lower than they would have been if the Respondents had not given effect to the Ad Ban Provisions. [Refer SoC Part M]

16) By reason of the allegations in paragraphs 11) to 15) the Applicant and the Group Members suffered loss and damage from the above contraventions.

B. THE PARTIES

The Applicant

17) The Applicant acquired, or acquired interests in, the following Listed Cryptocurrencies prior to or during the “Relevant Period” (as defined in the Originating Application): Bitcoin, Ethereum, ZCash, Monero, Steem, Siacoin, Decred, Hive and Gulden.

18) The Applicant has at various times before and during the Relevant Period directly or indirectly provided services, including computer processing power to or in relation to various cryptocurrency blockchains in expectation of programmed cryptocurrency reward from that blockchain. Such activity is referred to in the cryptocurrency industry as “cryptocurrency mining”.

19) The Applicant has at various material times created and curated content on social media applications using the Steem and Hive blockchains in expectation of programmed cryptocurrency rewards from those blockchains based on other user’s votes for such content.

The Facebook Respondents

20) The First Respondent was at all material times a corporation duly incorporated in the state of Delaware in the United States of America, able to be sued in its own corporate name and the ultimate parent company of Facebook Australia Pty Ltd (“Facebook Australia”) and Facebook Ireland Limited (“Facebook Ireland”).

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21) The First Respondent, Facebook Australia and Facebook Ireland (“Facebook Companies”) are related bodies corporate.

Particulars

Exhibit 21.1 to the First Respondent’s 2019 Annual Report (Form 10-K filed with the United States Securities Exchange Commission) (“Facebook 2019 Annual Report”) lists Facebook Ireland and Facebook Global Holdings II LLC as subsidiaries of the First Respondent.

The Australian Securities Commission company extract for Facebook Australia lists Facebook Global Holdings II LLC as its sole member shareholder and the First Respondent as its ultimate holding company.

22) The First Respondent is a substantial supplier of online advertising services, in Australia and globally, via its products Facebook, Instagram, Messenger and third-party websites and applications.

Particulars

The Facebook 2019 Annual Report, states:

“We generate substantially all of our revenue from selling advertising placements

to marketers. Our ads enable marketers to reach people based on a variety of

factors including age, gender, location, interests and behaviors. Marketers

purchase ads that can appear in multiple places including on Facebook,

Instagram, Messenger, and third-party applications and websites.” [Page 7]

The First Respondent’s 2018 Annual Report (Form 10-K filed with the United States Securities Exchange Commission) (“Facebook 2018 Annual Report”) repeats the above statement on page 5.

The First Respondent’s 2017 Annual Report (Form 10-K filed with the United States Securities Exchange Commission) (“Facebook 2017 Annual Report”) repeats the above statement on page 5.

The First Respondent’s revenues from supply of online advertising services were US$69.655 billion in 2019, US$55.013 billion in 2018 and US$39.942 billion in 2017. [Table entitled “Revenue” on page 56.]

“Revenue was [US]$70.70 billion, up 27% year-over-year, and advertising

revenue [was [US]$69.66 billion, up 27% year-over-year.” [Page 44].

23) The First Respondent is a substantial supplier of online communications services, in Australia and globally, including instant messaging (WhatsApp and Facebook Messenger) and video streaming (Facebook and Instagram), social media platform services (Facebook and Instagram) and other online services on the internet.

Particulars

The Facebook 2019 Annual Report [page 7] lists Facebook, Instagram, Messenger and WhatsApp as the Third Respondents main products and provides descriptions of what each does.

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The Google Respondents

24) The Second Respondent was at all material times a limited liability corporation duly incorporated in the state of Delaware in the United States of America, able to be sued in its own corporate name.

25) Alphabet Inc. a company incorporated in Delaware, USA, (“Alphabet Inc.”) is the ultimate parent company of the Second Respondent and Google Australia Pty Ltd (“Google Australia”) (collectively all three are the “Google Companies”).

Particulars

Exhibit 21.01 to Alphabet Inc.’s 2019 Annual Report (Form 10-K filed with the United States Securities Exchange Commission) (“Google 2019 Annual Report”) lists the Second Respondent as a significant subsidiary registered in Delaware.

The Australian Securities Commission company extract for Google Australia lists Alphabet Inc. as its ultimate holding company.

26) By reason of the allegations in paragraph 25) the Google Companies are related bodies corporate.

27) The Second Respondent is a substantial supplier of online advertising services, in Australia and globally, via its products including Google Search, YouTube and third-party websites and applications.

Particulars

The Google 2019 Annual report states:

“We generate revenues primarily by delivering relevant, cost-effective online

advertising.” [Page 55]

“We generated over 83% of total revenues from the display of ads online in 2019” [page 9]

Table of Google advertising revenues [page 30] lists 2019 revenues as follows:

Google Search & other: US$98.115 billion

YouTube ads: US$15.149 billion

Google Network Members’ properties: US$21.547 billion

28) The Second Respondent is a substantial supplier of online communications services, in Australia and globally, including web search (Google Search), email (Gmail), video

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conferencing (Google.Meet), video sharing (YouTube), web browser (Chrome) cloud storage (Google Cloud) and other online services on the internet.

Particulars

The Google 2019 Annual Report states:

“Google’s core products and platforms such as Android, Chrome, Gmail, Google

Drive, Google Maps, GooglePlay, Search and Youtube have over one billion

monthly active users.” [page 5]

See details regarding the Google Respondents’ products and services on pages 5 to 7 of Google 2019 Annual Report.

Jurisdiction over Respondents

29) The First and Second Respondents are incorporated outside Australia; each is a foreign corporation and a corporation under section 4 of the Act.

30) By reason of the allegations in paragraphs 33) to 51) the First Respondent carries on business in Australia and is subject to the Act in relation to conduct outside of Australia by virtue of section 5(1)(g) of the Act.

31) By reason of the allegations in paragraphs 56) to 64) the Second Respondent carries on business in Australia and is subject to the Act in relation to conduct outside of Australia by virtue of section 5(1)(g) of the Act.

C. THE STANDARD CONTRACTS

32) Each of the Respondents have “clickwrap” standard contracts with their users.

Particulars

The Australian Competition and Consumer Commission (ACCC) released a report in June 2019 entitled the Digital Platforms Inquiry (“ACCC Report”)

Appendix H of the ACCC Report contains a detailed review of each of the Respondents user sign-up processes including flow-charts.

On page 576 the ACCC Report states:

“Clickwrap agreements

As shown in the light blue boxes in the above flowcharts for Facebook, Google

and Twitter, each of these three digital platforms use a clickwrap agreement

where new users are deemed to have accepted their terms and conditions (which

incorporate their privacy policies) by proceeding with the sign-up process.”

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The Facebook website and standard terms & conditions

33) The First Respondent publishes a website known as “Facebook” at the domain name www.facebook.com (“Facebook Website”).

Particulars

The Facebook 2019 Annual Report states:

“Our website address is www.facebook.com.” [page 9]

34) The Facebook Website is accessible in Australia and provides services (“Facebook Services”) to Australian users. The domain name www.facebook.com.au redirects to the Facebook Website.

35) The First Respondent owns the www.facebook.com and www.facebook.com.au domain names.

Particulars

See particulars to paragraph 33).

A domain name search on www.whois.com lists the First Respondent as the Registrant Contact and Domain Manager of the www.facebook.com and www.facebook.com.au domain names.

36) The First Respondent owns the Australian trademarks for “Facebook”.

Particulars

An Australian trademark search lists the trademark “Facebook” in classes 35, 38, 42 and 45 to be registered to the First Respondent, with a priority date of 29 June 2006.


“Facebook, the Facebook logo, FB, the Like button, Instagram, Oculus,

WhatsApp, and our other registered or common law trademarks, service marks,

or trade names appearing in this Annual Report are the property of Facebook,

Inc. or its affiliates.” [Page 9]

37) During the SRR Period (defined in paragraph 40)), Facebook Ireland provided the Facebook Services to Australian users as agent for the First Respondent.

Particulars

See Australian Information Commission v Facebook Inc. [2020] FCA 531 at [39 – 40] (findings of law and facts not in issue relating to period when SRR was in force).

The Applicant relies on the SRR (see paragraph 40) for its full terms as if set out in full herein.

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38) In the alternative, during the SRR Period, the First Respondent provided the Facebook Services to Australian users on behalf of Facebook Ireland.

39) After the SRR Period, the First Respondent provided the Facebook Services directly to Australian users.

Particulars

The Applicant relies on the ToS (see paragraph 46) for its full terms as if set out in full herein.

40) During the period 30 January 2015 to least 19 April 2018 (“SRR Period”) the Facebook Website contained a document entitled “Statement of Rights and Responsibilities” (“SRR”) which set out the standard terms and conditions to which users of the Facebook Website were to be bound in contract by use of any Facebook services.

Particulars

During the period from 30 January 2015 to at least 19 April 2018 the SRR displayed on the Facebook Website at www.facebook.com/legal/terms/ was the current version and stated: “Date of Last Revision: 30 January, 2015”

The first substantive paragraph of the SRR states:

“This Statement of Rights and Responsibilities ("Statement," "Terms," or "SRR")

derives from the Facebook Principles, and is our terms of service that governs

our relationship with users and others who interact with Facebook, as well as

Facebook brands, products and services, which we call the “Facebook Services”

or “Services”. By using or accessing the Facebook Services, you agree to this

Statement, as updated from time to time in accordance with Section 13 below.

Additionally, you will find resources at the end of this document that help you

understand how Facebook works.

Because Facebook provides a wide range of Services, we may ask you to review

and accept supplemental terms that apply to your interaction with a specific app,

product, or service. To the extent those supplemental terms conflict with this SRR,

the supplemental terms associated with the app, product, or service govern with

respect to your use of such app, product or service to the extent of the conflict.”

On 19 April 2018 a notice stating: “Our Statement of Rights and Responsibilities

is changing. You can view our new Terms of Service here” was added to the SRR displayed at www.facebook.com/legal/terms/ [Wayback Machine].

41) During the SRR Period, the SRR constituted a contractual offer, acceptance of which was by using or accessing the Facebook Services and the consideration for which included supply of the Facebook Services to the user.

42) During the SRR Period, the SRR stated that the Facebook party to the contract created with users by the SRR is the First Respondent for users resident or with a principal place of business in the United States or Canada and Facebook Ireland for other users, including those in Australia.

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43) During the SRR Period, the SRR directly applied Facebook’s Self-Serve Ad Terms and Facebook’s Advertising Policies (“Facebook Advertising Policies”) to anyone using the Facebook platform for advertising or a commercial purpose (“Commercial Use”).

Particulars

Clause 10 of the SRR is entitled “Special Provisions Applicable to Advertisers” and states:

“If you use our self-service advertising creation interfaces for creation,

submission and/or delivery of any advertising or other commercial or sponsored

activity or content (collectively, the “Self-Serve Ad Interfaces”), you agree to our

Self-Serve Ad Terms. In addition, your advertising or other commercial or

sponsored activity or content placed on Facebook or our publisher network will

comply with our Advertising Policies.”

44) During the SRR Period, the SRR also incorporated by reference various other documents and policies including Facebook’s Advertising Policies in the SRR.

Particulars

Clause 13.3 of the SRR makes the continued use of Facebook’s Services after a change of policies an acceptance of those policies.

The penultimate paragraph of SRR lists Facebook’s Advertising Policies as one of Facebook’s policies.

45) During the SRR Period, the operation of the SRR and the Facebook Website established a mechanism of offer, acceptance and consideration by which each and every person who used or accessed the Facebook Services entered into a contract, incorporating the Facebook Advertising Policies, with either the First Respondent or Facebook Ireland (“Facebook User Contract”).

Particulars

See also Young v Facebook Australia Pty Ltd [2015] FCA 1440 including [64-65].

46) After the SRR Period, the First Respondent replaced the SRR with new “Terms of Service” (“ToS”) which set out the standard terms and conditions to which users of the Facebook Website were to be bound in contract with the First Respondent by use of any Facebook Services.

Particulars

See ToS, including clause 5.1.

47) After the SRR Period, the ToS requires anyone using the Facebook platform for a Commercial Use to agree to the First Respondent’s “Commercial Terms”.

Particulars

Clause 4.5.2 of the ToS states:

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“Some of the Products we offer are also governed by supplemental terms. If you

use any of those Products, supplemental terms will be made available and will

become part of our agreement with you. For instance, if you access or use our

Products for commercial or business purposes, such as buying ads, selling

products, developing apps, managing a group or Page for your business, or using

our measurement services, you must agree to our Commercial Terms.”

48) After the SRR Period, the ToS, incorporating the Commercial Terms directly applies Facebook’s Self-Serve Ad Terms and Facebook’s Advertising Policies to anyone using the Facebook platform for a Commercial Use.

Particulars

Clause 6 of the Commercial Terms states:

“If you use our self-service advertising creation interfaces for creation,

submission and/or delivery of any advertising or other commercial or sponsored

activity or content (collectively, the “Self-Serve Ad Interfaces”), you must agree

to our Self-Serve Ad Terms.

Your advertising placed on Facebook Company Products or our publisher

network must comply with our Advertising Policies.”

49) After the SRR Period, the ToS also incorporated by reference various other documents and policies including Facebook’s Advertising Policies in the ToS.

Particulars

Clause 5 of the ToS lists Facebook’s Advertising Policies, as one of Facebook’s policies that may apply to a user.

50) After the SRR Period, the operation of the ToS, including the Commercial Terms, and the Facebook Website established a mechanism of offer, acceptance and consideration by which each and every person who used or accessed the Facebook Services entered into a contract, incorporating the Facebook Advertising Policies, with either the First Respondent (also a “Facebook User Contract”).

51) A very large number of people use or access the Facebook Services every month.

Particulars

According to the Facebook 2019 Annual Report:

“millions of businesses [] rely on our services to grow and create jobs” [Page 44]

In the quarter ending 31 March 2018 there were, on average, 2.196 billion people who were a registered and logged-in user of one of the First Respondent’s products and who visited one of the First Respondent’s websites or applications in a 30 day period. [Page 46]

52) The First Respondent’s accounting policies prevent it from recognizing revenue from advertising sales unless it is able to identify a contract with a customer incorporating Facebook’s relevant terms and conditions for paid advertising (ie Self Service Ad Terms).

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Particulars

According to the Facebook 2018 Annual Report, page 64, the process for Facebook to recognize revenue under Accounting Standards Update No 2014-09

Revenue from Contracts with Customers (Topic 606) (“ASC 606”) requires it to identify a contract with a customer and the performance obligations of that contract before being able to recognize revenue from that customer.

53) By reason of the allegations in paragraph 51) the contract formation mechanisms set out in paragraphs 45) and/or 50) have created a Facebook User Contract incorporating the Facebook Advertising Policies with every user of Facebook Services.

54) By reason of the allegations in paragraphs 52) and 53) the Facebook Respondents have recognized the creation of a Facebook User Contract containing the Facebook Advertising Policies with every person from whom it has recognized revenue from the supply of online advertising services (see particulars to paragraph 22)).

55) By reason of the allegations in paragraph 21) and the operation of section 45AC of the Act and/or the allegations in paragraph 46) the First Respondent is, or is taken to be a party to every Facebook User Contract, including Facebook Contracts between Australian users and Facebook Ireland.

The Google website and standard terms & conditions

56) The Second Respondent publishes website known as “Google” at www.google.com (“Google Global Website”) and at www.google.com.au (“Google Australian Website”).

57) Both the Google Global Website and Google Australian Website (collectively “Google Websites”) are accessible in Australia.

58) A web search conducted on the Google Global Website returns search results on the Google Global Website.

59) A web search conducted on the Google Australia Website returns search results on the Google Australian Website.

60) The Second Respondent owns the www.google.com domain name.

Particulars

A domain name search on www.whois.com lists the Second Respondent as the Registrant Contact and Domain Manager of the www.google.com domain name.

61) The Second Respondent owns the Australian trademark for “Google”.

Particulars

An Australian trademark search lists the trademark “Google” in classes 9, 38, and 42 to be registered to the Second Respondent, with a priority date of 16 September 1998.

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62) The Second Respondent owns the www.google.com.au domain name.

Particulars

A domain name search shows the www.google.com.au domain name to be owned by Google Inc. Google Inc became Google LLC in September 2017 as part of a corporate reorganization.

The Alphabet Inc. 2017 Annual Report (Form 10-K filed with the United States Securities Exchange Commission) (“Google 2017 Annual Report”) states on page 6 that: “As part of the Alphabet reorganization, we converted Google Inc.

into a limited liability corporation in September 2017.”

63) The search engines on the Google Websites are exclusively provided by, operated by and controlled by the Second Respondent.

Particulars

See Rana v Google Australia Pty Ltd [2013] FCA 60 at [35 – 36] (unchallenged evidence of Google Australia).

In Australian Competition and Consumer Commission v Trading Post Australia

Pty Ltd [2011] FCA 1086 (22 September 2011) the Second Respondent conceded at [18] that:

“it was at all relevant times responsible for determining the appearance of the

user interface of the Google search engine available at the google.com.au and

google.com websites. Further, Google has conceded that if the provider of the

Google search engine made any of the pleaded representations to users then such

representations were made by Google.”

These concessions were not facts at issue in those proceedings.

64) The Second Respondent is the contracting party for the provision of a range of services, including gmail, directly to Australian users.

Particulars

The Second Respondent’s terms and conditions for provision of gmail and other services to users, including those in Australia, provides that the Second Respondent is the contracting party.

See https://policies.google.com/terms?gl=AU&hl=en

“Google services are provided by, and you’re contracting with:

Google LLC

organized under the laws of the State of Delaware, USA, and operating under the

laws of the USA

1600 Amphitheatre Parkway

Mountain View, California 94043

USA”

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65) At the relevant times the Google Website contained a document entitled “Advertising Program Terms” (“APT”) which sets out the standard terms and conditions to which persons wishing to use the advertising programs and services offered by the Google Website (“Google Advertising Services”) are to be bound in contract by use of these services.

Particulars

The first substantive paragraphs of the APT state:

“On November 1, 2016, the Google Advertising Program Terms applicable to

Australia-based customers were changed and assigned to Google Australia Pty

Ltd. A copy of the updated terms is available below:

Advertising Program Terms

These Advertising Program Terms (“Terms”) are entered into by Google

Australia Pty Ltd (“Google”) and the entity executing these Terms or that accepts

these Terms electronically (“Customer”). These Terms govern Customer’s

participation in Google’s advertising programs and services (i) that are

accessible through the account(s) given to Customer in connection with these

Terms or (ii) that reference or are referenced by these Terms (collectively,

“Programs”). In consideration of the foregoing, the parties agree as follows:”

The APT describes itself as effective from 1 November 2016.

The Applicant relies on the APT (see paragraph 40) for its full terms as if set out in full herein.

66) The APT constitutes the terms of a contractual offer, acceptance of which was by execution or electronic acceptance and the consideration for which included supply of the Google Advertising Services to the user.

67) Google Australia is the contracting party to the APT for Australian users of the Google Advertising Services and other related bodies corporate of the Second Respondent are the contracting parties in other parts of the world.

68) The APT incorporates by reference various other documents and policies including Google’s Advertising Policies (“Google Advertising Policies”).

Particulars

Section 2 of the APT states:

“2 Policies. Customer is solely responsible for its use of the Programs (e.g.,

access to and use of Program accounts and safeguarding usernames and

passwords) (“Use”). Program Use is subject to applicable Google policies

available at www.google.com/ads/policies and all applicable Partner policies

made available by Google to Customer (in each case, as modified from time to

time, “Policies”).”

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69) The operation of the APT and the Google Website establish a mechanism of offer, acceptance and consideration by which any person wishing to use the Google Advertising Services must electronically accept or otherwise execute the APT and thus enters into a contract, incorporating the Google Advertising Policies, with the Second Respondent or one of its related bodies corporate (“Google Advertiser Contract”).

70) A very large number of people use or access the Google Advertising Services.

Particulars

The Google 2019 Annual Report, page 6, states:

“Our advertising solutions help millions of companies grow their businesses”

71) Alphabet Inc’s accounting policies prevent it from recognizing revenue from the Second Respondents’ advertising sales unless it is able to identify a contract with a customer incorporating the Second Respondent’s relevant terms and conditions for paid advertising (i.e. the APT).

Particulars

According to the Google 2018 Annual Report, page 55, on 1 January 2017 Google adopted ASC 606.

As per particulars to paragraph 52) ASC 606 requires a company to identify a contract with a customer and the performance obligations of that contract before being able to recognize revenue from that customer.

72) By reason of the allegations in paragraph 70), the contract formation mechanism set out in paragraph 69) has created a Google Advertiser Contract with every user of Google Advertising Services.

73) By reason of the allegations in paragraphs 71) and 72) the Second Respondent has recognized the creation of a Google Advertiser Contract containing the Google Advertising Policies with every person from whom it has recognized revenue from the supply of online advertising services (see particulars to paragraph 27)).

74) By reason of the allegations in paragraph 26) and by operation of section 45AC of the Act, the Second Respondent is taken to be a party to every Google Advertiser Contract, including Google Advertiser Contracts between Australian users and Google Australia.

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D. THE AD BAN PROVISIONS

Facebook Cryptocurrency Ad Ban

75) On 30 January 2018 the First Respondent announced and effected changes in the Facebook Advertising Policies which introduced a complete ban on all cryptocurrency related advertising.

Particulars

Facebook Announcement entitled: “New Ads Policy: Improving Integrity and Security of Financial Product and Services Ads” dated 30 January 2018 by Rob Leathern, Product Management Director [https://www.facebook.com/business/news/new-ads-policy-improving-integrity-and-security-of-financial-product-and-services-ads] (“Facebook First Ad Ban Announcement”),

Facebook Advertising Policy 30 Jan 2018. Policy (4)(29) Prohibited Financial Products and Services (“Facebook First Ad Ban Policy”),

76) The terms of the Facebook First Ad Ban Policy stated: “Ads must not promote financial

products that are frequently associated with misleading or deceptive promotional

practices, such as binary options, initial coin offerings, or cryptocurrency.”

77) The terms of the Facebook First Ad Ban Policy listed examples of prohibited ads including:

i) “Click here to learn more about our no-risk cryptocurrency that enables instant

payments to anyone in the world.”

ii) “New ICO! Buy tokens as a 15% discount NOW!”

iii) “Use your retirement funds to buy Bitcoin!”

78) The Facebook First Ad Ban Announcement stated, without citing any evidence, that: “there are many companies who are advertising binary options, ICOs and

cryptocurrencies that are not currently operating in good faith. This policy is

intentionally broad …”

79) The Facebook First Ad Ban Announcement also stated: “we may not catch every ad that

should be removed under this new policy, and encourage our community to report

content that violates our Advertising Policies.”

80) By reason of the allegations in paragraphs 45) and 75) the Facebook First Ad Ban Policy became part of every Facebook User Contract on 30 January 2018.

81) On 26 June 2018 the First Respondent announced and effected changes in the Facebook Advertising Policies to allow cryptocurrency related advertisements from pre-approved advertisers while continuing to prohibit initial coin offerings.

Particulars

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Facebook Announcement entitled: “Updates to Our Prohibited Financial Products and Services Policy” dated 26 June 2018 by Rob Leathern, Product Management Director. (“Facebook Second Ad Ban Announcement”)

Facebook Advertising Policy 26 June 2018. (“Facebook Second Ad Ban Policy”)

82) In order to obtain pre-approval under the Facebook Second Ad Policy the advertiser was required to provide evidence to assess their eligibility “including any licenses they have obtained, whether they are traded on a public stock exchange and any other relevant public background on their business”.

83) On 26 June 2018, its was rare for any member of the cryptocurrency industry to be listed on a major stock exchange for the reasons set out in paragraph 207).

84) On 26 June 2018, its was rare for any member of the cryptocurrency industry to have been licensed in relation to their cryptocurrency activities by relevant authorities in their jurisdiction. This is because, on 26 June 2018, apart from New York, USA, there was no licensing required or even available to cryptocurrency businesses in the vast majority of countries, including Australia.

85) By reason of the allegations in paragraphs 50) and 81) the Facebook Second Ad Ban Policy became part of every Facebook User Contract on 26 June 2018.

86) On 8 May 2019 the First Respondent announced and effected changes in the Facebook Advertising Policies which partly relaxed the ban on all cryptocurrency related advertising and replaced it with a new set of restrictions.

Particulars

Facebook Announcement entitled: “Updating our ad policies for financial services and products” dated 8 May 2019. (“Facebook Third Ad Ban Announcement”),

Facebook Advertising Policy 8 May 2019. Policy (4)(11) Cryptocurrency Products and Services (“Facebook Third Ad Ban Policy”)

87) The terms of the Facebook Third Ad Ban Policy stated: “Ads may not promote cryptocurrency trading or related products and services without prior written permission.”

88) The terms of the Facebook Third Ad Ban Policy listed different levels of restriction for different types of cryptocurrency ads:

i) “Not allowed: Cryptocurrency token sales.”

ii) “Allowed With Permission: Hardware/software for cryptocurrency mining;

cryptocurrency trading platform; Cryptocurrency”

iii) “Allowed: Tax services for cryptocurrency companies; Events, education and news

related to Cryptocurrency (where no cryptocurrency products or services are on

offer); Blockchain technology information”

89) In order to obtain permission under the Facebook Third Ad Policy the advertiser is required to provide evidence to assess their eligibility “including any licences they have

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obtained, whether they are traded on a public stock exchange and any other relevant

public background on their business”.

90) By reason of the allegations in paragraphs 50) and 86) on 8 May 2019 the Facebook Third Ad Ban Policy became, and continues to be, part of every Facebook User Contract.

Google Cryptocurrency Ad Ban

91) On 15 March 2018 the Second Respondent announced changes in the Google Advertising Policies which introduced a complete ban on all cryptocurrency related advertising, effective in June 2018.

Particulars

Google Announcement entitled: “Financial Services: New restricted financial products policy (June 2018)” posted [15] March 2018. (“Google Ad Ban Announcement”)

Google Advertising Policy. Financial Services – Restricted Financial Products (“Google Ad Ban Policy”)

92) The Google Ad Ban Announcement stated: “In June 2018, Google will update the

Financial services policy to restrict the advertisement of Contracts for Difference, rolling

spot forex and financial spread betting. In addition, ads for the following will no longer

be served:

- Binary options and synonymous products

- Cryptocurrencies and related content (including but not limited to initial coin offerings,

cryptocurrency exchanges, cryptocurrency wallets, and cryptocurrency trading advice)

Ads for aggregators and affiliates for the following will no longer be allowed to serve:

…

- Cryptocurrencies and related content.

…

This policy will apply globally to all accounts that advertise these financial products.”

93) In June or early July 2018 the Second Respondent amended the Google Advertising Policies to include the terms of the Google Ad Ban Policy which stated: “The following is not allowed: …

- Ads for cryptocurrencies and related content

- Examples: Ads for initial coin offerings, ads promoting the purchase or sale of

cryptocurrency, cryptocurrency wallets, cryptocurrency trading advice

- Ad destinations that aggregate or compare issuers of cryptocurrencies or related

products

- Examples: Cryptocurrency trading signals or investment advice, aggregators or

affiliate sites containing related content or broker reviews.”

94) In September 2018, the Second Respondent amended the Google Advertising Policies to update the Google Ad Ban Policy to allow regulated cryptocurrency exchanges to advertise in the United States and Japan effective October 2018.

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Particulars

Google Announcement entitled: “Update to Financial products and services policy (October 2018)” posted September 2018.

95) At some time between October 2018 and September 2019, the Second Respondent further amended the Google Advertising Policies to further update the Google Ad Ban policy (without making an announcement) to allow products and services associated with cryptocurrency mining.

Particulars

Google Cryptocurrencies Policy from September 2019.

96) By reason of the allegations in paragraphs 69) and 91) in June or early July 2018 the Google Ad Ban Policy became, and has continued to be, part of every Google Advertiser Contract with the modifications referred to in paragraphs immediately above.

E. THE RESPONDENTS’ ONLINE ADVERTISING ACTIVITIES

Supply of Online Advertising

97) By reason of the allegations in paragraphs 22) and 27) each of the Respondents is a supplier of online advertising services, in Australia and globally, both on their own websites and on large networks of third party websites.

98) The Respondents are the two largest digital platforms in Australia.

Particulars

The ACCC Report states, at page 4, that:

“Google and Facebook are the two largest digital platforms in Australia and the

amount of time Australian consumers spend on Google and Facebook dwarfs

other rival applications and websites.”

The ACCC Report states, at page 6 that:

“Each month, approximately 19.2 million Australians use Google Search, 17.3

million access Facebook, 17.6 million watch YouTube (which is owned by

Google) and 11.2 million access Instagram (which is owned by Facebook). Given

Australia’s current population of 25 million, with 21 million over the age of 13, it

is clear that a large majority of the population are regular users of these

platforms.

Figure 2 identifies which apps and websites Australians spend the most time on.

As can be seen, the amount of time Australians spend on Google or Facebook

platforms dwarfs the amount of time spent on other websites or apps.”

Acquisition of Online Advertising

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99) The First Respondent is a substantial acquirer of online advertising services.

Particulars

The 2019 Facebook Annual Report [page 81] states:

“We incurred advertising expenses of [US]$1.57 billion, [US]$1.10 billion, and

[US]$324 million for the years ended December 31, 2019, 2018, and 2017

respectively.”

100) The First Respondent advertises its products on numerous third party online platforms including the websites of the Second Respondent, media organisations and members of the Cryptocurrency Industry.

Particulars

Facebook advertisements at the top of Google search results.

Facebook advertisement at the top of search results of Crikey.com, an Australian media website.

Facebook advertisement on steemit.com, a cryptocurrency based social network website.

101) The First Respondent acquires online advertising services, in the form of advertising space on third-party affiliated websites and mobile applications from third parties which it then resells as part of its broader offering to advertisers.

Particulars

The Facebook 2019 Annual Report [page 54] states:

“Our advertising revenue is generated by displaying ad products on Facebook,

Instagram, Messenger and third-party affiliated website or mobile applications.”

102) The Second Respondent is a substantial acquirer of online advertising services.

Particulars

The Google 2019 Annual Report [page 59] states:

“For the years ended December 31, 2017,2018 and 2019, advertising and

promotional expenses totaled approximately [US]$5.1 billion. [US]$6.4 billion,

and [US]$6.8 billion, respectively.”

103) The Second Respondent advertises its products on numerous third-party online platforms including the websites of the First Respondent.

Particulars

Google pages and advertisements on Facebook.

104) The Second Respondent acquires online advertising services for the purpose of resale, in the form of advertising space on third-party websites and other electronic platforms

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(“Properties”), from “Google Network Members” who use the Second Respondent’s AdMob, AdSense and Google Ad Manager products.

Particulars


“Google advertising revenues are generated on our Google properties (including

Google Search & other properties and YouTube) and Google Network Members’

properties.”

“Google Network Members’ properties consist of revenues generated primarily

on Google Network Members’ properties participating in AdMob, AdSense, and

Google Ad Manager.”

105) The Second Respondent’s acquisition of online advertising services from Google Network Members is generally conducted as a principal acquiring advertising space, filling it with ads from its own customers, collecting the gross revenue and paying a fee to the Google Network Members.

Particulars


“For ads placed on Google Network Members’ properties, we evaluate whether

we are the principal (i.e., report revenues on a gross basis) or agent (i.e., report

revenues on a net basis). Generally, we report advertising revenues for ads

placed on Google Network Member’ properties on a gross basis, that is, the

amounts billed to our customers are recorded as revenues, and the amounts paid

to Google Network Members are recorded as cost of revenues. Where we are the

principal, we control the advertising inventory before it is transferred to our

customers. Our control is evidenced by our sole ability to monetize the

advertising inventory before it is transferred to our customers, and is further

supported by us being primarily responsible to our customers and having a level

of discretion in establishing pricing.”

106) Where the Second Respondent acted as an agent in its relationship with Google Network Members, the Second Respondent supplies online advertising services to Google Network Members in the form of feeds of advertising targeted at the users of the Google Network Members’ Properties.

Particulars

See extract from page 61 of the Google 2019 Annual Report above.

107) The Second Respondent receives payments from advertisers for advertisements displayed on Google Network Members’ Properties and pay fees, described as TAC, to the Google Network Members. TAC also includes payments to distribution partners.

Particulars


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“TAC represents the amounts paid to Google Network Members primarily for

ads displayed on their properties and amounts paid to our distribution partners

including browser providers, mobile carriers, original equipment manufacturers,

and software developers.” [Page 55, under the heading “Costs of Revenues”]

Advertising revenues from Google Network Members’ properties were US$17.6 billion, US$20.0 billion and US$21.5 billion for the ended 31 December 2017, 2018 and 2019 respectively. [Page 30]

TAC paid to Google Network Members’ properties were US$26.7 billion and US$30.0 billion for the ended 31 December 2018 and 2019 respectively. [Page 35]

Control of Online Advertising Opportunities

108) The third-party website and applications from which the Respondents acquire online advertising services for the purpose of resale include such a wide variety of websites that, when combined with the Respondents’ own websites, they constitute the largest and easiest to access aggregated advertising market available to online marketers.

Particulars

See Chapter 3 of the ACCC Report.

The ACCC Report states, at pages 122 and 123 that:

3.1.2 Online advertising expenditure in Australia

The rise in online advertising has also been accompanied by the rise of Google

and Facebook as the two largest suppliers of online advertising opportunities.

Outside of Google and Facebook, online advertising is highly fragmented with a

large number of websites offering ad inventory, each with a small market share.

Examples of other websites that provide online ad inventory include:

traditional news media businesses; for example, Nine Entertainment Co Holdings

Ltd (Nine) through its online mastheads such as The Sydney Morning Herald and

The Age and Ninenews.com.au, and News Corp Australia, through its online

mastheads such as The Australian and News.com.au.

other types of digital platforms; for example, eBay, Bing, Reddit, and Amazon.

The owners of media websites can be considered competitors to digital platforms

for the supply of ad inventory but are also reliant on Facebook and Google,

which offer ad services that assist websites in the selling of their ad inventory.

The ACCC notes that any website can offer ad inventory; however, not all

websites choose to. Estimates of the top 50 websites by traffic in Australia include

a number of websites that do not sell advertising opportunities to third parties,

such as the websites of the four major banks, Wikipedia, Netflix and a variety of

government websites.

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Professional reports on the global online advertising industry indicate that the Respondents have a large share of the global online advertising market and a very large share outside China.

109) Persons from whom the Respondents acquire the particular online advertising service of online advertising inventory for resale (“Third Party Publishers”) are variously described in Annual Reports as:

i) by the First Respondent as “third-party affiliates”; and

ii) by the Second Respondent’s parent company Alphabet Inc. as “content providers” who “generate revenues from advertising” and “Google Network Members”.

110) By reason of the allegations in paragraphs 99) to 108) and 163) to 166) each of the Respondents is an acquirer of online advertising services, in Australia and globally.

F. CRYPTOCURRENCY INDUSTRY’S ONLINE ACTIVITIES

Specific cryptocurrency industry members

Brave

111) Brave Software Inc., (“Brave”), a corporation duly incorporated in state of Delaware in the United States of America, is the creator of the Brave web browser and the Basic Attention Token (BAT) cryptocurrency. Its website is https://brave.com/ (“Brave Website”)

Particulars

The Brave white paper (“Brave White Paper”) can be found at: https://basicattentiontoken.org/wp-content/uploads/2017/05/BasicAttentionTokenWhitePaper-4.pdf

112) Brave supplies online advertising services to advertisers on the basis that users of the Brave web browser are compensated for watching advertisements by micropayments of BAT. The Brave web browser allows its users to compensate the owners of web sites they view via BAT micropayments, while keeping their viewing habits private.

Particulars

The Brave White Paper and Brave Website

Brave announcement of its advertising platform: https://brave.com/brave-ads-launch/

113) The Brave browser is a direct competitor with the Chrome Browser supplied by the Second Respondent.

Particulars

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The Brave White Paper

The Brave Website (features section) states:

“Watch Brave in action, head-to-head-to-head against Chrome and Firefox.

Brave loads pages three times as fast out of the box with nothing to install, learn

or manage.”

114) By reason of the allegations in paragraphs 111) to 113) Brave is a supplier of online advertising services, web browser services and cryptocurrency services.

115) Brave had, prior to the Relevant Period, used or accessed Facebook Services, including by creating a Facebook page, and thus had become a party to the Facebook User Contract by reason of the allegations in paragraph 45).

116) Brave had, prior to the Relevant Period, used Google’s Advertising Services, and thus had become a party to the Google Advertiser Contract by reason of the allegations in paragraph 69).

117) By reason of the allegations in paragraphs 115) to 116), Brave is an acquirer of online advertising services.

118) In order to operate its BAT cryptocurrency and business, Brave trades other cryptocurrencies such as Bitcoin to and from BAT using Cryptocurrency Exchanges. Brave is thus an acquirer of cryptocurrency services.

Steem (including Steemit)

119) Steemit Inc., (“Steemit”), a corporation duly incorporated in state of Delaware in the United States of America, is the creator of the Steem blockchain, the Steemit.com social media website and the Steem (STEEM) and Steem backed Dollar (SBD) cryptocurrencies. Its website is www.steemit.com. (“Steemit Website”)

Particulars

The Steem white paper (“Steem White Paper”) can be found at: https://steem.com/steem-whitepaper.pdf

120) The Steem blockchain provides a platform allowing various social media and other applications, including the Steemit Website, to immutably store in a decentralized manner content generated by users and a method of granting programmed cryptocurrency rewards to users for the content they create and curate based on its attractiveness to other users.

Particulars

The Steem White Paper.

121) The Steemit Website allows sharing of text and picture content with the ability of users to interact with the content by upvotes (likes) downvotes (dislikes) and comments. It is a direct competitor with the First Respondent’s Facebook social media website.

Particulars

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122) Steemit supplies online advertising services to advertisers on the basis that users of the Steemit website can post content on the website and then spend STEEM or SBD to promote that post either directly with Steemit Inc or via vote buying services into the “Trending” or “Hot” feeds on the Steemit.com website.

Particulars


123) Steemit also supplies online advertising services by allowing third parties to advertise on the front page of the Steemit Website.

Particulars

Steemit Inc. announcement of the ability to advertise on the Steemit.com website:

https://peakd.com/steemit/@steemitblog/advertise-on-steemit-com

124) The First Respondent advertised on the Steemit Website.

Particulars

Example of a Facebook ad on the Steemit Website https://peakd.com/steemit/@soyrosa/ehm-0tu4b8ru

125) By reason of the allegations in paragraphs 119) to 124) Steemit is a supplier of online advertising services and cryptocurrency services.

126) Steemit Inc. tried and failed to advertise on the Second Respondent’s platforms during the Relevant Period.

Particulars

Email dated 7 Aug 2019 from Andrew Levine, Communications Director of Steemit

127) Steem users advertised the Steem platform on the First Respondent’s platforms prior to the Relevant Period and on the Second Respondent’s platforms prior to June 2018.

Particulars

Crowdfunded advertising campaign between June 2017 to April 2018 to promote Steem using paid advertising on the Respondents platforms organized and immutably documented by posts on the Steem blockchain itself by Steem user Jerry Banfield (user name @jerrybanfield). (“Banfield Campaign”)

128) These advertising campaigns were very successful in creating very rapid growth on crucial business metrics for a social media platform, such as new user acquisition and user engagement as well as rapid increases in the price of the Steem token.

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Particulars

Banfield Campaign

The Facebook 2019 Annual Report sets out in extensive detail the importance of business metrics such as new user acquisition and user engagement in the success or failure of a social media business.

129) These advertising campaigns ceased as a result of the Respondents progressively implementing their bans on cryptocurrency advertising.

Particulars

Banfield Campaign

130) Steemit had, prior to the Relevant Period, used or accessed Facebook Services, including by creating a Facebook page, and thus had become a party to the Facebook User Contract by reason of the allegations in paragraph 45).

131) Steemit had, prior to the Relevant Period, used Google’s Advertising Services, and thus had become a party to the Google Advertiser Contract by reason of the allegations in paragraph 69).

132) By reason of the allegations in paragraphs 126) to 131), Steemit and certain Steem users, including Jerry Banfield, are acquirers of online advertising services.

133) In order to operate its STEEM and SBD cryptocurrencies and business, Steemit trades other cryptocurrencies such as Bitcoin to and from STEEM using Cryptocurrency Exchanges. Steemit is thus an acquirer of cryptocurrency services.

134) In early 2020, Steemit Inc was purchased by parties associated with Yuchen Sun. Much of the Steem community perceived this as a hostile takeover.

135) On 20 March 2020, there was a fork of the Steem blockchain which led to the creation of the Hive blockchain. The majority of the users and applications (other than Steemit.com) moved to the Hive blockchain, which preserved the history of the Steem blockchain.

PreSearch

136) PreSearch Inc., (“PreSearch”), a corporation duly incorporated in state of Delaware in the United States of America, is the creator of the PreSearch blockchain, the Presearch (PRE) cryptocurrency and the presearch.org decentralized search engine, a direct competitor with the Second Respondent’s Google search engine.

Particulars

The PreSearch white paper (“Presearch White Paper”) can be found at: https://www.presearch.io/uploads/WhitePaper.pdf

137) PreSearch supplies online advertising services to advertisers on the basis that users of the can stake PRE tokens to reserve keywords which will direct web traffic to their website.

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PreSearch also supplies online advertising services by allowing third parties to place a short text message on its search results.

Particulars

PreSearch White Paper

PreSearch advertising platform announcement:

https://medium.com/@presearch/newpresearchads-2a53b491d49

See https://keywords.presearch.org/.

138) By reason of the allegations in paragraphs 136) to 137) PreSearch. is a supplier of online advertising services and cryptocurrency services.

139) PreSearch had, prior to the Relevant Period, used or accessed Facebook Services, including by creating a Facebook page, and thus had become a party to the Facebook User Contract by reason of the allegations in paragraph 45).

140) PreSearch had, prior to the Relevant Period, used Google’s Advertising Services, and thus had become a party to the Google Advertiser Contract by reason of the allegations in paragraph 69).

141) By reason of the allegations in paragraphs 139) to 140) PreSearch is an acquirer of online advertising services.

142) In order to operate its PRE cryptocurrencies and business, PreSearch trades other cryptocurrencies such as Bitcoin to and from PRE using Cryptocurrency Exchanges. PreSearch is thus an acquirer of cryptocurrency services.

LBRY

143) LBRY Inc., (“LBRY”), a corporation duly incorporated in state of Delaware in the United States of America, is the creator of the LBRY blockchain, the lbry.com and lbry.tech websites (“LBRY Websites”), the LBRY video (and other content) sharing application, and the LBRY Credit (LBC) cryptocurrency.

144) The LBRY video sharing application allows users to upload and share content (particularly videos) and earn cryptocurrency from other users viewing that content using micropayments. It is a direct competitor with the Second Respondent’s YouTube product.

Particulars

LBRY Websites.

145) By reason of the allegations in paragraphs 143) and 144) LBRY, is a supplier of online video sharing services and cryptocurrency services.

146) LBRY had, prior to the Relevant Period, used or accessed Facebook Services, including by creating a Facebook page, and thus had become a party to the Facebook User Contract by reason of the allegations in paragraph 45).

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147) LBRY had, prior to the Relevant Period, used Google’s Advertising Services, and thus had become a party to the Google Advertiser Contract by reason of the allegations in paragraph 69).

148) By reason of the allegations in paragraphs 146) to 147) LBRY is an acquirer of online advertising services.

149) In order to operate its LBC cryptocurrencies and business, LBRY trades other cryptocurrencies such as Bitcoin to and from LBC using Cryptocurrency Exchanges. LBRY is thus an acquirer of cryptocurrency services.

Supply and Acquisition

150) Certain members of the Cryptocurrency Industry such as Brave, Steemit and PreSearch are suppliers of online advertising services (“Crypto Ad Suppliers”).

151) Certain members of the Cryptocurrency Industry such as Brave, Steemit, PreSearch and LBRY are suppliers of Web 3.0 Services (such as web browser, web search, social media and content including video sharing) which compete directly with the Respondents products for user attention.

152) Many members of the Cryptocurrency Industry (including Brave, Steemit, PreSearch, LBRY) are acquirers of online advertising services (“Crypto Ad Acquirers”).

153) The Respondents’ platforms were the main method by which members of the Cryptocurrency Industry advertised their goods and services to the public prior to the introduction of the Ad Ban Provisions.

G. THE RESPONDENTS’ CRYPTOCURRENCY ACTIVITIES

Facebook’s cryptocurrency involvement including Project Libra

154) Mark Zuckerberg is the founder, Chairman and CEO of the First Respondent and has control over key decisions of the First Respondent, including the ability to control the boards of directors.

Particulars

See statement to this effect on page 25 of the Facebook 2019 Annual Report.

155) Mark Zuckerberg’s Facebook Page, (https://www.facebook.com/zuck), (“Zuckerberg Facebook Page”) is an officially designated method of the First Respondent disclosing material non-public information and complying with disclosure obligations.

Particulars

See statement to this effect in the 3rd last paragraph of page 9 the Facebook 2019 Annual Report.

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156) On 4 January 2018, Mark Zuckerberg posted on the Zuckerberg Facebook Page his annual statement about challenges for 2018 in which he recognized cryptocurrencies as an important force for decentralizing power and putting it in the people’s hands, stated that it was a “risk” they were hard to control and undertook to study the positives and negatives of cryptocurrency and how to best use it in the First Respondent’s services.

Particulars

Mark Zuckerberg Facebook Post 4 Jan 2018. https://www.facebook.com/zuck/posts/every-year-i-take-on-a-personal-challenge-to-learn-something-new-ive-visited-eve/10104380170714571/

…

For example, one of the most interesting questions in technology right now is

about centralization vs decentralization. A lot of us got into technology because

we believe it can be a decentralizing force that puts more power in people's

hands. (The first four words of Facebook's mission have always been "give people

the power".) Back in the 1990s and 2000s, most people believed technology would

be a decentralizing force.

But today, many people have lost faith in that promise. With the rise of a small

number of big tech companies — and governments using technology to watch

their citizens — many people now believe technology only centralizes power

rather than decentralizes it.

There are important counter-trends to this --like encryption and cryptocurrency --

that take power from centralized systems and put it back into people's hands. But

they come with the risk of being harder to control. I'm interested to go deeper and

study the positive and negative aspects of these technologies, and how best to use

them in our services.

157) On 18 June 2019 the First Respondent announced that it had created a new subsidiary called Calibra and a Swiss foundation called the Libra Foundation, of which the First Respondent is a primary sponsor, to create and supply a new global “digital payment system powered by blockchain technology” (ie. a cryptocurrency) called Libra.

Particulars

See statement to this effect on page 31 of 2019 Facebook Annual report.

See https://www.facebook.com/pg/LibraAssociation/posts/

158) Project Libra published a White Paper in June 2019 and a revised White Paper in April 2020.

Particulars

The revised White Paper can be found at: https://libra.org/en-US/white-paper/ while the original White Paper can be found at https://web.archive.org/en-US/white-paper/. (“Libra White Paper”).

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159) Morgan Beller is or was an employee of the First Respondent and the Head of Strategy at Calibra. She joined the First Respondent as an employee in May 2017 and became Head of Strategy at Calibra in January 2018.

Particulars

LinkedIn Profile of Morgan Beller

https://www.linkedin.com/in/morganbeller/

160) In order to operate and interact with its Libra cryptocurrency, it is likely that the First Respondent or one of its related bodies corporate will need to trade other cryptocurrencies such as Bitcoin to and from Libra using Cryptocurrency Exchanges.

161) By reason of the allegations in paragraph 154) to 160) the First Respondent or one of its related bodies corporate were, or were likely to be, suppliers of cryptocurrency services during the Relevant Period.

162) By reason of the allegations in paragraphs 154) to 160) the First Respondent or one of its related bodies corporate were, or were likely to be, acquirers of cryptocurrency services during the Relevant Period.

H. COMPETITION CONDITION

Respondent Standard Contracts with each other

163) The First Respondent had, prior to the Relevant Period, used the Google Advertising Services, and thus had become a party to the Google Advertiser Contract by reason of the allegations in paragraph 69).

164) Related bodies corporate of the First Respondent had, prior to the Relevant Period, used Google’s Advertising Services, and thus, by operation of section 45AC of the Act, the First Respondent had become a party to the Google Advertiser Contract by reason of the allegations in paragraph 69).

165) The Second Respondent had, prior to the Relevant Period, used or accessed Facebook Services, including by creating one of more Facebook pages, and thus had become a party to the Facebook User Contract by reason of the allegations in paragraph 45).

166) Related bodies corporate of the Second Respondent had, prior to the Relevant Period, used or accessed Facebook Services, including by creating one of more Facebook pages, and thus, by operation of section 45AC of the Act, the Second Respondent had become a party to the Facebook User Contract by reason of the allegations in paragraph 45).

The Respondents’ Standard Contracts with their users

167) By reason of the allegations in Parts C and E above, the First Respondent and the Second Respondent supply online advertising services to large numbers of persons under the Facebook User Contract and the Google Advertiser Contract respectively. Each such

30

person is thus an acquirer of online advertising services (each a “Contracted Ad Acquirer”).

168) By operation of section 45AC of the Act, if a person is a Contracted Ad Acquirer in relation to:

i) a related body corporate of the First Respondent, then it is a Contracted Ad Acquirer in relation to the First Respondent;

ii) a related body corporate of the Second Respondent, then it is a Contracted Ad Acquirer in relation to the Second Respondent.

169) By reason of the allegations in paragraphs 99) to 108) the First Respondent and the Second Respondent acquire online advertising services on a very large scale, both to advertise their own products and as inventory for resale.

170) Because of the ubiquity of use of the Respondent’s services, the scale of the Respondents’ acquisition of online advertising services and the inter-dependence between the Respondents and the Third Party Publishers supplying online advertising services (advertising space) to the Respondents, most Third Party Publishers are party to the Standard Contract of the respective Respondent to whom they supply online advertising services. Each such Third Party Publisher is a “Contracted Ad Supplier”.

Particulars

The particulars to paragraphs 100), 103), 123) and 124) provide examples of these arrangements where a Respondent is both a supplier of online advertising services to a Third Party Publisher under its Standard contract and also an acquirer of online advertising services from that Third Party Publisher.

These arrangements are set out in detail for the traditional media industry in Part 3 of the ACCC Report.

“The owners of media websites can be considered competitors to digital platforms

for the supply of ad inventory but are also reliant on Facebook and Google,

which offer ad services that assist websites in the selling of their ad inventory.” [Page 122]

Further particulars will be provided, if necessary, after the Respondents file their Defence.

171) By operation of section 45AC of the Act, if a person is a Contracted Ad Supplier in relation to:

i) a related body corporate of the First Respondent, then it is a Contracted Ad Supplier in relation to the First Respondent;

ii) a related body corporate of the Second Respondent, then it is a Contracted Ad Supplier in relation to the Second Respondent.

The Respondents’ Admissions regarding Competition in Online Advertising

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172) Because of the global nature of the internet and the scale and global nature of the Respondents online advertising supply businesses, the Respondents are, or likely to be, in competition with substantially all other persons supplying online advertising services.

Particulars

Facebook 2019 Annual Report pages 7 – 8 & 14 – 15.

Google 2019 Annual Report pages 7 & 9.

173) Because of the global nature of the internet and the scale and global nature of the Respondents online advertising acquisition requirements, the Respondents are, or likely to be, in competition with substantially all other persons acquiring online advertising services.

Particulars



174) The Respondents admit that they are in competition with each other in relation to the supply of online advertising services.

Particulars



175) The Respondents admit that they are in competition with many other persons in relation to the supply of online advertising services, including Third Party Publishers who are Contracted Ad Suppliers.

Particulars



176) The Respondents admit that they are in competition with many other persons in relation to the acquisition of online advertising services (advertising space) including from the Third Party Publishers who are Contracted Ad Acquirers.

Particulars


“We face significant competition in every aspect of our business, including from

… companies that enable marketers to display advertising…”

Google 2019 Annual Report page 7.

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“Specifically, for advertising, competing successfully depends on attracting and

retaining:

• Users, for whom other products and services are literally one click away,

largely on the basis of the relevance of our advertising, as well as the

general usefulness, security and availability of our products and services.

• Advertisers, primarily based on our ability to generate sales leads, and

ultimately customers, and to deliver their advertisements in an efficient

and effective manner across a variety of distribution channels.

• Content providers, primarily based on the quality of our advertiser base,

our ability to help these partners generate revenues from advertising,

and the terms of our agreements with them.” [Emphasis added]

177) The Respondents use online auction-based systems to establish automated, real-time market competition between acquirers of online advertising services on their digital platforms. This reinforces the competition between acquirers of online advertising services.

Particulars

Facebook Website: “Your guide to Facebook bid strategies” https://www.facebook.com/business/m/one-sheeters/facebook-bid-strategy-guide

Google 2019 Annual Report page 7. Reference to “… Google Ads, our primary auction-based advertising platform.”

Google Website: “How the Google Ads auction works” https://support.google.com/google-ads/answer/6366577?hl=en

Competition in online advertising services between the Respondents themselves

178) By reason of the allegations in paragraphs 163) to 166) and 172) to 177):

i) The First Respondent and the Second Respondent were during the Relevant Period in competition with each other in relation to the supply of online advertising services for the purposes of section 45AD (4) (g) & (h) of the Act.

ii) The First Respondent and the Second Respondent were during the Relevant Period in competition with each other in relation to the acquisition of online advertising services for the purposes of section 45AD (4) (ha) of the Act.

Competition in online advertising services between Respondents and their users

179) By reason of the allegations in paragraphs 167) to 177):

i) Each Contracted Ad Supplier and the First Respondent were, or were likely to be, in competition with each other in relation to the supply of online advertising services during the Relevant Period for the purposes of section 45AD (4) (g) & (h) of the Act.

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ii) Each Contracted Ad Supplier and the Second Respondent were, or were likely to be, in competition with each other in relation to the supply of online advertising services during the Relevant Period for the purposes of section 45AD (4) (g) & (h) of the Act.

iii) Each Contracted Ad Acquirer and the First Respondent were, or were likely to be, in competition with each other in relation to the acquisition of online advertising services during the Relevant Period for the purposes of section 45AD (4) (ha) of the Act.

iv) Each Contracted Ad Acquirer and the Second Respondent were, or were likely to be, in competition with each other in relation to the acquisition of online advertising services during the Relevant Period for the purposes of section 45AD (4) (ha) of the Act.

Competition in online advertising services between the Respondents and Cryptocurrency Industry members

180) By reason of the allegations in paragraphs 150) to 153) and 167) to 177):

a) Each Crypto Ad Supplier and the First Respondent were, or were likely to be, in competition with each other in relation to the supply of online advertising services during the Relevant Period for the purposes of section 45AD (4) (g) & (h) of the Act.

b) Each Crypto Ad Supplier and the Second Respondent were, or were likely to be, in competition with each other in relation to the supply of online advertising services during the Relevant Period for the purposes of section 45AD (4) (g) & (h) of the Act.

c) Each Crypto Ad Acquirer and the First Respondent were, or were likely to be, in competition with each other in relation to the acquisition of online advertising services during the Relevant Period for the purposes of section 45AD (4) (ha) of the Act.

d) Each Crypto Ad Acquirer and the Second Respondent were, or were likely to be, in competition with each other in relation to the acquisition of online advertising services during the Relevant Period for the purposes of section 45AD (4) (ha) of the Act.

Competition in other services between the Respondents and Cryptocurrency Industry members

181) By reason of the allegations in paragraphs 111) to 162)

i) Each member of the Cryptocurrency Industry and the First Respondent, including by the operation of section 45AC of the Act, were, or were likely to be, in competition with each other in relation to the supply of cryptocurrency services during the Relevant Period for the purposes of section 45AD (4) (g) & (h) of the Act.

ii) Each member of the Cryptocurrency Industry and the First Respondent, including by the operation of section 45AC of the Act, were, or were likely to be, in competition

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with each other in relation to the acquisition of cryptocurrency services during the Relevant Period for the purposes of section 45AD (4) (ha) of the Act.

iii) Brave and the Second Respondent, including by the operation of section 45AC of the Act, were, or were likely to be, in competition with each other in relation to the supply of web browser services during the Relevant Period for the purposes of section 45AD (4) (g) & (h) of the Act.

iv) Steemit and the First Respondent were, or were likely to be, in competition with each other in relation to the supply of social media services and content sharing services during the Relevant Period for the purposes of section 45AD (4) (g) & (h) of the Act.

v) PreSearch and the Second Respondent were, or were likely to be, in competition with each other in relation to the supply of web search services during the Relevant Period for the purposes of section 45AD (4) (g) & (h) of the Act.

vi) LBRY and the First Respondent, including by the operation of section 45AC of the Act, were, or were likely to be, in competition with each other in relation to the supply of content sharing services during the Relevant Period for the purposes of section 45AD (4) (g) & (h) of the Act.

vii) LBRY and the Second Respondent, including by the operation of section 45AC of the Act, were, or were likely to be, in competition with each other in relation to the supply of content sharing services during the Relevant Period for the purposes of section 45AD (4) (g) & (h) of the Act.

Competition Condition in s45AD of the Act

182) By reason of the allegations in paragraph 178) the competition condition in section 45AD (4) of the Act is satisfied in relation to:

i) each Facebook User Contract with the Second Respondent; and

ii) each Google Advertiser Contract with the First Respondent.


i) each Facebook User Contract with each Contracted Ad Acquirer;

ii) each Facebook User Contract with each Contracted Ad Supplier;

iii) each Google Advertiser Contract with each Contracted Ad Acquirer; and

iv) each Google Advertiser Contract with each Contracted Ad Supplier.


i) each Facebook User Contract with each Crypto Ad Acquirer;

ii) each Facebook User Contract with each Crypto Ad Supplier;

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iii) each Google Advertiser Contract with each Crypto Ad Acquirer; and

iv) each Google Advertiser Contract with each Crypto Ad Supplier.

185) By reason of the allegations in paragraph 181) the competition condition in section 45AD (4) of the Act is satisfied in relation to the services specified in that paragraph in relation to:

i) each Facebook User Contract with each member of the Cryptocurrency Industry who was party to such contract, including Steemit and LBRY; and

ii) each Google Advertiser Contract with Brave, PreSearch and LBRY.

I. PURPOSE CONDITION

Express Purpose of Ad Ban Provisions

186) By reason of the allegations in paragraphs 75) to 90) the direct effect intended to be achieved by, and thus a substantive purpose of the Facebook First Ad Ban Policy, the Facebook Second Ad Ban Policy and the Facebook Third Ad Ban Policy (collectively the “Facebook Ad Ban Policies”) was to directly prevent, restrict or limit the supply of online advertising services to members of the Cryptocurrency Industry by the First Respondent.

187) By reason of the allegations in paragraphs 75) to 90) the direct effect intended to be achieved by, and thus a substantive purpose of the Facebook Ad Ban Policies was to directly prevent, restrict or limit the acquisition of online advertising services from the First Respondent by members of the Cryptocurrency Industry who were Contracted Ad Acquirers, including the Crypto Ad Acquirers.

188) By reason of the allegations in paragraphs 91) to 96) the direct effect intended to be achieved by, and thus a substantive purpose of the Google Ad Ban Policy was to directly prevent, restrict or limit the supply of online advertising services to members of the Cryptocurrency Industry by the Second Respondent.

189) By reason of the allegations in paragraphs 91) to 96) the direct effect intended to be achieved by, and thus a substantive purpose of the Google Ad Ban Policy was to directly prevent, restrict or limit the acquisition of online advertising services from the Second Respondents by members of the Cryptocurrency Industry who were Contracted Ad Acquirers, including the Crypto Ad Acquirers.

Purpose of Ad Ban Provisions from Motive and Implementation

190) The Facebook First and Second Ad Ban Announcements indicated that in introducing the Facebook Ad Ban Policies into its Standard Contract the First Respondent’s:

i) motive was to protect its users from “misleading and deceptive” conduct by companies not acting in “good faith”; and

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ii) its implementation was “intentionally broad” such that it would impact all persons wishing to advertise cryptocurrency related goods and services, not just those who, according to the First Respondent, were engaging in misleading and deceptive conduct or not acting in good faith.

191) The only way the Facebook Ad Ban Policies could give effect to the objectives set out in paragraph 190) was to directly prevent, restrict or limit the acquisition of online advertising services from the First Respondent by members of the Cryptocurrency Industry who were Contracted Ad Acquirers, including the Crypto Ad Acquirers.

192) By reason of the allegations in paragraphs 75) to 90) and 190) to 191) the effect intended to be achieved by, and thus a substantive purpose of the Facebook Ad Ban Policies was to directly or indirectly prevent, restrict or limit the supply of online advertising services to members of the Cryptocurrency Industry by the Second Respondent.

193) By reason of the allegations in paragraphs 75) to 90) and 190) to 191) the effect intended to be achieved by, and thus a substantive purpose of the Facebook Ad Ban Policies was to directly prevent, restrict or limit the acquisition of online advertising services from the First Respondent by members of the Cryptocurrency Industry who were Contracted Ad Acquirers, including the Crypto Ad Acquirers.

194) On 12 June 2019 the Applicant sent, by registered mail, letters dated 11 June 2019 to the Second Respondent and Google Australia informing them of the Applicant’s view that the Google Ad Ban Policy was a breach of s45AK of the Act and the claims of the Group Members, including the Applicant for damages.

195) By letter dated 26 July 2019, Google Australia replied to the Applicant, on behalf of itself and Second Respondent (with whom it stated that it had consulted) stating that: “Google

requires that advertisers on the Google network comply with certain policies to manage

the risks associated with online consumerism: …The change in Google’s Financial

Products and Services Policy was made by Google’s global ads policy team to address

the inherent risks in the underlying products and because in many cases the products are

unverifiable and/or unregulated.” (“Google Letter”)

196) The Google Letter indicates that in introducing the Google Ad Ban Policy into its Standard Contract the Second Respondent’s

i) motive was to “manage risks associated with online consumerism”; and

ii) its implementation was intentionally broad such that it would impact all persons wishing to advertise cryptocurrency related goods and services, irrespective of whether or not the particular circumstance of the potential advertiser was:

(1) one of the “many cases [where] the product was unverifiable”, without making any investigation into whether the product was actually unverifiable and whether this actually created any substantive risk for the Second Respondent;

(2) one of the “many cases [where] the product was … unregulated”, without making any investigation into whether the product was actually unregulated, whether regulation of the product was actually required or whether lack of regulation actually created substantive risks for the Second Respondent.

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197) The only way the Google Ad Ban Policies could give effect to the objectives set out in paragraph 196) was to directly prevent, restrict or limit the acquisition of online advertising services from the Second Respondent by members of the Cryptocurrency Industry who were Contracted Ad Acquirers, including the Crypto Ad Acquirers.

198) By reason of the allegations in paragraphs 91) to 96) and 194) to 197) the effect intended to be achieved by, and thus a substantive purpose of the Google Ad Ban Policies was to directly, or indirectly, prevent, restrict or limit the supply of online advertising services to members of the Cryptocurrency Industry by the Second Respondent.

199) By reason of the allegations in paragraphs 91) to 96) and 194) to 197) the effect intended to be achieved by, and thus a substantive purpose of the Google Ad Ban Policies was to directly prevent, restrict or limit the acquisition of online advertising services from the Second Respondent by members of the Cryptocurrency Industry who were Contracted Ad Acquirers, including the Crypto Ad Acquirers.

Strategic Purpose of Ad Ban Provisions

200) At the commencement of the Relevant Period, the cryptocurrency industry (also known as the blockchain industry or Web 3.0) comprised almost one thousand relatively new technology businesses and projects which competed with established internet companies (also known as Web 2.0), including the Respondents, across most aspects of internet business.

Particulars

Article entitled “Why the Web 3.0 Matters and you should know about it” by Matt Zago dated 31 January 2018 https://medium.com/@matteozago/why-the-web-3-0-matters-and-you-should-know-about-it-a5851d63c949

Article entitled “Why the net giants are worried about the Web 3.0” by Matt Zago dated 17 Mar 2018. https://medium.com/@matteozago/why-the-net-giants-are-worried-about-the-web-3-0-44b2d3620da5

Chart entitled “Web 2.0 -> Web 3.0 Comparison Landscape – Welcome Internet of Blockchains” by Matteo Gianpietro of The Internet of BlockChain Foundation

201) At the commencement of the Relevant Period, the cryptocurrency industry had raised many billions of dollars via initial coin offerings (“ICOs”) over the previous 12 months. The amount of money raised via ICOs each month was well over $1 Billion in January 2018 and was rising quickly.

Particulars

Chart of monthly ICOs by BitMEX Research, icodata.io dated 25 April 2019 [Tab 66]

202) ICOs were a new mechanism for technology business fundraising using cryptocurrency tokens created by the cryptocurrency business or project and generally paid for by investors using other cryptocurrencies.

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203) In the period prior to July 2018, most ICO tokens did not represent a share of the business or project or its profits, but instead were intended to be used in the cryptocurrency project’s ecosystem and gain value from the increase in numbers of users joining that ecosystem (“Utility Tokens”).

204) In the period prior to July 2018, the amount of money available to relatively early stage startups in the cryptocurrency space was far in excess of what early stage technology startups could have obtained by traditional fundraising methods (i.e. seed round, venture capital and initial public offering).

205) The existence of a large number of new competitors utilizing powerful new technologies (including blockchain) with access to much larger than usual funding sources presented a potential strategic threat to established internet business such as the Respondents.

206) The Respondents historical response to threats from new startups employing powerful new technologies was to acquire them before they could become a threat. The Respondents admit that acquisitions form an important part of their business strategy, particularly as a means of acquiring access to new technologies. In the ACCC Report, this is described as a “killer acquisition strategy”.

Particulars


“As part of our business strategy, we have made and intend to continue to make

acquisitions to add specialized employees and complementary companies,

products, or technologies. We may not be able to find suitable acquisition

candidates, and we may not be able to complete acquisitions on favourable terms,

if at all.” [Page 25]

“Some competitors may gain a competitive advantage against us in areas we

operate, including: by making acquisitions …” [Page 14]


“We must continue to invest significant resources in research and development,

including through acquisitions…” [Page 9]

“[Competitors] can use their experience and resources in ways that could affect

our competitive position, including by making acquisitions…” [Page 9]

Section 2.3.5 of the ACCC Report – “Google’s Strategic Acquisitions”.

Section 2.4.4 of the ACCC Report – “Facebook’s Strategic Acquisitions”.

207) Cryptocurrency based competitors who were decentralized and/or raised funds by the issue of Utility Tokens presented a substantial risk for the Respondents’ acquisition strategy because such competitors could not be effectively acquired for reasons including:

i) The founding entity and main initial driver of for many cryptocurrency projects was a not-for-profit Foundation which cannot be purchased;

ii) Utility Tokens do not provide ownership rights, and rarely provide control rights, thus purchasing them is not an effective means to making an acquisition;

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iii) The amounts raised in ICOs made cryptocurrency projects which would have been potential acquisitions for the Respondents far less interested in being acquired and, if interested, far more expensive than had been the case historically for the Respondents;

iv) Even when the founding entity and main initial driver of a cryptocurrency project was a corporation which could be acquired, this does not necessarily give control of the cryptocurrency project and blockchain if a decentralized community has arisen around that project.

Particulars

(i) Ethereum Foundation, Cardano Foundation, IOTA Foundation;

(ii) Brave White Paper, Steemit White Paper, Presearch White Paper;

(iii) See particulars to paragraph 201);

(iv) This is what happened when an acquisition of Steemit was attempted. See paragraphs 134) and 135).

208) By reason of the allegations in paragraphs 78) and 154) to 162) the First Respondent knew on 30 January 2018 that:

i) cryptocurrencies, including decentralized public blockchains enabled by them, were powerful technological trends with many positive aspects;

ii) cryptocurrencies, including decentralized public blockchains enabled by them, were a force for decentralization and returning power to the people, which could be a threat to the First Respondent’s centralized control, but also an opportunity for expansion of the First Respondent’s business;

iii) there were many legitimate businesses in the Cryptocurrency Industry that would be negatively impacted by Facebook’s Ad Ban Policies.

209) By reason of the allegations in paragraphs 154) to 162) and 200) to 208) the First Respondent considered the existing members of the Cryptocurrency Industry to be a strategic threat to its centralized business model and acquisition strategy as well as a strategic opportunity to expand its business into the Cryptocurrency Industry.

210) By reason of the allegations above, the strategic effect intended to be achieved by, and thus a substantial purpose of the Facebook Ad Ban Policies was to damage or delay Cryptocurrency Industry members’ ability to compete with the First Respondents’ core online advertising, social media and content sharing businesses while providing time for the First Respondent to develop the technologies and products to compete in supply of cryptocurrency services.

211) By reason of the allegations above the strategic effect intended to be achieved by, and thus a substantial purpose of the Facebook Ad Ban Policies was to directly or indirectly prevent, restrict or limit the supply or likely supply of cryptocurrency services, social media services, content sharing services and instant messaging services by members of the Cryptocurrency Industry to consumers and businesses.

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212) By reason of the allegations above the strategic effect intended to be achieved by, and thus a substantial purpose of the Facebook Ad Ban Policies was to directly or indirectly prevent, restrict or limit the capacity of members of the Cryptocurrency Industry who were Contracted Ad Acquirers to supply cryptocurrency services, social media services, content sharing services and instant messaging services.

213) By reason of the allegations in paragraphs 200) to 207) the Second Respondent considered the existing members of the Cryptocurrency Industry to be a strategic threat to its centralized business model and acquisition strategy.

214) By reason of the allegations above, the strategic effect intended to be achieved by, and thus a substantial purpose of the Google Ad Ban Policy was to damage or delay Cryptocurrency Industry members’ ability to compete with the Second Respondent’s core online advertising, web search, web browser, cloud storage and content sharing businesses.

215) By reason of the allegations above the strategic effect intended to be achieved by, and thus a substantial purpose of the Google Ad Ban Policies was to directly or indirectly prevent, restrict or limit the supply or likely supply of cryptocurrency services, web search, web browser, cloud storage and content sharing services by members of the cryptocurrency industry to consumers and businesses.

216) By reason of the allegations above the strategic effect intended to be achieved by, and thus a substantial purpose of the Google Ad Ban Policies was to directly or indirectly prevent, restrict or limit the capacity of members of the Cryptocurrency Industry who were Contracted Ad Acquirers to supply cryptocurrency services, web search, web browser, cloud storage and content sharing services.

Purpose Condition in s45AD of the Act

217) By reason of the allegations in paragraphs 186), 187), 190) to 195) and 200) to 212) and the operation of section 4F of the Act the Facebook Ad Ban Policies satisfy the purpose condition in section 45AD (3) of the Act.

218) By reason of the allegations in paragraphs 188), 189), 196) to 199), 200) to 207) and 213) to 215) and the operation of section 4F of the Act the Google Ad Ban Policy satisfies the purpose condition in section 45AD (3) of the Act.

J. AD BAN PROVISIONS ARE CARTEL PROVISIONS

Cartel Provision in s45AD of the Act

219) By reason of the allegations in paragraphs 182) to 185) and 217) each of the Facebook Ad Ban Policies, is a cartel provision for the purposes of 45AD (1) of the Act.

220) By reason of the allegations in paragraphs 182) to 185) and 218) above, the Google Ad Ban Policy is a cartel provisions for the purposes of 45AD (1) of the Act.

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K. RESPONDENTS GAVE EFFECT TO CARTEL PROVISIONS

Giving Effect to a Cartel Provision in s45AK of the Act

221) The First Respondent gave effect to the Facebook Ad Ban Policies for the purposes of section 45AK (1) (b) of the Act by:

i) publicly announcing these policies as set out in paragraphs 75), 81) and 86);

ii) implementing algorithms in their software to enforce these policies, including as referred to in paragraph 79);

Particulars

Examples of members of the Cryptocurrency Industry being blocked from advertising on the First Respondent’s platforms by automated systems.

iii) by encouraging other users to report breaches of these policies and providing a software mechanism to do so, as set out in paragraph 79).

222) By reason of the allegations above, the First Respondent gave effect to cartel provisions in one or more contracts in contravention of section 45AK (1) of the Act (“Facebook Cartel Contraventions”).

223) The Second Respondent gave effect to the Google Ad Ban Policy for the purposes of section 45AK (1) (b) of the Act by:

i) publicly announcing this policy as set out in paragraphs 91) and 94);

ii) implementing algorithms in their software to enforce this policy;

Particulars

Examples of members of the Cryptocurrency Industry being blocked from advertising on the Second Respondent’s platforms by automated systems.

224) By reason of the allegations above, the Second Respondent gave effect to cartel provisions in one or more contracts in contravention of section 45AK (1) of the Act (“Google Cartel Contraventions”).

225) Neither of the Respondents sought authorization for their conduct under section 88 of the Act.

L. OTHER CLAIMS

Misleading and Deceptive Conduct

226) The Facebook First Ad Ban Announcement and Second Ad Ban Announcement contained the following direct and implied representations (“Facebook Scam Representations”):

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i) a direct representation that cryptocurrency and initial coin offerings were financial services frequently associated with misleading or deceptive promotional practices;

ii) a direct representation that many companies advertising cryptocurrencies and initial coin offerings were not acting in good faith; and

iii) an implied representation that cryptocurrency and initial coin offerings were related to binary options;

iv) an implied representation that goods and services provided by many members of the Cryptocurrency Industry were “scams”.

Particulars

See paragraphs 75) to 78).

The Facebook First Ad Ban Announcement stated:

“This policy is part of an ongoing effort to improve the integrity and security of

our ads, and to make it harder for scammers to profit from a presence on

Facebook.”

227) The Facebook First Ad Ban Announcement and Second Ad Ban Announcement contained the following direct and implied representations regarding the First Respondent’s motive for introducing the Facebook Ad Ban Policies (“Facebook Motive Representations”):

i) a direct representation that the First Respondent’s motive for introducing the Ad Ban Provisions was to ensure ads were “safe” for users;

ii) a direct representation that the First Respondent’s motive for introducing the Ad Ban Provisions was to protect users from misleading and deceptive conduct.

iii) a direct representation that the First Respondent’s motive for introducing the Ad Ban Provisions was to protect users from “scammers”.

228) The Facebook Scam Representations were serious and damaging accusations made without providing any supporting evidence against an entire industry which was using a new technology (blockchain), which the First Respondent knew was legitimate and powerful, to compete with the First Respondents, as set out in paragraphs 111) to 162) and 200) to 212).

229) The Facebook First Ad Ban Announcement failed to disclose that the First Respondents had already established a business unit, Calibra, that was working on developing its own cryptocurrency technology and products, Libra, as set out in paragraphs 154) to 162).

230) The Facebook First Ad Ban Announcement failed to disclose the strategic threat that the Cryptocurrency Industry represented to the First Respondent’s centralised business model and acquisition strategy as set out in paragraphs 200) to 212).

231) In the two and a half years since the Facebook Scam Representations were first made, the level of regulatory and legal action against members of the Cryptocurrency Industry for misleading and deceptive conduct and/or acting in bad faith does not support the Facebook Scam Representations.

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232) At the time of the Facebook Representations, the vast majority of ICOs by members of the Cryptocurrency Industry used the software “smart contract” system of the Ethereum blockchain to receive investment and issue ICO tokens to investors.

233) This “smart contract” system imposed technical and operational requirements that required a high level of technical skill and familiarity with cryptocurrency to be able to invest in an ICO for the first time. (“ICO Technical Requirements”)

Particulars

The technical steps required for investing in an ICO using an Ethereum “smart contract” system at the time of the Facebook Scam Representations were:

i) Acquiring sufficient amounts of the Ether cryptocurrency (ETH) to be eligible to participate in the ICO by either:

(1) setting up an account on a Cryptocurrency Exchange to allow the purchase of ETH using national currency which usually involved completing a “Know Your Customer” process of identification; or

(2) mining ETH using numerous graphics cards on multiple computers using specialized software and hardware setup;

ii) Setting up an Ethereum wallet on your own computer, tablet or phone (device) using specialized software and recording your cryptocurrency private key in a secure manner. This was necessary because Ethereum wallets held by customers on Cryptocurrency Exchanges were not set up to allow customers to receive ICO tokens issued by the Ethereum smart contracts.

iii) Sending the ETH purchased or mined at step (i) to your the Ethereum wallet on your device.

iv) Sending the amount of ETH for investment from your device wallet to the wallet address of the ICO, where the smart contract would process the transaction and send the ICO token to the Ethereum wallet on your device.

234) At the time of the Facebook Scam Representations, because of the ICO Technical Requirements it was not possible to invest in an ICO via credit card or bank transfer.

235) At the time of the Facebook Scam Representations, the First Respondent could reasonably be expected to have been aware of the ICO Technical Requirements by virtue of its own cryptocurrency activities (see paragraphs 154) to 162)).

236) At the time of the First Facebook Ad Ban Announcement, the First Respondent had the capability to distinguish between genuine ICOs, which met the ICO Technical Requirements, and scams impersonating genuine ICOs, which sought payment via credit card or bank transfer.

237) Only people who already held ETH in their own cryptocurrency wallet, and thus were technically competent and at least somewhat experienced with cryptocurrency could invest in an ICO quickly and easily, in response to a Facebook advertisement for that ICO. Thus advertisements for genuine ICOs could only target sophisticated cryptocurrency investors.

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238) The Facebook Scam Representations failed to distinguish between genuine ICOs by members of the Cryptocurrency Industry (which met the ICO Technical Requirements) and scams impersonating ICOs (which did not meet the ICO Technical Requirements) despite the First Respondent’s ability to do so.

239) Binary options are a form of high-risk traditional investment or gambling which has been outlawed in many countries. It has no more relationship to cryptocurrencies than to national currencies.

240) The Facebook Scam Representations were made in trade or commerce without reasonable grounds.

241) By reason of the allegations in paragraphs 226) to 240) the Facebook Scam Representations were misleading and deceptive in contravention of section 18 of the ACL.

242) The making of the Facebook Scam Representations and Facebook Motive Representations while failing to disclose the matters in paragraphs 229) and 230) was misleading and deceptive conduct in contravention of section 18 of the ACL.

243) By reason of the allegations in paragraphs 241) & 242) the First Respondent engaged in misleading and deceptive in contravention of section 18 of the ACL. (“Facebook s18 Contraventions”).

Breach of section 45 of the Act

244) By reason of the allegations in Parts F and M (below) there are markets in Australia (“Cryptocurrency Markets”) for

i) Listed Cryptocurrencies;

ii) services supplied by Cryptocurrency Exchanges;

iii) cryptocurrency mining hardware;

iv) Web 3.0 Services.

245) By reason of the allegations in Parts C, D, I and K the First Respondent has given effect to provisions (the Facebook Ad Ban Policies) in contracts (the Facebook User Contracts) that have a substantial purpose of substantially lessening competition in Cryptocurrency Markets in contravention of section 45(1)(b) of the Act.

246) By reason of the allegations in Parts C, D, I, K and M (below) the First Respondent has given effect to provisions (the Facebook Ad Ban Policies) in contracts (the Facebook User Contracts) that have had the effect of substantially lessening competition in Cryptocurrency Markets in contravention of section 45(1)(b) of the Act.

247) By reason of the allegations in Parts C, D, I and K the Second Respondent has given effect to provisions (the Google Ad Ban Policy) in contracts (the Google Advertiser Contracts) that have a substantial purpose of substantially lessening competition in Cryptocurrency Markets in contravention of section 45(1)(b) of the Act.

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248) By reason of the allegations in Parts C, D, I, K and M (below) the Second Respondent has given effect to provisions (the Google Ad Ban Policy) in contracts (the Google Advertiser Contracts) that have had the effect of substantially lessening competition in Cryptocurrency Markets in contravention of section 45(1)(b) of the Act.

249) By reason of the allegations in Parts C, D, I and K the Respondents have together engaged in a concerted practice (introducing the Ad Ban Provisions into their Standard Contracts and giving effect to them) that has a substantial purpose of substantially lessening competition in Cryptocurrency Markets in contravention of section 45(1)(b) of the Act.

250) By reason of the allegations in Parts C, D, I, K and M (below) the Respondents have together engaged in a concerted practice (introducing the Ad Ban Provisions into their Standard Contracts and giving effect to them) that has had the effect of substantially lessening competition in Cryptocurrency Markets in contravention of section 45(1)(b) of the Act.

251) The Respondents’ contraventions of section 45 of the Act set out above shall be know as the “s45 Contraventions”.

252) None of the Respondents sought authorization for their conduct under section 88 of the Act.

M. CONTRAVENING CONDUCT CAUSED LOSS AND DAMAGE

Cryptocurrency exchanges and price discovery mechanisms

253) Each of the Listed Cryptocurrencies are traded in markets of investors or potential investors on one or more cryptocurrency exchanges in which the price is established by automated, real-time matching of buy and sell offers, generally operating on 24 hours a day, 7 days a week basis (a “Cryptocurrency Exchange”).

254) Listed Cryptocurrencies are listed for trading on Cryptocurrency Exchanges in pairs comprising the Listed cryptocurrency and either:

i) a national currency such as US dollars, Euros or Australian dollars;

ii) another major cryptocurrency such as Bitcoin, Ethereum or Ripple; or

iii) a stable coin cryptocurrency token such as US Dollar Tether (USDT) where the issuer of that stable coin promises that each such token is backed 1:1 by the national currency specified.

255) During the month of January 2018, the total trading volumes of Cryptocurrency Exchanges globally varied between 25 and 67 billion US dollars per day.

256) As of July 2020 there are over 300 Cryptocurrency Exchanges listed under the heading “Top Cryptocurrency Spot Exchanges” on the CoinMarketCap website, which provides a description and website link, and list of active cryptocurrency pair markets for each such Cryptocurrency Exchange.

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257) The price of each Listed Cryptocurrency on any cryptocurrency exchange at any time is established by the automated, real-time matching of offers from buyers and sellers which reflect the economic principles of supply and demand.

Impact of the contravening conduct

258) By reason of the allegations in Parts C and E, the Respondents control a very large share of online advertising opportunities both in Australia and globally. In particular they constitute the largest and easiest to access aggregated advertising market available to online marketers.

259) The giving effect to the Ad Ban Provisions eliminated the main mechanism by which members of the Cryptocurrency Industry advertised their goods and services, including opportunities to purchase Listed Cryptocurrencies on Cryptocurrency Exchanges, to the public.

260) The purpose and effect of advertising is to stimulate demand for a good or service. The Respondents’ online advertising services must be effective in increasing demand for the advertised good or service and providing a compelling return on investment, or else advertisers would not use the Respondents’ online advertising services.

Particulars

Facebook 2019 Annual Report – References to marketers purchasing online advertising services requiring a compelling return on their investment (increased demand) in advertising. [pages 11-12 and 15]

Google 2019 Annual Report

“[Advertisers] may not continue to do business with us if we do not create more

value (such as increased numbers of users or customers, new sales leads,

increased brand awareness, or more effective monetization) than their available

alternatives.” [Page 9]

261) The elimination of the largest and easiest to access aggregated advertising market available to online marketers in the Cryptocurrency Industry substantially reduced demand for cryptocurrency related goods and services, including demand for:

i) the Listed Cryptocurrencies;

ii) the services supplied by Cryptocurrency Exchanges;

iii) cryptocurrency mining hardware;

iv) Web 3.0 Services.

262) The substantially reduced demand, and anticipation of substantially reduced demand, for Listed Cryptocurrencies caused by the Respondents’ contravening conduct caused the prices of Listed Cryptocurrencies on Cryptocurrency Exchanges to fall:

i) by over 50% in the week following the First Respondent’s announcement and implementation of its Ad Ban Provision;

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ii) by over 30% in the week following the Second Respondent’s announcement of its Ad Ban Provision;

iii) in the cases of many Listed Cryptocurrencies associated with Web 3.0 Services which compete with the Respondent’s offerings, by over 90% during the period in which the Respondents have continued to give effect to the Ad Ban Provisions.

Particulars

Market data from Cryptocurrency Exchanges and aggregators of such data such as CoinMarketCap.

263) The substantially reduced demand for Listed Cryptocurrencies caused by the Respondents’ contravening conduct resulted in the daily trading volumes of Listed Cryptocurrencies on Cryptocurrency Exchanges falling substantially.

Particulars

Market data from Cryptocurrency Exchanges and aggregators of such data CoinMarketCap.

264) The substantially reduced demand for cryptocurrency mining hardware caused by the Respondents’ contravening conduct resulted in major manufacturers of such hardware, such as Bitmain, Canaan and Ebang Holdings, turning from substantial profitability to substantial losses, including the need to cancel their Initial Public Offerings.

Particulars

From Bitmain Initial Public Offering regulatory filings.

Bitmain was the world’s largest manufacturer of cryptocurrency mining equipment in early 2018.

Bitmain went from a quarterly profit of $1.1 Billion in Q1 2018 to a $100M loss in Q2 2018 to a $500M loss in Q3 2018 to laying off around half its staff and closing offices at the end of 2018. Bitmain also had to cancel its Initial Public Offering.

From Canaan and Ebang Holdings Initial Public Offering regulatory filings.

Other large manufacturers of cryptocurrency mining equipment, such as Canaan and Ebang Holdings suffered similar impacts.

265) Prior to the Respondents’ contravening conduct, businesses and projects supplying Web 3.0 Services, such as Steem, had been experiencing very rapid growth on relevant business metrics such as new user acquisition, user engagement and the amount of money raised for investment.

Particulars

On 29 January 2018, the day before the first Crypto Ad Ban was announced, Steemit, the Steem blockchain and Steem cryptocurrency were in very healthy states and were growing their user base very fast:

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1. a new daily record was set for number of new users added to applications on the Steem blockchain: 20,898 new users;

2. the price of the Steem cryptocurrency was US$6.14;

3. the market cap of the Steem cryptocurrency was over $1.5 Billion;

4. the number of weekly posts (including comments) on the Steem blockchain was over 1.8 million;

5. the number of active monthly users on the Steem blockchain was over 195,000;

6. the number of new users joining applications on the Steem blockchain weekly was over 45,000.

Particulars of the business metrics of other Web 3.0 Projects impacted by the Respondents’ contravening conduct will be provided before trial.

266) The Respondents’ contravening conduct turned this rapid growth into decline by preventing suppliers of Web 3.0 Services, such as Steem, from gaining the attention of and connecting with potential new users, especially those persons using competing services supplied by the Respondents.

Particulars

By 25 September 2019, after the Crypto Ad Ban had been in place for over 15 months, Steem had suffered continual decline in all of the above metrics:

1. the price of the Steem cryptocurrency was US$0.13;

2. the market cap of the Steem cryptocurrency was $42 Million;

3. the number of weekly posts (including comments) on the Steem blockchain was around 220,000;

4. the number of active monthly users on the Steem blockchain was 58,000;

5. the number of new users joining applications on the Steem blockchain weekly was around 2,500.

267) The value of the Applicant’s and the Group Members’ investment in Listed Cryptocurrencies dropped substantially due to the Respondents’ contravening conduct.

268) The returns from the Applicant’s cryptocurrency mining and Steem and Hive based content creation and curation activities and the revenues of Group Members who supply cryptocurrency related services dropped substantially due to the Respondents’ contravening conduct.

269) The current value of the Group Members businesses and projects in the Cryptocurrency Industry, particularly those supplying Web 3.0 Services, is substantially lower than it would have been if the Respondents had not engaged in the contravening conduct.

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270) The Applicant and the Group Members suffered loss and damage resulting from the Facebook Cartel Contraventions, the Google Cartel Contraventions, the s45 Contraventions and the Facebook s18 Contraventions.

N. MATTERS RELEVANT TO ORDERS SOUGHT

No Adverse Costs Order (section 82 (4) of the Act)

271) By reason of all allegations above, this proceeding raises a reasonable issue for trial for the purposes of section 82 (5) (a) of the Act.

272) By reason of all allegations above, this proceeding raises issues that are significant not only for the Applicant but for other persons or groups of persons for the purposes of section 82 (5) (b) of the Act. Such issues include:

i) The common questions of law and fact set out in the Originating Application;

ii) The impact of the Respondent’s contravening conduct on members of the Cryptocurrency Industry and the Cryptocurrency Industry as a whole;

iii) Whether the orders sought under section 87 (1) of the Act can compensate members of the Cryptocurrency Industry for the loss of business growth that may otherwise have occurred had it not been for the Respondents’ contravening conduct.

273) The persons or groups of persons for whom such issues may be significant include:

i) the Group Members;

ii) the Australian Competition and Consumer Commission;

iii) persons who may have chosen to use the online services (including social media, video sharing, web search, cloud storage and messaging) of members of the Cryptocurrency Industry in preference to those of the Respondents, had they had the opportunity to discover such alternatives via online advertising on the Respondents’ platforms; and

iv) competition law regulators in other countries where the Respondents contravening conduct may also breach their local law.

274) The Respondents are two of the most financially powerful corporations in the world with combined revenues exceeding A$300 billion per annum, combined income of approximately A$75 billion per annum and combined liquid assets (cash, cash equivalents and marketable securities) of approximately A$250 billion.

Particulars

Facebook 2019 Annual Report summary Financial Results [Page 44]

Google 2019 Annual Report Executive Overview of Results [Page 28] and consolidated balance sheet [Page 50]

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275) The Applicant is an individual and father of five children with an income of less than A$50,000 per annum and liquid assets of less than $200,000, including liquid assets of his 100% owned companies JPB Liberty Pty Ltd and Green Freedom Limited (Israel).

276) The Applicant has been advised by the managing partner of a firm of solicitors who has been assisting the Applicant that the Respondent’s costs in these proceedings could exceed A$17 million and security for costs in these proceedings could be as high as A$12 million.

Particulars

Costs estimates and securities for costs estimates of McCabe Curwood, solicitors.

277) By reason of the allegations above, the Applicant does not have the financial resources to pursue these proceedings unless the no adverse cost order sought is granted.

278) The Applicant is an Australian legal practitioner with litigation and advocacy experience before superior Courts who is capable of pursuing these proceedings if the no adverse cost order is granted.

279) By reason of the allegations above, the disparity between the financial position of the Applicant and the financial position of the Respondents is such that the possibility of a costs order that does not favour the applicant might deter the applicant from pursuing this action for the purposes of section 82 (5) (c) of the Act.

Relief Sought

280) The Applicant claims the relief sought in the Originating Application.

Date: 13 August 2020

Signed by Andrew Paul Stuart Hamilton Applicant

This pleading was prepared by Andrew Paul Stuart Hamilton, the Applicant.

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Schedule

No. of 20

Federal Court of Australia

District Registry: NSW

Division: General

Respondents

Second Respondent: Google LLC

Date: 13 August 2020

Statement of claim - Cloudinary

Documents