SAN JOSE (CN) — Old claims that tech firms conspired to rig bids and sell MySpace on the cheap gained new life this week with a lawsuit that cites documents uncovered in a separate antitrust case.
Lead plaintiff Peng Chan sued TimeWarner, Google's parent company Alphabet and News Corp., which acquired MySpace in 2005, in a federal class action on Oct. 30. He also sued six executives and employees of various tech and media firms, alleging a conspiracy to deflate MySpace's value before its acquisition.
Founded in 2003, MySpace was a popular social networking site until Facebook eclipsed it in users and internet traffic in 2008.
Before it was acquired by News Corp. in July 2005, Chan says, directors sitting on the boards of companies with conflicts of interests allowed MySpace's search engine contract with Yahoo! to expire without seeking new bids.
Chan claims the companies entered into a web of secret pacts to ensure Google and another search engine company, AskJeeves, would not bid on the contract until after MySpace was acquired.
Had Google won that contract before the acquisition, Chan says, MySpace would have sold for much more than $580 million and that investors in its parent company, Intermix Media, would be $32 billion richer today.
Chan says "critical new evidence" shedding light on the alleged conspiracy was disclosed for the first time in an antitrust class action in 2013 and 2014.
That lawsuit, overseen by U.S. District Judge Lucy Koh in San Jose, claimed that Apple, Google, Intel, Adobe and other tech firms struck secret deals not to recruit each others' workers. The case was settled for $435 million last year, including a prior $20 million settlement.
Chan says he and fellow investors in MySpace's parent company had no idea News Corp. also struck secret, anticompetitive deals until it was revealed in Koh's July 2014 ruling.
He says the statute of limitations should not apply to his claims because the defendants concealed their collusive behavior and continued the scheme by reaffirming their secret, anticompetitive pacts.
The hefty, 216-page complaint claims Chan and other shareholders were "victims of a conspiracy led by Google," and coordinated with AskJeeves' directors, who used their positions on the boards of MySpace and its parent company to "block any new commercial search engine contract" until after the acquisition.
Chan also claims that directors of TimeWarner/AOL also used their positions to ensure that AOL did not bid for MySpace or to take over search engine services for the social networking site before it was sold News Corp.
Additionally, Chan says News Corp.'s board of directors used their power to make sure Google won the exclusive search engine contract for MySpace after its acquisition.
"Facilitating the scheme was the fact that Google, TimeWarner/AOL, and News Corporation all shared directors that were partners in venture capital firm, Kleiner Perkins Caufield, which is the largest shareholder in Google," the complaint states.
Chan says News Corp. acknowledged in the 2009 book, "Stealing MySpace," by former Wall Street Journal reporter Julia Angwin, that it was "customary in its dealings with Google to make agreements to suppress competition binding but not written."
He says the complex arrangement was worth tens of billions of dollars to Google because it allowed the company to take over 50 percent of the U.S. internet search market by 2007.
"Controlling over 50 percent market share allowed Google to begin charging 2X or higher per click versus all its competitors, and Google has used this advantage to dominate the paid search industry ever since," the complaint states.
Chan seeks class certification for all those who invested in MySpace's parent company, Intermix Media, from October 2003 to September 2005.
He also seeks restitution, disgorgement, treble damages and costs of suit.
He is represented by Jared Peterson of Oceanside, Calif.
Emails seeking comment from Google, TimeWarner and News Corp. went unanswered Wednesday night.
Last year, a federal judge tossed a similar suit filed by Brad Greenspan, the former CEO of MySpace's parent company, Intermix Media, for failure to prosecute.
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