Odd Couple Unites in Action Against Big Tech

The duo are key players in an antitrust lawsuit filed last year on behalf of a group of states against Google, which claims that the

Alphabet Inc.

GOOG 0.44%

subsidiary uses its control over ad exchanges to favor its own businesses and to levy fees on websites that rely on it for revenue.

The case, in spite of turmoil in Mr. Paxton’s office, remains a key part of a wave of bipartisan actions against technology giants that has sparked comparisons to the trustbusting era of Theodore Roosevelt.

It developed from the Texas attorney general’s leadership of a multistate investigation and accelerated after Ms. Srinivasan, an antitrust scholar, unearthed one of the case’s breakthrough documents, a 2018 business agreement between

Facebook Inc.

FB -0.96%

and Google that the lawsuit argues shows collusion.

The cooperation between Mr. Paxton and Ms. Srinivasan is a rare area of common ground in a hyperpartisan era. “Politics were not on the decision block,” Ms. Srinivasan said in an interview. “When you have state governments who agree to pull resources to go after an injustice…that was the only thing that matters.”

“I look for the best talent to accomplish a goal, and Dina has remarkable skills and ability and an amazing reputation for what she can accomplish,” said Mr. Paxton.

The concern that Big Tech is stifling competition has been raised by state and federal lawmakers, as well as both the Trump and Biden administrations. The scrutiny targets companies across multiple lines of business, will likely unfold over years and could fundamentally alter how the companies do business.

Facebook,

Amazon.com Inc.

and

Apple Inc.

face accusations that they have used their dominance of social media, e-commerce and app distribution, respectively, to unfairly benefit themselves and impede competition. Late last month, the House Judiciary Committee passed six bills designed to curb the dominance of Google, Facebook, Amazon and Apple.

Against Google, in addition to the Texas-led suit, the Justice Department and 38 state attorneys general filed separate antitrust cases last year alleging its search services block competition. Another antitrust suit was filed this month by three dozen state attorneys general against Google’s app store, alleging the company blocks competition for apps on mobile devices running its Android operating system.

The Texas-led suit could reshape the digital economy because it focuses on Google’s alleged monopoly in a display advertising industry that funds millions of websites.

Google has called the lawsuits flawed and said the Texas-led suit inaccurately portrays its business agreement with Facebook to paint Google’s involvement in the industry as nefarious. The company said it collects lower fees for ads than the industry average. In reference to the app store suit, it said its open operating system allows customers to download apps directly from developers’ websites.

Outside their views on the tech industry, Mr. Paxton, 58 years old, and Ms. Srinivasan, 41, have few things in common.

A veteran politician who graduated from Baylor University and University of Virginia’s law school, Mr. Paxton was first elected in 2002 to the Texas House of Representatives for a district outside Dallas. Amid the Tea Party wave of 2010, he ran an unsuccessful populist campaign to unseat the Republican incumbent House speaker, then won a 2014 race for attorney general.

In 2017, Mr. Paxton attained a national profile by deploying the 750 lawyers staffing one of the nation’s largest state justice departments in the service of conservative causes such as challenging the Affordable Care Act. He also drew the spotlight after being indicted in 2015 on felony securities fraud charges. He has denied wrongdoing.

As he sought re-election in 2018, Mr. Paxton said, constituents complained about issues related to Big Tech. He assembled a team that traveled to California to learn from tech companies, lawyers and experts about the industry. Many of the conversations focused on Google’s ad dominance.

In December 2019, attorneys general from 48 states, all except California and Alabama, signed on to support an investigation, which Mr. Paxton announced from the steps of the U.S. Supreme Court. They have since split into separate actions, with Mr. Paxton leading a suit by 14 states and Puerto Rico.

Ms. Srinivasan’s path to the case was quite different. Born in Seattle to a Lebanese father and American mother, she spent her childhood in a warring Beirut where she recalls playing with cousins on a balcony and seeing Prime Minister Rashid Karami’s helicopter explode nearby. She returned to the Pacific Northwest for high school and college, later enrolling in law school at Yale, where she focused on antitrust.

She co-founded and sold part of a digital advertising company to WPP Global and spent time as an executive there before leaving in 2017. Troubled by the marketplace dominance of Facebook and Google, she began a personal investigation of both companies that eventually led to a 63-page paper she published in the Berkeley Business Law Journal titled “The Antitrust Case Against Facebook.”

She said she is a political independent but leans left.

At an antitrust event in 2019 at La Villa in the Sky, a rooftop restaurant with floor-to-ceiling glass views of Brussels, she met

Darren McCarty,

a conservative Republican and deputy at the time to Mr. Paxton who was helping assemble the case against Google.

They connected because she saw similarities between Google’s digital ad practices and airline ticket-service provider

Sabre Holdings Corp.

, which was sued for inflating booking fees. Mr. McCarty knew the case well, having worked for

American Airlines Group Inc.

“We were a bunch of nerds at an antitrust conference,” Mr. McCarty said.

While the Texas team pursued its case, Ms. Srinivasan joined an antitrust initiative at Yale called the Thurman Arnold Project, and did research for

News Corp,

The Wall Street Journal’s parent company and an outspoken Google critic. In June 2020, she published a first draft of her second academic paper: “Why Google Dominates Advertising Markets: Competition Policy Should Lean on the Principles of Financial Market Regulation.”

Mr. McCarty saw it, and called Ms. Srinivasan.

“I’m going to get right to the point,” he said. “Would you come work with us?”

“When?” she asked.

“Immediately,” he said.

In September, Ms. Srinivasan and her family arrived at a three-bedroom

Airbnb

in Austin. Her role was to assist in reviewing documents and to advise on the complaint.

But around that time, Mr. McCarty and several other Paxton deputies reported to federal authorities that the attorney general had violated the law and abused his office to help a political donor. Mr. Paxton said the allegations are false.

Ms. Srinivasan considered leaving the case, she said, but a legal friend advised her to see the work through. Growing up during a civil war, she learned to focus amid chaos, she said.

One afternoon the following week, Ms. Srinivasan was hunched over her laptop on the white couch in her Airbnb, poring over Google documents collected by the state as part of its investigation. Months earlier she had seen a

Twitter

post by a software programmer at an analytics company saying he had discovered code that suggested that Google and Facebook were collaborating to share data and support ad sales.

On one of the pages before her, she came across a contract that supported that idea, signed by Facebook Chief Operating Officer

Sheryl Sandberg

and Google Chief Business Officer

Philipp Schindler,

people familiar with the matter said. It was part of a little-known deal struck in 2018, code-named “Jedi Blue,” that saw Facebook join—rather than compete against—an advertising program Google offered called “Open Bidding” in exchange for lower fees.

She called Mr. McCarty. Over dinner at an upscale Mexican restaurant in downtown Austin, they avoided discussion of the turmoil at the attorney general’s office as she detailed her discovery.

“We were focused on the breakthrough,” said Mr. McCarty.

Mr. McCarty resigned days later, joining an exodus of top staff. The FBI has opened a criminal investigation into Mr. Paxton to determine whether he abused his office.

The allegations played a role in the division of the 48 states that were supporting the investigation. Some states were also turned off by Mr. Paxton’s decision to file a lawsuit against four battleground states that declared President Biden victorious over Donald Trump, according to people familiar with the effort.

An outside attorney has been hired to lead the Texas case against Google.

In December, Texas filed its suit against Google in U.S. District Court in Texas. The Google-Facebook project and a program Google developed allegedly to favor its own ad-buying system over competitors made headlines.

A Google spokeswoman said the case was meritless and said Mr. Paxton went “ahead in spite of all the facts.” The spokeswoman added, “We’ve invested in state-of-the-art ad tech services that help businesses and benefit consumers.”

Mr. Paxton called Ms. Srinivasan afterward and thanked her for her work. “The reason we made so much progress is you played a major role,” he said. “I appreciate it.”

The trial is set to begin in 2023. Mr. Paxton’s involvement will be left to voters. Next year, he is up for re-election.

Write to Tripp Mickle at [email protected]