The new bipartisan bill would force Google to break up its Ad business

Published: May 20, 2022
Updated: May 20, 2022
bipartisan bill would force Google to break up its Ad business

The new bipartisan law would compel Google to separate its advertising and search businesses.

The bill, which has some Democratic backing, targets advertising technology conflicts of interest.

On Thursday, a bipartisan group of senators led by Utah Republican Mike Lee filed legislation to address conflicts of interest in the advertising technology industry and require Google to divide up its dominant online ad business.

Senators Ted Cruz (R., Texas), Amy Klobuchar (D., Minnesota), and Richard Blumenthal (D., Connecticut) co-sponsored the bill, which is among the most aggressive of the legislative proposals circulating in Congress aimed at limiting Big Tech’s power.

Companies that process more than $20 billion in digital ad transactions yearly would be prohibited from participating in more than one element of the digital advertising ecosystem under the Competition and Transparency in Digital Advertising Act.

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This would have a direct impact on Google, a subsidiary of Alphabet Inc., GOOG -1.47 percent, which is the dominant player in every step in the chain connecting buyers and suppliers of online advertising. Google runs tools that enable businesses to sell and buy advertisements, as well as auction houses and exchanges where transactions take place in milliseconds.

Google would be unable to continue operating in all of those companies under the legislation.

“When Google serves as both a seller and a buyer while also running an exchange, it provides them an unfair, undue advantage in the marketplace that doesn’t always reflect the value they provide,” Mr. Lee said in an interview. “A firm that can wear all of these hats at the same time can engage in conduct that is harmful to everyone.”

new bipartisan bill would force Google to break up its Ad business

According to Mr. Lee, the proposal would effectively oblige Google to liquidate large pieces of the digital advertising company it established after acquiring DoubleClick Inc. in 2008. 

“They’ve got a tremendous, massive company going,” he continued. In 2021, Google’s “network” division produced $31.7 billion in income, which includes technologies used by third parties to buy and sell ads.

Companies would have a year to comply with the new standards after the legislation is passed.

“Advertising technologies from Google and many others help American websites and apps fund their content, grow their companies, and safeguard users from privacy threats and misleading ads,” a Google spokeswoman said.

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“Breaking those tools would harm publishers and advertisers, degrade ad quality, and introduce new privacy issues,” the spokeswoman warned. It would also hurt small firms looking for simple and effective ways to grow online at a time when inflation is high. The true problem is low-quality data brokers who are endangering Americans’ privacy and bombarding them with spammy advertisements.”

According to antitrust experts, if passed, the bill would be the most significant change to antitrust law in a generation. It would change the Clayton Act of 1914, which is one of two antitrust statutes that haven’t been changed since the 1970s.

Mr. Lee’s plan, at its foundation, takes ideas from financial regulation and applies them to the market for electronically traded, or “programmatic,” internet advertising. Most digital publications and websites benefit from these digital adverts.

The bill aims to address some of the charges made public by more than a dozen state attorneys general, led by Texas Attorney General Ken Paxton, in their antitrust lawsuit against Google launched in 2020.

Smaller companies that execute more than $5 billion in digital ad transactions yearly will be required to meet additional standards, including acting in their customers’ best interests on every transaction and providing clarity about ad pricing.

The US Department of Justice and state attorneys general would enforce the bill if it became law. Customers will be able to sue ad tech behemoths for infractions including failing to be transparent or acting in their best interests.

Mr. Lee said he supported the Texas lawsuit, but that Congress should also play a role in such things. “We may have to wait nearly a decade, by which time a lot of the damage will have been done,” he warned.

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