TR Daily Senators Question Google’s Advertising Practices
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Tuesday, September 15, 2020

Senators Question Google’s Advertising Practices

While a Google LLC representative argued during a Senate Judiciary antitrust, competition policy, and consumer rights subcommittee hearing today that the company operates in a competitive online advertising marketplace, senators on both sides of the aisle expressed varying levels of concern that Google’s digital advertising business violates U.S. antitrust law, and warned there could be antitrust enforcement action in the offing.

Subcommittee Chairman Mike Lee (R., Utah) focused on whether Google is unfairly controlling both the selling and buying sides of the digital online advertising placement process.

Mr. Lee, echoed later by other Republicans on the panel, also accused Google of improperly preventing “The Federalist” from using Google’s advertising placement services on the comments section of its website.

The chairman, who frequently referred to Google as being “dominant” in digital advertising, argued it is a sign of Google’s market power that it thinks it can take such action without suffering any economic fallout.

Mr. Lee also spent much of his time arguing that while he does not agree with those who want to eliminate antitrust law entirely, he disagrees with those he said want to “repurpose antitrust law into a social justice program” that would serve as a “panacea for all of their perceived social ills,” such as “alleged” labor, income, and racial disparities.

“These may be laudable goals but they’re not problems that antitrust law is meant to solve,” he said. “Nor are they problems that antitrust law is even capable of solving, at least [not] without creating a whole bunch of other problems.”

Sen. Amy Klobuchar (D., Minn.) was among those expressing concerns Google controls too much of the online advertising process.

“We are not having this hearing because Google is big,” she said, adding: “The law can’t be blinded by Google’s success, or its past innovations. If the company, in its zeal to achieve greater success, crossed the line into anticompetitive behavior, it’s our job to regulate it. It’s that simple.”

While she has worries about Google’s advertising practices, Ms. Klobuchar said Google is not the only possible antitrust threat to deal with and there should be a wholesale revamping of U.S. antitrust law to deal with online platforms.

“I think it should be a huge priority going into the coming year,” she said.

Ms. Klobuchar said she also hopes the Federal Trade Commission and Department of Justice will step in to tackle antitrust issues.

Overall, she said, the hearing about Google’s advertising practices “could be the beginning of a reckoning for our antitrust laws, to start looking at how we’re going to grapple with the new kinds of markets that we see across our country. It would help answer the question of whether our federal antitrust laws are able to restrain the business conduct of even the largest, most successful companies in the world.”

In addition, she said, “To me, it’s about more than just Google, because our laws haven’t matched the sophistication of [Google] and others,” Ms. Klobuchar said. “Our regulators haven’t matched it. And we are where we are. That’s why I think we need a major overhaul [of competition law].”

Sen. Josh Hawley (R., Mo.) questioned whether Google’s position in the marketplace gives it “an enormous advantage” in “every single layer” of the ad buying and selling process.

He argued companies have little choice but to deal with Google to buy and sell ads.

Mr. Hawley also questioned whether Google was transparent enough about how much revenue it was “taking from each side of the advertising equation.”

Mr. Hawley also expressed concerns about “The Federalist” example mentioned by Mr. Lee.

“It’s extraordinary market power that would enable you to do something like this,” he said. “To basically call the tune for a small, independent publisher, the construction of their site, to design moderation policies for third-party content that they don’t monitor or use. And yet, you are able to do this and to force them to adopt those sorts of policies, or effectively cut off their revenue stream. That’s extraordinary.”

Sen. Richard Blumenthal (D., Conn.) argued Google’s conduct in the advertising market has been “indefensible,” and said he expected the matter to end up in the courts.

It “seems really unacceptable” for Google to have its hand in both the buying and selling sides of online advertising, he said.

“Which is why I hope there will be antitrust enforcement against Google,” he added.

Mr. Blumenthal equated Google’s advertising platforms to “insider trading” that is unfair to competitors.

“This is not a criticism of your products,” he said. "And it’s not a criticism of your businesses. It is very, very grave doubts about how those businesses are put together and how the power that they give you is used to benefit the company, rather than consumers, and potentially stifle innovation. And I think it is classically the function of antitrust law to protect competition and consumers, which is what will be necessary in a court of law.”

Donald Harrison, Google president–global partnerships and corporate development, contended Google advertising tools “help businesses grow,” and several times he disputed comments from senators that Google holds a “dominant” position in the digital advertising market.

“The free and open Internet we all enjoy is made possible by advertising,” he said. “Without it, web sites would be forced to adopt subscription models, putting their content behind paywalls or shut down their operations entirely.”

Mr. Harrison defended Google’s overall practices.

“We have built good products,” he said. “And I am proud that the publisher ecosystem and the advertiser ecosystem chooses to use those products.” Mr. Harrison also argued against the notion Google has harmed online sites for news publishers.

Overall digital advertising prices have fallen 40% since 2010, which has benefited publishers, he said.

“Google has helped publishers make more money from ads,” Mr. Harrison said. “In 2018 we paid more than $14 billion to the publishing partners in our ad network. This is up from $10 billion in 2015.”

In addition, he said, publishers kept more than 69% of advertising revenue, more than the industry average of 67%.

Mr. Harrison argued that “the right way to look at whether a market is functioning is to ask yourself, ‘Are there lots of competitors? Are there lots of choices? Are prices falling?’ And I think that when you look at online advertising, not only the search for information but online advertising, you’ll see that there are a lot of companies that are doing very well.”

Mr. Harrison explained Google’s actions regarding “The Federalist” resulted from the violations by the site’s comment section of Google’s policies against placing ads on sites that contain racist language.

“The Federalist” had the option of moderating its comments section to eliminate those comments or closing its comment section to advertising, he said.

Mr. Harrison also argued “The Federalist” uses several other ad placement services not owned by Google.

“The Federalist” has “many choices if it’s unhappy with how we provide our services,” he said.

Mr. Harrison offered similar responses to similar concerns expressed by Mr. Hawley and Sen. Ted Cruz (R., Texas).

“We did not require ‘The Federalist’ to adopt content moderation,” he said. “We gave them options on how to make sure that our ads could show up next to their content that didn’t violate our policies, that wasn’t offensive.”

During a subsequent panel, Chalice Custom Algorithms Chief Executive Officer Adam Heimlich and Omidyar Network Senior Adviser–beneficial technology David Dinielli were highly critical of Google’s ad platform practices.

Mr. Heimlich likened Google to a “shady stockbroker” that steals from a client.

Google has “leveraged its market power to slow the pace of innovation” in online display advertising and made the ad exchange marketplace “less attractive to advertisers,” he said.

Mr. Dinielli argued it appears “more and more likely” Google’s online advertising practices have violated antitrust laws.

“There is a strong basis to believe that Google has illegally monopolized and/or maintained a monopoly in the market for digital advertising,” he said.

Among other things, it is a “big red flag” that Google offers products to both sellers and buyers of advertising, he contended.

But Carl Szabo, NetChoice vice president and general counsel, argued, “Frankly, there’s not a case against Google.” He added that there is no evidence to show that Google’s actions have resulted in consumer harm. —Jeff Williams

MainStory: FederalNews Congress MergersAntitrust InternetIoT

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