US senators target Big Tech’s digital advertising machine with new legislation

The bill introduced Thursday by Sens. Mike Lee, Amy Klobuchar, Ted Cruz and Richard Blumenthal zeroes in on the world’s largest digital advertising giants — restricting their ability to own multiple parts of the so-called “advertising stack” that makes up a vast and sprawling online ecosystem.

“Monopoly rents are being imposed upon every website that is ad-supported and every company—small, medium, or large—that relies on internet advertising to grow its business,” Lee said in a statement. “It is essentially a tax on thousands of American businesses, and thus a tax on millions of American consumers.”

The Competition and Transparency in Digital Advertising Act, the lawmakers said, is aimed at eliminating conflicts of interest that can arise when one company owns multiple parts of the ecosystem — and is incentivized to engage in self-dealing. A factsheet on the bill said Thursday that in addition to the impacts on Google (GOOGL (GOOGL)), Meta (FB (FB)) and Amazon (AMZN (AMZN)), the legislation could also affect Apple’s burgeoning third-party ads business.

Meta declined to comment on the bill. Apple, Google and Amazon didn’t immediately respond to a request for comment.

“Big Tech claims that it simply presides over an open and free market, but in a truly free market the same party can’t represent the seller, the buyer, make the rules, and conduct the auction,” Blumenthal said in a statement. “And that is unacceptable in a free enterprise system — it hurts consumers and it hurts competition.”

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The bill’s chief target appears to be Google, widely considered the largest player in online advertising due to its dominance across the ad stack that connects publishers and websites on one hand, and advertisers and marketers on the other.

The legislation imposes ownership restrictions on companies that report more than $20 billion a year in digital ad revenue. For example, such a company could own an ad exchange, but not the software that helps advertisers bid on ad inventory nor the software that helps publishers offer inventory for sale.

A second requirement would apply to a wider range of companies, those with at least $5 billion in annual digital ad revenue. For these businesses, the legislation would impose a legal obligation to, among other things, prevent conflicts of interest stemming from owning multiple parts of the ad stack; provide customers with transparency; and act in their best interests.

Policymakers have increasingly scrutinized the tech industry’s power in advertising. In December 2020, the state of Texas sued Google, alleging that it had abused its dominance in advertising technology.