• GOP-led bipartisan bill takes aim at Google and Facebook and would force them to break up online ad businesses
• Competition and Transparency in Digital Advertising Act is trying to rein in tech power through antitrust reform
A bipartisan group of senators introduced legislation on Thursday that aims at conflicts of interest in the advertising technology industry and if passed, would force the Big Techs to break up its dominant online-ad business.
The Competition and Transparency in Digital Advertising Act, sponsored by Sens. Mike Lee (R-Utah), Amy Klobuchar (D-Minn.), Sens. Ted Cruz (R-Texas), and Richard Blumenthal (D-Conn.), is aiming to rein in the power of Big Tech.
The legislation mainly targets Alphabet Inc’s (NASDAQ: GOOGL) Google and Facebook parent Meta Platforms Inc (NASDAQ: FB), whose massive part of the revenue comes from digital advertisements.
In the first quarter, Alphabet reported $68.01 billion in revenue, of which $54.66 billion was earned from advertising — up from $44.68 billion the year prior.
Meta, on the other hand, earned $27 billion in revenue from digital ads in the first quarter, while its total revenue was $27.91 billion.
The bill would ban Big Tech giants that earn more than $20 billion in digital advertising revenue annually from participating in more than one part of the digital ad process.
“Companies like Google and Facebook have been able to exploit their unprecedented troves of detailed user data to obtain vice grip-like control over digital advertising, amassing power on every side of the market and using it to block competition and take advantage of their customers,” Lee said in a statement.
“The conflicts of interest are so glaring that one Google employee described Google’s ad business as being like ‘if Goldman or Citibank owned the NYSE.’”
Rein in Google’s ad business
Google infamously has a hand in multiple steps of the digital ad process, from running an auction, or exchange, where ad transactions are made and also runs tools to help companies sell and buy ads.
“When you have Google simultaneously serving as a seller and a buyer and running an exchange, that gives them an unfair, undue advantage in the marketplace, one that doesn’t necessarily reflect the value they are providing,” Lee told the Wall Street Journal in an interview, who first reported the news.
“When a company can wear all these hats simultaneously, it can engage in conduct that harms everyone.”
Google spokesperson Julie Tarallo McAlister said the proposed law would ultimately hurt users.
“Advertising tools from Google and many competitors help American websites and apps fund their content, help businesses grow, and help protect users from privacy risks and misleading ads,” McAlister said in a statement.
“Breaking those tools would hurt publishers and advertisers, lower ad quality, and create new privacy risks. And, at a time of heightened inflation, it would handicap small businesses looking for easy and effective ways to grow online. The real issue is low-quality data brokers who threaten Americans’ privacy and flood them with spammy ads. In short, this is the wrong bill, at the wrong time, aimed at the wrong target.”
Picture Credit: Expandex
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