A bipartisan group of legislators led by Utah Republican Mike Lee filed legislation on Thursday. It aims at conflicts of interests in the adtech industry and would force Google to break up its dominant ad business.
The bill is co-sponsored by Richard Blumenthal (D., Conn.), Amy Klobuchar (D., Minn.), and Sens. Red Cruz (R., Texas). It is also one of the more extreme legislative measures pending in Congress to limit the dominance of big tech firms.
The Competition and Transparency in Digital Advertising Act would inhibit businesses processing over 20 billion USD in digital ad transactions annually from participating in more than one part of the digital ad ecosystem.
It would have a direct impact on Google, an arm of its parent firm Alphabet Inc, which is the dominant player in the entire string that connects sellers and buyers via online ads. Google offers tools that help businesses sell and purchase ads and exchanges or auction houses where transactions happen in split seconds.
If the new legislation is passed, Google won’t be able to stay in all of its businesses.
More Legislations Imminent on Google
According to congressional aides, similar legislation is likely to be introduced next week, led by Colorado’s Republican Ken Buck and Washington’s Democrat Pramila Jayapal.
“When companies like Google simultaneously offer their services as a seller and buyer and run an exchange, they get an unfair advantage in the marketplace. It does not necessarily reflect the value they offer,” said Lee in an interview. “When a business wears multiple hats simultaneously, it can engage in activities that harm everyone.”
The legislation, in effect, would likely require Google to divest major portions of the digital ad business it built following its acquisition of DoubleClick Inc in 2008. “Google has a massive business going,” Lee added. Notably, Google’s network business, which includes tools third parties use to purchase and sell ads, made 31.7 billion USD in revenue last year.
Companies would have a year to comply with the new regulations after the legislation is passed.
“Ad solutions provided by Google and others assist American apps and websites in funding their content, growing their companies, and protecting users from deceptive ads and privacy issues,” said a Google spokesperson.
Further adding that “breaking these tools would hurt advertisers and publishers, create new privacy risks, and lower ad quality. And at a time of higher inflation, it would restrict small businesses from getting an easy and effective way to grow online. The real challenge is low-quality data brokers who threaten privacy in America and flood people with spammy ads.”
“The rise of big tech, with its numerous free services and extensive acquiring of personal data and disputes over free speech, has thrown consensus of the Clayton Act and its predecessor, the Sherman Act of 1890, into disarray,” privacy experts claim. “It has jumbled some of the typical party stances toward reining in big business.”
The bill proposed by Lee aims to address some allegations made in the antitrust lawsuit against Google filed in 2020 by over a dozen state attorneys general, led by Ken Paxton, a Texas Attorney General.
According to the complaint, Google lied to advertisers and publishers for years about the pricing and processes of its ad bids, creating hidden programs that inflated sales for select organizations while raising prices for buyers.
According to people familiar with the legislation, Meta’s Facebook would also likely be obliged to divest large chunks of its advertising business under Lee’s legislation.
Smaller companies that execute more than 5 billion USD 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 bill would have to be enforced by the US Department of Justice and state attorneys general to become law. It would enable customers to sue tech behemoths for infractions, including failing to be transparent or acting in their best interests.