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July 20, 2022 - By Hawke Media

Google Ads Bill: The Competition and Transparency in Digital Advertising Law and Its Effects on Paid Search Advertising

The digital advertising space has continually evolved since its inception several decades ago. Major advertisers, such as Google and Facebook, have thus far mainly led the way. That could be changing with The Competition and Transparency in Digital Advertising Bill, and other legislation. The federal government could soon significantly change the landscape of online advertising with this act, commonly referred to as the Google Ads Bill.

What is The Competition and Transparency in Digital Advertising Bill?

The Competition and Transparency in Digital Advertising Bill was introduced in the Senate on May 19, 2022. The bill takes an antitrust approach to break up major online advertising services, namely Google, but potentially also Facebook. Other large players would also be affected, but small-time advertising services would evade impact.

If the bill passes, major digital advertising services would be forced to participate in just one aspect of digital advertising. Essentially, the bill sees these services as having a vertical monopoly that must be separated.

What is the Current Legislation of the Google Ads Bill?

The primary names on the bipartisan bill are the Ranking Member and the Chair of the Judiciary’s Subcommittee on Antitrust.

Mike Lee (R-Utah, Ranking Member) and Amy Klobuchar (D-Minnesota, Chair) were joined by Ted Cruz (R-Texas) and Richard Blumenthal (D-Connecticut). These were the four names on the bill when it was initially introduced.

The Wall Street Journal first reported the bill’s introduction, and many news outlets have since covered it.

What Changes Will the Bill Bring?

Should the bill pass, the exact changes it forces will depend on the specifics of the finalized version that actually becomes law. As the bill is currently written, it would force significant changes on Google and other major digital advertising services:

  • The bill currently applies to digital advertising services that have annual digital advertising revenue of $20 billion or more. This most targets Google, which is the most comprehensive digital advertising service and reported $44.8 billion in Q1 2022 digital advertising revenue. It also would apply to Facebook and other major servicers, while smaller advertisers would be unaffected.
  • The bill would force servicers of this size to operate in just one aspect of digital advertising. Google currently runs an advertising exchange (auction), has tools for ad buyers, and has tools for ad sellers. It’d have to choose only one of these three services/tools to provide. The other services would have to be sold or broken off as entirely separate entities.

For companies that purchase paid ads, the change would hopefully increase transparency in cost structure and bring down costs. In general, breaking up vertical monopolies and introducing greater competition is good for customers and users.

The reason to specifically target the biggest servicers is to break up trusts and monopolies in the digital advertising space. Companies that gross billions have the power to shape the advertising market, but those with smaller revenues don’t directly impact the industry as much.

Senator Mike Lee explained the subcommittee’s position on the current role of large digital advertising services: “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.” He went on to note that the practices that major advertising services engage in may harm all users.

A Google spokesperson provided an opposing view, explaining how the company believes it does good by providing comprehensive services: “Advertising tools from Google and many competitors…help businesses grow, and help protect users from privacy risks and misleading ads,” 

The spokesperson explains that breaking up the aspects of advertising services would lessen control over ad quality, ad accuracy and personal privacy (which is especially important in healthcare). It could also be harmful to small businesses, which are facing a potential recession and often rely on digital advertising as a marketing method.

How Will the Google Ads Bill Proceed Through Congress?

At a time when the divided Congress is taking limited action, the Google Ads Bill appears to be an outlier that stands a good chance of becoming law, at least in some form similar to what’s currently proposed. The reasons for this projection are:

  • Well-known senators who have sway introduced this bill
  • Both notable Democrats and notable Republicans introduced the bill
  • Public sentiment generally wants greater restrictions on big tech
  • Congress wants to show it accomplished something during a midterm election year

Perhaps most significantly, Senator Robert Lee was one of the senators who introduced the bill. He has opposed other antitrust measures that Senator Amy Klobuchar has brought to the antitrust subcommittee, but Lee supports this one.

There’s also a powerful public advocacy group lobbying for the bill. Google and digital advertising industry organizations oppose the bill, and are actively lobbying against it. 

Other Legislation Affecting Digital Advertising

The Competition and Transparency in Digital Advertising Bill is one of the most impactful and likeliest digital advertising bills to pass. It’s not the only effort to reform the space through legal processes, however. Other efforts include:

  • State-led antitrust lawsuit brought against Google, by the attorneys general of 36 states (including Republican- and Democrat-led states)
  • American Innovation and Choice Online Act, which would prevent dominant platforms from promoting their products over other products that are advertised/provided through the platforms’ services
  • Open Apps Marketplace Act, which is similar to the Innovation and Choice Act but targeted for Google’s and Apple’s app stores
  • Digital Services Act, which would ban targetted advertising toward children that’s based on their ethnicity, political views or sexual orientation (among many other regulations)

Change is Coming to Digital Advertising

The Competition and Transparency in Digital Advertising Bill has a strong chance of becoming law this year, and it’d bring major changes to digital advertising. Even if it doesn’t, major changes are sometimes bound to come as legislative efforts to better regulate the industry grow.

At Hawk Media, we’re keeping abreast of the various legislative efforts that could change digital advertising. We’re prepared to make changes for our clients when it’s necessary.

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