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Welcome to The Corner. In this issue, we examine a new Senate bill called the AMERICA act that aims to break Big Tech’s control over advertising technology and platforms.

Senate Bill to Break Big Tech’s Control Over Digital Ads Would Support Journalism

Karina Montoya

The scrutiny over the end-to-end control that Big Tech corporations have in intermediating ad sales for news publishers is entering a new stage. Last week, the Senate Judiciary Subcommittee on competition hosted a hearing to discuss the impact of a new bill named the AMERICA Act [[link removed]] — short for Advertising Middlemen Endangering Rigorous Internet Competition Accountability Act.

The AMERICA Act would prohibit corporations that make $20 billion in ad revenues from operating in multiple parts of the market that connects news publishers with advertisers, known as the “ad tech stack.” The bill would force Google, Facebook, and Amazon to divest key ad tech operations, allowing them to earn ad revenues only by selling ads on platforms they own. The bill also separates the ad tech market horizontally, and would ban brokers from acting simultaneously as both a seller and buyer of advertisements.

The bill was introduced in March [[link removed]] by a bipartisan group led by Republican Senator Mike Lee, and it comes amid a new round of journalist layoffs and the closure of some newsrooms, including the once-hot online native Buzzfeed News [[link removed]]. Along with the American Innovation and Online Choice Act [[link removed]] and the Journalism Competition and Preservation Act [[link removed]], both sponsored by Democratic Senator Amy Klobuchar, the AMERICA Act demonstrates how antimonopoly law and enforcement can play a significant role in supporting financially independent journalism.

Globally, digital ad spending is poised to reach $680 billion this year, out of which $271 billion will be spent in the U.S., per Statista [[link removed]]. Over the past 15 years, Google and other tech behemoths have exploited their intermediary positions to capture well more than half of these sales. In the process, the platform monopolists severely weakened the direct relationships between news publishers and advertisers, and have also decreased annual ad revenues for news outlets by tens of billions of dollars.

Today, at least 60 percent [[link removed]] of ad dollars go directly to the multiple digital properties owned by Big Tech corporations. For example, Google dominates search and video ads, Facebook leads ad sales on social media, while Amazon is supreme on e-commerce ads. These platforms also exploit their control of ad tech infrastructure to take a cut of between 49 to 80 percent of every other online ad dollar, including those placed on news outlets, according to some studies [[link removed]]. Publishers end up collecting only some portion of what remains.

News publishers and advertisers mainly use three ad tech tools: publisher ad servers (for publishers to manage their ad spaces), ad buying platforms (for small and large advertisers to buy ads), and ad exchanges, where supply and demand meet. Although there are many companies that run these platforms, Google owns the ones that place more than half of all the ads across the web.

The main problem with this structure is that the tech giants can use insights from all sides of the market to inflate ad prices, extort advertising from captive suppliers, and divert ad dollars from news publishers to their own business. A recent Department of Justice antitrust case against Google’s advertising business, for instance, alleges that this system allowed Google to manipulate ad prices [[link removed]] to increase its ad exchange revenues, and to siphon at least $200 million in ad spending from publishers that chose not to use Google’s publisher ad server.

Advocates also claim the greater competition created by the AMERICA Act would result in lower prices for digital advertising and would curtail the ability of the platforms to leverage audience data from third-party publishers to their own benefit. Currently, the personal data Google obtains from the publishers’ side of the ad tech market is used to feed its own offer of targeted ads on its web properties.

The bill will not dismantle the overall power of Big Tech corporations, since their footprint goes far beyond digital advertising. In addition to the current antitrust tech bills, it will be critical to impose non-discrimination rules on all platforms acting as gatekeepers of essential online services, so that no one company has the ability to pick and choose which content reaches consumers and which doesn’t.

In Testimony, Open Markets Barry Lynn Calls on Senate to Ban Personalized Manipulation by Big Tech

Open Markets Institute’s executive director Barry Lynn testified [[link removed]] at a hearing last week of the Senate Judiciary Subcommittee on Antitrust. Addressing the topic of “Competition in the Digital Advertising Ecosystem,” Lynn shared Open Markets’ support for legislation to rein in big tech abuses including the AMERICA Act, the American Innovation and Choice Online Act and the Journalism Competition and Preservation Act. He also urged Congress to go further, saying, “We do not believe these ideas – even taken together – are sufficient to address the full array of threats posed by the power and control concentrated in Google, Facebook, Amazon, and Microsoft.” Lynn said it is also critical that “enforcers and Congress move now to impose a system of non-discrimination on these gatekeepers, one that would require them to provide essentially the same service to every individual and business who depends on them.” View Lynn’s testimony here [[link removed]] and read his testimony here [[link removed]].

📝 WHAT WE'VE BEEN UP TO: Open Markets Europe director Max von Thun wrote an article for The Times [[link removed]] in the UK applauding the country’s aggressive back-to-back moves on the competition front. Last month, U.K. regulators blocked Microsoft’s takeover of Activision and the government released comprehensive legislation governing competition in digital markets, called the Digital Markets, Competition and Consumers Bill. "Big Tech might not like it, but robust competition policy is a critical ingredient in ensuring Britain’s technology success,” von Thun says.

Caroline Fredrickson, Open Markets’ strategic councilor on democracy and power, published an op-ed in The American Prospect [[link removed]]calling on President Biden to appoint corporate skeptics to the federal courts to counter the right’s planting of judges who support their pro-business stance. “Less well known is that their vision of remaking the courts has encompassed another goal besides abortion: to defang our nation’s anti-monopoly and fair competition laws as part of the right-wing project to concentrate power at the very top,” she writes. The Prospect [[link removed]] quoted Fredrickson’s op-ed in a subsequent article on appointing judges with diverse worldviews.

Open Markets Institute reporter Karina Montoya wrote an article in Tech Policy Press [[link removed]] highlighting the struggle news publishers face in an era when Big Tech corporations continue to consolidate control over communications infrastructure and digital advertising. “This sharp contrast between the tech behemoths and digital news media companies should help us recast the last 15 years of journalism in a new light, one that can help us see that market consolidation in the tech industry impacted journalism in ways we had not seen before,” Montoya notes.

Open Markets’ legal director Sandeep Vaheesan published an article in Barron’s [[link removed]] noting the more aggressive stance global antitrust regulators are taking to vertical mergers, pointing to the U.K. regulator’s blocking of the Microsoft-Activision deal as an example. “The decision is a big deal in its own right, but just as importantly, it represents a broader rethinking of consolidations between firms in a buyer-seller relationship,” Vaheesan writes.

OMI Europe director Max Von Thun also penned an article for Tech Policy Press [[link removed]] discussing ways the U.K.’s 400-page Digital Markets, Competition and Consumers Bill (DMCC) could be improved. “There remain some important gaps in the Bill that could be filled, particularly when it comes to merger control and limiting [Big Tech] firms’ ability to blunt or evade the DMCC’s provisions,” von Thun writes.

OMI senior legal analyst Daniel Hanley published an article in Sling [[link removed]] arguing for the abandonment of complex econometric models used to define markets in antitrust litigation and a return to methodology based on qualitative data. “To continue facilitating the progressive antitrust policy that began with President Biden’s administration and to start broadly de-economizing antitrust litigation, both agencies should seize the opportunity to jettison the econometric-heavy market definition tests and enshrine this change within the updated merger guidelines,” Hanley writes.

Open Markets Institute joined European civil society groups in drafting a letter [[link removed]] to Margrethe Vestager, European Commissioner for Competition, expressing concerns over reports that she planned to appoint an American as chief competition economist. The letter noted the economist’s consulting work for Amazon and Apple “will hamper her ability to enforce the EU’s competition laws neutrally and effectively” against Big Tech. The joint letter was covered by the Financial Times [[link removed]] and Politico [[link removed]].

Open Markets’ senior fellow Johnny Ryan filed a complaint with the European Commission ombudsman accusing the Irish Data Protection Commission of failing to enforce the tough privacy policy the EU has put in place, the General Data Protection Regulation. Ryan filed the complaint on behalf of the Irish Council for Civil Liberties.

Open Markets Institute board member and Financial Times [[link removed]] columnist Rana Foroohar this week cited executive director Barry Lynn’s “rule of four” in her column on concentrated power. “In crucial areas, from food to fuel to consumer electronics, critical minerals, pharmaceutical products and so on, no country or individual company should make up more than 25 per cent of the market,” she says. “What’s more countries should apply this rule both locally and globally.”

OMI Europe director Max Von Thun spoke to BBC Radio [[link removed]] about the U.K. antitrust regulator’s review [[link removed]] of competition and consumer protection considerations amid the rapid rollout of products with artificial intelligence. "What they’re trying to do with AI and other emerging technologies is act a little bit more agilely, to keep these markets open and prevent them from being dominated by a few incumbents," von Thun said.

The Washingtonian [[link removed]] published an interview with Caroline Fredrickson, OMI’s strategic councilor on democracy and power, in which she called the absence of an ethical code of conduct for Supreme Court judges “dumbfounding.” Fredrickson also joined U.S. Rep. Rashida Tlaib (D-Detroit) at a Detroit news conference urging reforms to the Supreme Court amid growing ethical concerns, reported on by Michigan’s CityPulse [[link removed]].

Open Markets Institute is sneeringly mentioned in an opinion piece by the Wall Street Journal [[link removed]]editorial board lambasting the Federal Trade Commission (FTC) and its chair Lina Khan for taking Meta to task for violating its 2020 consent decree. Referring to the FTC’s requirement that Meta appoint to its board’s privacy committee an independent director from a nonprofit whose mission is “to safeguard civil liberties” or “strengthen consumer privacy standards,” the WSJ editorial board writes, “One candidate: the Open Markets Institute where Ms. Khan worked after law school. Ms. Khan wants a mole at the company.”

Bloomberg [[link removed]] quoted OMI senior fellow Johnny Ryan on the dangers of real-time data exchanges. “What everyone on the internet is reading, watching and listening to, and where they move in the real world, is being broadcast to thousands of companies all of the time,” Ryan warns.

Fern’s AG Insider [[link removed]] reprinted an article written by Claire Kelloway, who manages OMI’s food systems program, that was originally published in the Food & Power newsletter [[link removed]]. Kelloway’s article explores corporate profiteering’s role in driving up inflation.

Blue Book Services, [[link removed]] which provides credit ratings to the produce industry, referred to a 2016 article co-authored by Open Markets’ legal director Sandeep Vaheesan with current FTC chair Lina Khan for the Harvard Law & Policy Review [[link removed]] in analyzing the merger between Kroger and Albertsons: “The article [by Vaheesan and Khan] argues that federal antitrust policy has been skewed toward ‘business efficiency’ rather than maintaining a truly competitive business climate ever since the Reagan administration made this policy shift in the 1980s.”

🔊 ANTI-MONOPOLY RISING:

A federal judge rejected Google’s motion to get the Department of Justice’s antitrust case against it dismissed, clearing the way for the lawsuit alleging that Google holds a monopoly over the digital advertising industry to move forward. ( ABC [[link removed]])

The DOJ is requiring Swedish lockmaker Assa Abloy to divest some of its assets in order to buy Wisconsin-based Spectrum Brands in a deal that faced an antitrust challenge last year. The DOJ sued to block the $4.3 billion deal over concerns it would weaken competition in the residential door hardware industry and raise prices. ( WSJ [[link removed]])

U.K.’s antitrust regulator has launched an investigation into Adobe’s $20 billion acquisition of web design rival Figma. The move follows a similar one by the EU earlier this year after European regulators said the deal would damage competition in the market for interactive product design and whiteboarding software. ( TechCrunch [[link removed]])

We appreciate your readership. Please consider making a contribution to support the continued publication of this newsletter.

DONATE [[link removed]] 📈 VITAL STAT: $34 Million

The amount received from Facebook by an advocacy group, American Edge, fighting antitrust legislation against tech giants. ( CNBC [[link removed]])

📚 WHAT WE'RE READING:

“Plunder: Private Equity's Plan to Pillage America.” [[link removed]] (PublicAffairs, Brendan Ballou): The author tells the story of how private equity is in the process of reshaping America this decade, much in the same way Big Tech corporations and subprime lenders did in previous ones. By examining how firms in the recent past molded policies to their benefit, this book brings a very specific agenda for reform.

“Speed Trap.” [[link removed]] (The Verge, David Pierce): The author delves into a little-known Google product that promised news publishers big gains in advertising but ended up helping Google cement its control over the web.

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Written and edited by: Barry Lynn, Max von Thun, Ezmeralda Makhamreh, Karina Montoya, and Anita Jain.

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