Google seems to be facing new legal trouble. This time it threaten to break up its biggest buiness — digital advertising. A new bipartisan bill introduced by a group of Senate Republicans and Democrats, if passed, threatens to break up Google’s advertising business. Called Competition and Transparency in Digital Advertising Act, it seeks to “restore and protect competition in digital advertising by eliminating conflicts of interest that have allowed the leading platforms in the market to manipulate ad auctions and impose monopoly rents on a broad swath of the American economy.” The bill is co-sponsored by Senators Mike Lee, Ted Cruz, Amy Klobuchar, and Richard Blumenthal.
What is Competition and Transparency in Digital Advertising Act about
The bill reportedly outlines two rulesets: One for companies with more than $20 billion in revenue per year and another for companies with more than $5 billion in revenue per year. The $20 billion number applies to the big giants of digital advertising, namely Google, Facebook and Amazon. Though the bill targets Google directly with each of the rules, however, any other company that has $20 billion in ad transactions too will be required to follow the regulations.
Google runs an exchange where ad networks bid on inventory, meaning a platform or auction where ad transactions are made and prices set. The company also offers tools to assist businesses buying and selling ads. The critics have a problem with this very business model of the company. They claim that Google engages in monopolistic practices in the digital ad market. The fact that the company represents both suppliers and purchasers of online ads, while also conducting real-time auctions, creates an antitrust issue.
“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,” Senator Mike Lee (R-Utah) told the Wall Street Journal. “When a company can wear all these hats simultaneously, it can engage in conduct that harms everyone,” he added
Why Google may be forced to breakup its business
The bill may force Google to divest majority of its digital advertising business, as it earns advertising dollars across its services Search, YouTube, and its ad networks. The total Google advertising revenue stood at $54.7 billion (up from 22% from $44.7 billion) in the past quarter Q1 2022. The bill thus aims at Google’s primary source of revenue. If the new legislation is passed, Google may have to choose which of these businesses it would want to retain.
Google’s response
In a statement, Google said, “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. 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.”
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