Digital Advertising Act aims to break up big tech ad platforms
The Competition and Transparency in Digital Advertising Act amends an existing antitrust law to include a section specifically focused on online ad platforms.
Another congressional bill aims to break up big tech companies -- this time, it's targeting their digital advertising practices.
The bipartisan Competition and Transparency in Digital Advertising Act introduced May 19 by Sen. Mike Lee (R-Utah), wants companies like Google, Meta and Amazon to sell off parts of their advertising businesses.
It aims to separate platforms providing both advertiser- and publisher-facing services that could potentially lead to a conflict of interest and reinforce the market power of those platforms within the advertising technology stack, according to Laura Petrone, principal analyst at London-based data analytics firm GlobalData. The bill is co-sponsored by Sens. Amy Klobuchar (D-Minn.), Ted Cruz (R-Texas) and Richard Blumenthal (D-Conn.).
The proposed Digital Advertising Act amends the Clayton Act, an existing U.S. antitrust law enacted in 1921, by adding a section outlining requirements for competition and transparency specifically in digital advertising.
Laura PetroneThematic analyst, GlobalData
The U.K. and European Union are already scrutinizing big tech's advertising platforms on antitrust grounds, and Petrone said she expects to see extensive cooperation between the EU and Washington in tackling competition and transparency issues.
"This new law focuses on the anticompetitive nature of big tech ad platforms and has the potential to contribute to ongoing industry disruption," Petrone said.
The proposed Digital Advertising Act aims to increase competition by prohibiting large digital advertising firms earning more than $20 billion in ad revenue from owning more than one piece of the digital ad ecosystem, according to the bill.
That means those companies couldn't simultaneously sell and buy advertisements, and offer digital advertising space.
"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 press release.
Should the bill be enacted into law, it would likely require companies like Google, Facebook owner Meta and Amazon to sell portions of their advertising businesses. Daniel Castro, vice president of the Information Technology and Innovation Foundation, said the legislation could "significantly disrupt the online ad ecosystem" for ad buyers and ad sellers.
Yet Castro said he doesn't know that breaking up the advertising platforms would be all that beneficial. Online advertising platforms offer integrated, cohesive services for businesses that would be difficult for the market to catch up to in the short term should tech companies be broken up by legislation, he said. "There's so much efficiency right now in online ad buying compared to where it started 20 years ago," he said. "It's so much different and that's because of integration."
The Digital Advertising Act also aims to increase transparency by requiring companies to provide advertising customers with information about ad performance, which Castro said is a good thing.
Performance data from advertising has been a long-standing issue for businesses, and the legislation could address that, Castro said. It could also begin to address concerns about platforms preferring their own products over a competitor's, since the proposed bill would require transparency into the advertising process.
"Is there any self-preferencing? Is there any kind of change in bidding algorithms that maybe disadvantage those who are buying and selling the ads? Those types of questions are perfectly legitimate to ask," he said.
Makenzie Holland is a news writer covering big tech and federal regulation. Prior to joining TechTarget, she was a general reporter for the Wilmington StarNews and a crime and education reporter at the Wabash Plain Dealer.