Google faces split as programmatic ad ‘transparency bill’ reaches Senate

Democrats and Republicans unite with a potential law that could shake up the programmatic ecosystem… and break up Google and Meta. Is the day of regulatory reckoning nigh?

Google faces split as programmatic ad ‘transparency bill’ reaches Senate

A bill that would break up Google's advertising business if it becomes law has been introduced in the Senate.

The new bipartisan proposal takes aim at Google and would force it to break up its digital advertising business if passed. 

The Competition and Transparency in Digital Advertising Act was introduced last week in the US Senate by a group of key senators on the Judiciary subcommittee on antitrust. It aims to bring more regulation and transparency to the world of programmatic ad exchanges.

The bill is one of the most aggressive pieces of legislation aimed at curbing the power of Big Tech firms. 

The coalition behind the bill underscores support for reining in tech power through antitrust reform cuts across both sides of the political aisle. 

The bill, introduced Thursday by Sen. Mike Lee, R-Utah, is designed to prevent conflicts of interest in the ad technology sector. The bill has bipartisan support, with Sens. Ted Cruz, R-Texas, Amy Klobuchar, D-Minn., and Richard Blumenthal, D-Conn., signed on as co-sponsors.

“When a company can wear all these hats simultaneously, it can engage in conduct that harms everyone”

The bill bars any businesses from owning more than one part of the digital ad ecosystem if they process more than $20bn in digital ad transactions. 

For example, If a company processes $20bn or more through a demand side platform digital service provider (DSP) service, for example, it can’t also operate a supply side platform (SSP).  

Google easily falls under that distinction as it made $54.7bn in ad revenue last quarter alone. While other companies such as Meta meet the threshold of the proposed rules, the law would have the biggest impact on Google as it is a key player in every step of the online ad buying and selling process, as it has tools that let companies purchase and sell ads, along with ad exchanges. 

The bill would prevent Google from being a part of all those businesses, forcing the company to divest large portions of its multi-billion dollar digital ad business.

Speaking to the Wall Street Journal, Lee said: “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. When a company can wear all these hats simultaneously, it can engage in conduct that harms everyone.”

A spokesperson for Google responded by saying that breaking up the company’s ad 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”.

“What the US government needs to focus on is facilitating competition”

Farhad Divecha, Managing Director at Accuracast, said the bill needs a different approach so as not to hurt ad buyers and publishers caught in the middle.

“It’s a really interesting time – Google’s market dominance is getting hammered from multiple sides, in the EU and in the US too,” Divecha said. “While I understand the drivers and reasons behind this bill, I don’t think it’s taking the right approach. For one, breaking up Google’s ad serving, ad buying, and exchange functions won’t really help ad buyers or publishers who sell ad space to Google.”

“The primary issue this might tackle is potential price-fixing – where Google acts as both the biggest buyer and seller, there’s ample scope for them to influence prices to their advantage. This is definitely an issue worth fixing, but the bill’s proposition is not the best solution. If the split entities still hold the controlling share of the market, there’s just as much likelihood of them fixing prices in a duopoly, as Google’s DSP would still be the largest customer of Google’s SSP.”

“The ad buying and selling market is (theoretically) a free, open market. If suitable competitors existed, both buyers and vendors would take their business away from Google. What the US government needs to focus on is facilitating competition. At present, new entrants find it nearly impossible to break into the market because of entrenched behaviours and the sheer size of Google’s DSP and SSP business. This bill won’t change that. In fact, changing that feels like an impossible task in today’s tech market, which is ruled by five giants.” 

Increasing crackdowns on ad transparency around the world

There are multiple pieces of pending legislation in the US aimed at limiting the power of Google and other Big Tech companies.

For example, the American Innovation and Choice Online Act, is being put forward to prevent companies like Google and Amazon from favouring their own services over others.

Meanwhile, the Open App Markets Act is aimed at bringing more competition to app stores, something that would chiefly impact Google as well as Apple. This bill would prevent the tech giants from requiring developers to use in-app payment systems as a condition of gaining distribution on their app stores.

Apple CEO Tim Cook has pushed back against the Open App Markets Act, claiming that it will compromise security, while advocates say it will give smaller companies a better chance to compete.

On the other side of the Atlantic, the UK joined the EU in expanding its Big Tech regulation plans. Earlier this month, the UK set out sweeping new plans to regulate tech companies and impose massive fines, but stopped short of saying how it will enforce the laws. 

The government will provide a new watchdog, called the Digital Markets Unit, with the power to enforce competition rules, such as stopping firms from hurting rivals by pre-installing their own products.


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