WATCH KLOBUCHAR’S FULL OPENING STATEMENT HERE
WASHINGTON - At a bipartisan Senate Judiciary Antitrust Subcommittee hearing titled, “Competition in the Digital Advertising Ecosystem,” U.S. Senator Amy Klobuchar (D-MN), Chairwoman of the Senate Judiciary Subcommittee on Competition Policy, Antitrust, and Consumer Rights, highlighted the need to address consolidation in digital advertising markets.
“Advertising, which is really at the center of this market, digital advertising, pays for many of the apps and websites we use throughout the day to read the news, look up recipes online, and stream movies. And like much of the digital economy, there is a lack of competition in digital advertising markets that has been harmful to small businesses and consumers. Today's hearing is about the consequences we are seeing from the unchecked consolidation and a reluctance to enforce antitrust laws. And it's about what we can do about it,” said Klobuchar. “I know that on this Committee, we are ready to stand up for American consumers, small businesses, and innovation.”
We are living in a time of rapid innovation and technological change that is reshaping our economy and transforming how we interact with each other. And we are now seeing how quickly things can change.
When we leave here, we're having a briefing on artificial intelligence systems. And I think we all know that is all tied up in the discussions that we have today.
Now advertising, which is really at the center of this market, digital advertising, pays for many of the apps and websites we use throughout the day to read the news, look up recipes online, and stream movies. And like much of the digital economy, there is a lack of competition in digital advertising markets that has been harmful to small businesses and consumers.
Today's hearing is about the consequences we are seeing from the unchecked consolidation and a reluctance to enforce antitrust laws. And it's about what we can do about it. Although Facebook and Amazon have significant ad businesses, there's one company that dominates digital advertising like no other and that is Google.
The ad technology ecosystem connects advertisers, like your local coffee shop, with publishers, like your favorite online newspaper, via systems that price and sell ad space and place display ads on websites.
Within that ecosystem, Google dominates the market for platforms and services on the publisher side. That would be the ads that publishers want to place as well as the advertiser side. So you have the coffee shops that want to put the ads in, and then you have your local newspaper that's displaying the ads. So they dominate both sides, as well as the ad exchanges that connect them. So it's like a three prong and I can see the witnesses nodding, I must be getting something right. A three part domination.
Google has a 90% share of the service that publishers use to sell space on their site. It has a 40% share of the services that advertisers, like the coffee shop, use to buy ads, and it has a 50% share of the market for ad exchanges that connect those advertisers and the publishers.
This end to end control gives Google unique access to information about virtually all digital ad transactions and allows it to extract a higher percentage of revenues than they would be able to get in a competitive ad technology market. For example, publishers using Google AdSense to sell their ad space must give Google 32% of the revenue generated. That's a pretty big cut.
Research has suggested that Google may be taking between 30 and 70% of every advertising dollar spent by advertisers using its services, depriving providers of original content that are in fact struggling to receive their own compensation. This includes many of our news outlets, we have a separate piece of legislation, Senator Kennedy and I have, on negotiating news content rates, something that's worked successfully in Australia. But the other piece of this is just the overall advertising market that involves news organizations and many other sites.
Google's ability to take a large share of the revenues generated by publishers’ ad space is contributing to the near collapse of advertising based revenue models for many news organizations. And this threatens more than competition. It threatens the viability of a free and independent press which is essential to our democracy, and it is especially hurting the small local radio, TV, and newspapers.
Google's market dominance, combined with its huge advantage in consumer data, gives it the market power to exclude its ad tech rivals and maintain its monopoly power. This strategy has been very lucrative, as they say, follow the money. Last week Google announced first quarter results that included in just ad revenue $55 billion, not million, $55 billion dollars in ad revenue in the first quarter. And you wonder why we are losing what will be a third of the nation's newspapers in just over a decade. You can look right there - $55 billion - that is where the revenue has shifted. And when you don't get paid for your content, and you're not able to crack into this trio of monopolies with the publishers and the advertising and the people in between, it's a recipe for disaster.
It was about $100 million dollars less - the $55 billion - than in the first quarter last year. But $100 million is about a rounding error when you look at numbers that big, what I bring that up for is that it shows that it is consistently that high. The Justice Department recently brought a case claiming that Google has engaged in anticompetitive conduct to establish and maintain monopoly power in these ad technology markets. State Attorneys General have also taken action, brought a case, but we know that there are difficult cases to win which is why this conduct has continued. We all saw what enforcers are up against last week when the DC Circuit upheld the dismissal of New York's federal antitrust claims against Meta, citing the Supreme Court's decision in Trinko. One of our arguments here, my arguments maybe not Mike’s, is that the Supreme Court decisions have narrowed the possibility of bringing these kinds of cases, which is another argument for making some changes to the laws.
The good news is that there is a bipartisan desire to take action. Last Congress, we passed the bipartisan bill Senator Grassley and I led that Cicilline and Buck led in the House to modernize the merger filing fees to make more resources available to the antitrust agencies. We also passed the bill that Senator Lee led and I was the Democratic lead to empower state antitrust enforcers. And when these bills were included in the end of year funding bill, Senator Lee and I led an amendment to ensure that the merger fee reforms took effect this year- that passed with an 88 to 8 vote.
To address the issues we are discussing today, I'm working with Senator Lee on the America Act to improve competition and transparency in ad technology markets. This legislation is a key part of the work this committee has been doing over the last few years to rein in the market power of a handful of online gatekeepers that are dominating our digital economy.
I would note some other bills, the American Innovation Choice Online Act that Senator Grassley and I have introduced, making it the first tech competition bill last year voted out of the Committee since the dawn of the internet. We did the same with the Open App Markets Act, something that Senator Blackburn and Senator Blumenthal are leading along with myself. And then I mentioned already, the Journalism Competition Preservation Act. I know that on this Committee, we are ready to stand up for American consumers, small businesses, and innovation.