Transcripts For CSPAN3 Senate Hearing On Google Online Ads Market Competition 20240712

Grand prize of 5,000. The deadline to submit videos is january 20th, 2021. For competition rules, tips, and more information on how to get started, go to our website, studentcam. Org. Now, a Senate Judiciary subcommittee hearing examining googles Online Advertising and its potential impact on Market Competition. Lawmakers heard first from a google representative, then a panel of technology and trade association officials. There was also a focus on googles Online Search engine, data privacy issues, and antitrust legislation. Welcome to todays hearing of the subcommittee on antitrust competition policy and consumer rights. The title we have chosen for today is stacking the tech, hasi googleke harmed competition in Online Advertising . I want to thank Ranking Member klobuchar and her staff for working closely with me and my o office as we prepared for today. And also want to thank our chairman, the chairman of the full Senate Judiciary committee, senator graham, for his support of this hearing. After i and then senator klobuchar give our opening remarks, well hear from two panelists of witnesses with sevenminute rounds of questions from the subcommittee. We have Something Interesting to deal with in the senate, and that every time they call votesh when they calley votes during ay subcommittee hearing or any hearing, for that matter, were at their mercy. A we have both cast our votes on o the first of aur series of thre or four. At some point, were either going to have to pause or tag t team as we allow other members sit in for us. Just dont be alarmed if that happens. The focus of todays hearing is googles Online Advertising business. Whether its a monopolist and n whether it might have engaged i any conduct that harms condu competition and harms consumersi but before we goon into that, i want to say just a few things about antitrust policy more broadly. I have been a member of this subcommittee ever since 2011 when i first arrived in the e e senate. And i have chaired the subcommittee for almost six years. Overhe that time, as the publi debates surrounding antitrust ug policy and enforcement has grown and in some cases evolved, so, too, has the gulf between the e opposing sides. Oppos one extreme fear are those who e would rather we have no uld antitrust laws at all. Antitru and the alternative, they advocate for an enforcement adva policy thatste overly deferentl to speculative efficiencies and quick to dismiss actual evidence of competitive harm whenever it mightwh conflict with unproven economic theories. This extreme end of the continuum sort of fetishizes freedom to the exclusion of the laws that maintain that very in freedom. They forget that very markets l governments do not keep not themselves free and that liberty is only secure when power is diffused. At the other extreme, however, is a line of arguments that has for years now been pushing an agenda sort of to sort of n transform the antitrust laws in this country from a tool based o in Economic Science to protect and promote competitive markets into a sort of panacea for all of their perceived social ills. Built on the economically myopie premise that big is bad and thats the beginning and end of the question, some in this end of the spectrum would use antitrust to address alleged labor, income, and racial go disparities. These may be laudable goals, but theyre not problems that antitrust law is meant to solve. Nor are their problems that antitrust law is even capable ob solving, at least without ust la creating a whole bunch of other problems, even within those a areas themselves. Attempts to repurpose antitrust law into a social justice pose program would have scores of unintended consequences that would cripple our economy for d generations. And of course, there is the hypocrisy in believing that big is bad applies only to corporations and not to government bureaucracy, the very type of government bureaucracy , that they would expand in order to dismantle and regulate them. D you may be wondering where i see myself in those two extremes, whose side am i on . Am i on the side of the American People . Yes, am i on the side of the law . Yes. I believe vigorous enforcement of antitrust laws is essential to maintaining the free markets that have made this the most prosperous nation on earth. And i believe that our current laws are for the most part sufficient to meet the n challenges of the day. I said a moment ago that libert. Is only secure when power is diffused. This is a bedrock principle of our constitutional republic. The concept of federalism, perhaps the greatest repub contribution of the founding generation, and of our foundingc document, is what makes american unique among all other nations. E this principle applies equally to economic power as it does to political power. In a way, antitrust laws might properly be described as federalism for the economy. That brings us to today. Were here to discuss what may s be the seminole antitrust case of the 21st century. One whose precedent will definen the termse of competition and innovation in our dynamic economy for years, in fact for o decadesmy to come. Unlike some of my colleagues iny the house, im not interested in staging a political spectacle to attack, to condescend, and to talk over witnesses. Naive though it may be in 2020, my hope is that by looking at t this specific question, we can have a serious and frank th conversation about the state ofe competition in digital markets. T Online Advertising is an incredibly complex business. And one that touches every Single Person on the internet. The technologies involved in inr connectingne advertisers and publishers have evolved rapidly in the last decade, and the lat expansion of Online Advertising has facilitated an explosion ofd online content by allowing even the smallest website owners to monetize the content they produce. Small andnd local businesses have alsoo benefitted from being abl to quickly and easily promote their businesses without any of the same Capital Investments that would have beene sam requi and indispensable for that n reu effort justir a few decades ago. So at the same time, this growth and this expansion has been exn largely consolidated onto a single platform, googles onlini ad business. As that business has grown, so, too, have complaints that that google, which both operates the ad selling and ad buying g and platforms, and sells its own inventory through those platforms. As conflukicts of interests and rigged technology and ad on auctions to favor its own ts interest and protect its own market share. Whether this is true or not tru matters because so many businesses depend upon Digital Advertising to market their productsad or to monetize the r content that they produce. Web users in turn benefit from f free online content and being ea connected to relevant businesses in a way that helps them to make optimal business decisions. L bui simply put, markets function better when businesses thrive and consumers are informed. Ideally, Online Advertising helps accomplish this. Ine ad if, however, Online Advertising has been monopolized and constrained by opaque pricing and exclusionary conditions, everyone loses to that degree. I would also add that google and other Big Tech Companies have been accused of a number of badf acts unrelated to antitrust or to competition. I myself have repeatedly expressed concerns about anticonservative bias by these firms and ill continue tofirmss pursue those concerns, but whilb i believe that issues like anticonservative bias certainly have implications for antitrust such as perhaps evidencing market power, todays hearing is not fundamentally about those concerns. This hearing is about an. Analytically distinct issue, about antitrust allegations in Online Advertising that are a legitimate subject of inquiry in their own right, and to be clear, just as i reject demands to use antitrust for social justice, i also emphatically reject using antitrust to solve other nonantitrust concerns. Todays discussions will, i hope, help everyone to better understand the Online Advertising market and how competition works or should work and how it might not be migh operating as well as it could i that space. I look forward to hearing from o our experienced and highly qualified witnesses. Thank you, and ill now turn tod Ranking Member klobuchar for her opening remarks. Well, thank you so much, mr. Chairman. And thank you to our witnesses, to mr. Harrison appearing virtually, and i want to start by making something absolutely clear. We are not having this hearing n because google is successful. Ar google is successful. Sful i just. Used it on my way here. W or because google is big. Thats not why, from my perspective, were having this t hearing. We are having it because even Successful Companies, even suc popular cecompanies, and even Innovative Companies are subject to the laws of this country. Including our antitrust laws. We are all successful when we el make sure that our economy is t strong and our economy is our working better. But the law cant be blinded by googles success or its past ss innovations if the company in o its zealif to achieve greater se successal crosses a line into anticompetitive behavior. Ticom its our job to regulate it. Its that simple. It so were going to touch on ere issues i hope today of competition, technological innovation, the use of personalv data, these are some of the a, h defining issues as the chair has said, defining issues of our her time. And i personally think, as we go into the months to come, this os wont just be about google. His this isnt even just about the t Tech Industry as much as i ogle. Believe we need to change our laws and look at monopolies ando changing the burdens and making it so that our laws are sophisticated as the companies h that nowat occupy our economy. I think we need to do all that, and i thinkth it should be a hud priority going into the year. Gog but right now, as the chairman h mentioned, we are focused on thism issue today. Ue our society has never been more dependent on this technology ent than we are now in the midst ofn this global pandemic, as i s gll noted, not just google. The pandemic has forced a buncht of Small Businesses to close their doors and the five largest Tech Companies continue to thrive to the point where they briefly accounted for nearly 25y of the value of the entire s p 500 staux index just a few weekk ago. St a again, i dont quarrel with their success. Few we but we have to start looking at do our laws really match that situation . And even if the original intenth when these companies started as startups was to be innovative, which they havevest been, at wh point do you cross the line so you squelch innovation and competition from other companies . We start with this, the ownership and use of data. The powerful companies that provide us with these com technologies arepa also collect personal information. Wees are know that. Th they know who our friends are. They know the books we read, where we live, whether we colleg graduated from e,college, incom levels, race, how many steps we took yesterday. The chairman and i share an interest in this. How long we have stayed where we are. Machine learning analyzes trove of personal data, allowing our firms to discern even more Sensitive Information about us. E our medical conditions, us, political, religious views, and even preferences that we dont n even know we have. And why would companies do all of this . D why well, put simply, to target us t with digital advertisement. Digia theres really no other reason. A it is a capitalist society. Thats what they do. Now, google makes more money doing that than any company in the world. More mo hands down. A by leveraging its unmatched access to consumer data gained through its existing dominance r in online andough mobile searchn mobile operating systems, system android, email, gmail, youtube, browsers, chrome, mobile mapping aps, and Ad Technology. This Ad Technology ecosystem known as the ad tac stack consists of advertisers on one side and publishers on the ts of other. So lets look at ad theseve two sides. On theside and advertising sidee controls access to the huge the number of advertisers that placf ads on Google Search, which has nearly 90 of the Search Market. And has unparalleled access toditeto date a. On the publisher side, google has access to ad data to inform its bidding strategies and then it also effectively controls thf process. The ad auction process that gets an advertisers ad to be put on a publishers site. Google dominates all of the markets for services on both r sides of the ad tech tack, the publisher side, and the other t side, and i hope that will be ar lot of our focus today. Toda research has suggested google may bested taking between 30 a 70 of advertising dollar spent by advertisers using its services depriving publishers og that revenue. That r who are the publishers . Theyre content publishers. Pub they depend on revenue, so many of our content producers, our u. News producers do, to get by, o and to me, given that my dad was a journalist, to me, this is on of the key elements here, the k because if you have unfairness e in how that ad ecosystem is is going, youre depriving these news organizations at a time when the First Amendment is already under assault of the revenue they need to keep going so whether its happening, and w we dont know all the details at the department of justice right now, this could be the beginning of aght now, reckoning for our t laws, to tart looking at how were going to grapple with the new kinds of markets that we see across our country. It would help answer the question of whether our federalp antitrust laws are able to our restrain the business conduct oe even the largest, most Successful Companies in the duct world. When you think of the breakup o. At t, that was our last big bra thing that happened in the big antitrust area, really big thing. What did that lead to . Lower prices, more competition. It reallylower worked. But were not able to do this o. Right now. E no and my hope is that were getting the start in the Justic Department that things are going on at the ftc, but to really do that, theyre going to need ly resources to take on the legions of lawyers at the companies, ans so thats my first goal. What can we do for enforcement . My second, what do we have to docement to make the laws work better . To look at some of the deals that have already been made. The third is what are the ve ale remedies . Do they made make a difference . Do they make a difference in e changing the behavior and allowing competition . I literally dont have personal grudges against these Companies Like sometimes the president has expressed about various companies. I dont. Vari i just want our capitalist system to work. I want it to work. To wor and to have it work, you simply cant have one company dominating areas of an industrya our Founding Fathers started this country in part because they were rebelling against heye monopoly power. We need to keep that spirit of entrepreneurship strong in this country. And this is a good way to start. Thank you, mr. Chairman. And i will be i may not be here right at the time because of the votes for my questions, but i will be here for questions. Thank you. Heree youll bet. An ink yo spirit either way. Thank you very much, senator ouy klobuchar. Sena well have two panels today. O pe our first panel will consist ofc mr. Harrison. Hes joining us virtually. ll if youll stand please to be sworn. Mr. Harrison, do you affirm thet testimony youre about to give before the committee will be th truth, the whole truth, and rut, nothing but the truth . Thing i do. Thank you. Ill now briefly introduce our witness for our firstt panel. It don harrison is googles president of global partnershipl andobal Corporate Development. As head of global partnerships overseas strategic partnershipss worldwide and is responsible for product and ecosystem enablement across googles product and business groups. Don manages the corporate oups. Development team that handles googles global mergers, acquisitions, and investments and has worked on googles hoo largest transactions. He also managed googles internal incubator, area 120, an a. I. Focused gradient fund. Prior to joining google, don was a lawyer where in 2003, he was first introduced to google and helped take the Company Public he started his career at the Toronto Law Firm otdavies ward, fil philips and feinberg. After earning aegree degree in Political Science in philosophy and law degree from the university of toronto. Thank you very much, mr. Harrison, for joining us today, and we look forward to your testimony. Well now hear your opening remarks. Chairman lee, Ranking Member klobuchar, and distinguished members of the committee, thank you for the opportunity to appear before you today. Committe my name is don harrison, at me s google i lead a partnerships and Corporate Development team wherp we support the growth of our products through partnerships, working with a range of businesses to helplp rtne themrs use our products to grow and succeed. I also receive area 120, our inhouse incubator that helps build businesses. My job at its core is to help other businesses grow. Usinesse as our partners businesses grow, ours does as well. The same is true of googles products. We build tools that help other businesses grow. We build one way we help bszs grow is through Online Advertising. On american businesses of all sizes use our advertising tools to find more customers at home and internationally. Online advertising prices in the u. S. Have fallen more than 40 since 2010. The benefits of these lower prices flow directly to american businesses and consumers. W t we helpo am businesses grow fro advertising on our own sites ans on other publishers sites. A wide range of businesses range including many small firms nclui advertise onng our sites in app like Google Search and youtube. That where we earn a majority of our advertising revenue. In addition to ads on our own helps les, google alsonue. Businesses advertise in a wide range of other websites and applications known as publishers. We offer technology that helps. Known lpss buy ad space as the buy side, and helps ce publishers sell their ad space, known as the sell side. Publ this technology is offer returned to as ad tech. The ad tech portion of our business accounts for a small portion of ourit advertising a revenue, and we share the majority of that revenue with publishers. The space isis crowded and ded a competitive. We compete with adobe, amazon, at t, facebook, news corporation, oracle, and verizon. As well as leaders like index exchange, mag nite, media math, open x, the trade desk, and many more. Lishers publishers and advertisers use tools from an array of f providers. The average publisher uses multiple ad side tools and buy side tools. Even as online ad prices have fallen, benefitting businesses and consumers, google has helped publishers make more money from ads. In 2018, way pay we paid more billion. Publishers kept over 69 of theu adrefrb new. E. Thats more than the industry average. In other it areas we take an op approach. Tools interoperable with rivals, increasing choice and competition. Publishers and advertisers enjoy a wide range of choices. Our tools give publishers acces to demand from over 700 advertising platforms, and advertisers access to ad space or more than 80 platforms. Our tools can also work seamlessly together in an integrated way generating her ge efficiency, speed, and securitya benefits for dverpub lrlishers, advertisers, and consumers. Op the free and open internet we all enjoy is made possible by advertisith bi advertising. Behout it, they would ed to forceding to adopt subscription models oro shut down their operations entirely. This would harm consumers withe higher prices and reduce choice online. Looking ahead, well continue investing in thein space, helpi publishers and advertisers grow their business, supporting the free and open internet we all c. Enjoy. Forwar i look forward to engaging with the committee on these important issues. S. Thank you very much, much, mr. Harrison. Ison. Thanks for joining us today. Were going to now launch right into our alternating rounds of sevenminute questions and i ad will begin that. Will beg at the outset, i want to address something briefly that i mentioned briefly in my openingo statement. And that is that i and many of m my colleagues are concerned about anticonservative bias at google and on some other online platforms. Earlier this year, i expressed grave concern and had grave had concern upon learning that google reportedly had banned the conservative website, the federalist, from monetizing its content through google ads. I want to be clear here that a R Private Company engaging in censorship on its own platform n is not a violation of antitrust laws. Nevertheless, as i pointed out in my letter to your company ony this subject, isnt this behavior evidence of market ny m power . In other words, why would any company want to treat its it w customers that way unless it was confident its customers had no u viablest alternative . Can you help me understand that thank you, senator. Just one a couple quick points. One, the federalist, and there e were some comments made in your Opening Statement, and in sena senatorto klobuchars statementp about there being a lacken of choice. Oice. Publishers like the federalist have manyshers li choices on ho can monetize their content. R the federalist actually uses 30 different tools, publisher sidet tools to, monetize its content. It has many choices if its unhappy with how were providing our services. Xampl in the example youre talking about, we have to have clear ar policies about how we show our advertisements, and no one, mos advertisers do not want their hr content to show up next to harmful content. In the case of the federalist, the federalist had common boards that had commentary in it, some of which our systems made clears was racist commentary, and we have been clear in our policies that our adsin cant show up nen to that kind oft commentary. We did try to work with the with federalist, and there are a ant bunch of options available to a company in this situation. First ofaccompa all, they can n a Comment Section. Secondly, they can moderate their Comment Section to take oo out comments that violate our ads policies, or third, they caa do a click through and there arm many large publishers like the New York Times that have a mes click through onth their commen section so they dont show ads on the section. Yre youre not suggesting that u there n federalist in its manage are racist . Racis no, not at all. Im saying that ing t youre talking solely about the commentary, about their abt obligation you would like to sei them have to moderate the commentary on their site . Is that right . Is yes. Absolutely. Thisab is what i find ironic. Some would say hypocritical, that google justifies ies deplatforming a website from its ad platform, here the federalist, because of content not by the site itself that the site itself has produced, but ue because of content on the sites Comment Section. While googlement insists that protections it receives under section 230 of the are Communications Decency act are essential to shield it from liability from its own users content. How is that not a double standard . And again, isnt the fact that google feels bold enough to act this way evidence that it it perhaps doesnt feel competition, doesnt feel threatened, even potentially, by any competition . Senator, first of all, no there, is no allegation that the federalist is racist. Se i think any large platform has Comment Sections and those Comment Sections can contain bad comments. Those are comments thatatco use have uploaded to the system. First of all, you mentioned section all, yt230. Ion section 230 is helping many publishers deal with the fact e that they shouldnt be legally responsible for the comments uploaded to their system, and so section 230 is a helpful part of making sure thas publishers and platforms can cat stay ayoperating even in a worli where they may have Comment Sections andcomm people can upl those comments. Oblems secondly, we have the same problems on youtube. Youtube has comments. Sometimes the Comment Sections h contain language that violates our own policies and we have he systems that capture this. Ure we have systems that can remove hundreds of millions of comments before anyone has seen this. Nyoe Machine Learning and human flagd that make sure that these comments arema taken down, thatt theyre removed, and i think we capture almost 99 of comments s before b they are read. Again, we can work with sites like the federalist and many edl others to makeis sure they also adopt moderation policies that make sure that these comments continue to operate according in with their policy. Their they die have options. Ly and by the way, they ha dont ow have options in how to maintain their comment board. They have options to go to otheg Advertising Solutions if they t think that our solutions arent working. Most ng. Publishers use between t and seven different publisher vi tools to sell their advertisinai the federalisteve uses almost 3i believe, tools to sell their advertising. Im glad to know that, know e you dont dispute youre a significant part of this. I still, unless im misunderstanding you, i still n dont think you have answered my question. Isnt there a double standard . Like help me understand why google should be entitled to e that sort of deference but ce bu youre not willing to give thato sort of deference to someone e else, to another firm that you t have just acknowledged isnt racist, doesnt sponsor those sorts of things, but people sometimes comment on those sites. I dont know, perhaps those to them excluded from googles platform, is that possible . Senator lee, we didnt demonetized or took away the federali federalists ability to use our services. We did not do that. We want to help the federalist continue to make money off the content it shows. They just need to make sure their Comment Section is moderated. I dont think any advertiser, and i dont think you would want any advertiser to see their advertisement showing up next to content that they dont agree with or that is objectionable or offensive. By the way, weve applied these policies to our own sites as well to the extent that this type of content is a risk of showi platforms, they need to comply with our policies in order to ne show advertising. I wouldldi w lover to turn 230 later. N, this again, this isnt directly relevant to the antitrust inquiry itself, but its indicative of it. This is how a company behaves when it senses, perhaps ves correctly, that it doesnt have meaningful competition. Mr. Harrison, moving on to another point, if im an advertisiner placing an ad usin googles Ad Technology, its my understanding google doesnt tell me how much the publisher is receiving for displaying my ad or how much money from each l advertisi advertising dollar google might be keeping for itself. It seems like the might be frustrating for anar advertiser who is trying to figure out whether or not shes getting a good deal. R compar and consider Comparison Shopping. Will you set the record straight and explain where each et advertiser dollar goes thats a spend on googles ad platform . Thank you for the question, senator. I point out to the committeete and imbu happy to share this tt we did recently publish two fes blogs that clarify how fees work. But let me address both. Ess first of all, for news publishers and this is an area w that were very we really got into ad tech in order to supporo ourp systems. Google is a search engine. Engine we benefit with vibrant, bright ecosystems where people need to only to information, not is that a benefit to the eco a system but a benefit to us because we help people find information, but we got into ad tech to start providing these tl publishers. Ecifica we care deeply specifically t about thehe news industry. We work closely with them. W we recognize theyre going through a hard evolution in evl their business modelut right nol and we have a lot of projects to try to help them, including the gni, which is a 300 million effort on our part to helpp the. News industry. We also have massive investment in the tools that help them monetize their content, and products that help them get subscribers. When ithel comes to the tools t monetize their content, which is your question, i want to note y they keep almost 95 cents of every dollar they earn from advertisers. Mainly for two reasons. One, they can sell that advertisement directly. And usually mostly they sell ost almost 75 of their advertisements directly, and when they do theirthat, they pa very, very small fees to use out systems. Where a lot of use people use o serving tools, were happy its a popular product, but we charge very, very small amounts of money to use that product. Then, with the portion they sell programmatically, where you know, where they use both of our ad site tools as well as our publisher side tools, they can y pay anywhere from 70 they receive, sorry, 70 or more of the income from their undle advertisements, when you bundle these things together, they kep 95 cents on thes to broader. R. When it comes to the broader lir ecosystem, we have done a full s analysis of our o tools. Ant i want to be clear, this is alo aspects of our tools. If an advertiser chooses to use our ad side products and our hec publishers use our publisher po side products anddu our ad side used to connect those two points. In those two situations, e th publishers keep more than 69 of the revenue. Is arou thats above the industry average which is around 67 . Thank you. We have to move on to senator hawley now. I will note that sharing how fees work isnt the same as transparency for the users on the actual bids. They know they keep 95 , but they dont know of what. They dont know what the what advertiser bid, nor do they know what google takes out of that t bid. We might want to get back to of. Later. B in the meantime, well go to ey. Senator hawley. Thanks for being here. Can we go back to the federalist for abe inmoment, please, just clarify something you said to c senator lee . You do i understand now that you have a content moderation requirement in order to access s googles ad platforms, is that m right . Is that your testimony . No because the bec federalistt moderate their content section. What youre saying is you require them now to engage in moderation in order to have in r access to your platform. Is that right . That no. Our ads policy, our ads policy is that our ads will not show uo against harmful, offensive content. Thats the requirement. They want to show our ads next to their content, then that content cant be harmful or o offensive. So in other words, they havee toit, right . E because they didnt moderate mr their content at all. This isnt even their content. Its thirdparty content and ene theyir didnt moderate it at al which under section 230, they t are rr perfectlyhe entitled to but youre saying now that in order to have access to your yo, arguably monopoly ad platform, they have to engage in content moderation and have to do it apparently according to your standards. Is that accurate . Will you tell us what thell you standards are that they have toe meet the content moderation starn standards. Apologies if ipologi wasnt a earlier, but they have three nt choices. They can choose not to show adst they can choose to moderate, or they can choose to put their commentary behind a wall and not show advertisements against mens that. So no, we werent requiring thet to moderate. Mod we gave them options on how to n change in order to allow our adw to show up next to their t content. Okay, so thei basically, the choices were, modify their site according to your standards, in one of two ways. Modify their site to height a Comment Section which they diddd not moderate, its not their nt content. Its eirthirdparty content. They didnt moderate it, but they had to hide their section,t put it behind a wall, you said,r or engage in content moderationd according to your standards. Acc i think your testimony wasord at moment ago youre willing to eng help them do that. He youre willing to help them engage in this content ntent moderation. Is that right . Senator, the comments here ot that were talking about were t highly racist comments. I think anyone t com they werent the federalists comments. To get at what it is you are requiring sites, especially small sites, like ths federalist, compared to your ras massive sites like tyoutube. What do they have to do to access your ad platform and what i think you said, which i thinkd is news, is that they have to nw engage in content moderation, and they have to do it according to standards that you have, you although i dont think any of hs know what they are. At t i think ith would be useful if everybody knew what those standards are, so i wonder if ns youll commit to me atoday, an this committee, that youll publish those content moderation standards that you expect sites to meet if theyre going to ds access your ad platforms. Will you do that . T . That . Senator, im happy to share o our ads policies with you that make it clear that we will not t showha ads next to offensive misleading, disturbing content, those policies are published and clear, and websites can i think theyre already online, but im happy to share them with your office. We did notoffice. Ag require the federalist to acquire content moderation. We gave themsure ou content to sure their ads shows up to content that isnt offensive. As as senator lee pointed out, its extraordinary market power that would ally calenable you da Something Like this, call the e tune forpe a small independent publishers construction of their site, to design moderation policies for thirdparty content they dont mainter or use, yet youre able to do this and fort them to adopt these policies or effectively cut off their lets revenue stream. Lets talk about your dominance in this space. Google operates a publisher ad server, is that correct . Several, actually. Thats right. And googp operates the supplm side as well, is that right . We do. We offer platforms on both the i publisher side and advertiser ar side. Right,side you. Offer a demad Side Platform also, correct . As correct. Weect . And you operate advertiser ad servers too, correct . That is correct. Right. Th okay. And the correuks competition a markets Authority Commission oms recently found that googles marketshare in all of those t layers of the ad stack is t ma dominant. In the first avemarket, you havt greater than 90 . The in the second market, between it 40 and 60 . N 50 in the third, between 30 and 70 . In the fourth, over niebt . Do you know of any other company that xexercises this kind of oft concentration and dominance in i every layer of the ad stack . First of all, senator, we have built good products and im proud that the system chooses to use those products. S. A couple things. One, the numbers which talk about ad server, like specifically ad serving which is the sort of the plumbing of the internet. We dobsites have a popular prod there that it doesnt take into account the richness of the entire ecosystem. Many many publishers out there chooso to provide their own advertisini directly, facebook does this, amazon does this. Tiktok does this. Yeah, but they dont provide advertising on the open web. Are you telling me that you met think that theha uks Market Competition market authoritys statistics are incorrect . Do you dispute these statistics . I do think they used too do narrow a market definition in looking at how to construct thew market. And i also dont c thinko theyn into account if we tried to raise prices, that there were so many other options out there that publishers or advertisers optid flip to onee of these othr options. I would be very curious givenwt that to hear what you think, ly what you assess your market share to be in each layerer thet ad stack . Would you make it available to the members of the committee . Very happy to cooperate with you. With anything we haveve perate internally int to help you understand how market share works. I want to make one point. Oint. Prices have fallen actually, im not interested in your instruction on how work. Market share works. Ested im interested in your respanse to the uks long study about your dominance in each layer ofo the ad stack. So ill take that as a yes. Well look forward to those statistics. Next, lets talk about your alk dominance in search and whethera or not hownc youre using your dominance in search and actually in video and youtube as well, to help give you dominance in the a ad stack. Domina its true that in order to place a display ad on youtube, you have to go through a a google platform, is that right . Ght . That is correct. The same for search, right . If i want to put an ad in search, i is to go through a google platform, is that correct . Like Many Companies, we sel our own operating control vento directly threw our channels. Many other companies do this ast well. Hesea and you control 92 of the market for search, is that when right . I dont agree with that at all. When people search fore se f or sometimes they use our product,l which is a general search th engine, but more often, they use other apps and experiences to find what theyre looking for. Od ill make one point for google a searches. We wouldld loveto if b people c our site when they wanted to buy a car or a bike. Or in california right now, its about buying air purifiers and detecting air quality, but they go to amazon more often than they go to us. Us. As a matter of fact, 70 of commercial queries start with a website other than google. T well, im talking about i understand thatwe you would liku under your universal search ry aspirations you would like every search in the world to be c conducted by the Google Google platform, but when it comes to assessing markets, your aspirations and market definition are Different Things and im simplyly quoting to you the statistics that other o authorities, including the uk uk authority have found, when they assess your dominance in the an Online Search inmarket. On but again, if you have a if different number, you can share that with us. Us i think you control 75 of the e market for online video platforms. Heres my point. T. It looks like in order to advertise in fact, its truee in order to advertise on eitherf of those dominant platforms, you have to use a google ad platform. That gives you an enormous advantage, enormous advantage i, this ad stack that you control every single layer of. Of. People come to you on the supply side and on the demand side sie because you control so much inventory, so much space, and also because you have so much data which you have collected through your consumer facingth applications like gmail and search for that matter. Gsuite, et cetera. S arent you using your monopolies in search and video in order to boost and maintain aonopol monon the ad space as well . No, i think the right way to look at whether a market is functioning is to ask yourself,t are there lots of competitors, lots ofere choices. Compet are prices falling . And i think when you look at tn Online Advertising, not only the search for information, but Online Advertising, youll see o there are a lot of companies doing very well. You have i touched on this i. My Opening Statement, but larget Companies Like amazon, amazons supply Side Platform, over the last three years, has grown, its is bigger thano ours. You have small Companies Like the trade desk and rubeicon tha have grown because all of these companies are able to rts of participate in either broad parts of the ad tech or narrow a parts of it and theyre able to use whatever advantages they have inhey hav order to produce competing product to ours. The there is no lack of formats for people to advertise today. Whether its on mobile, whethere its connected tv,r whether it on the web, and there are no n lack of Companies Including newg Companies Like tiktok, which ar, becoming very popular in terms of giving people new inventory toto advertise against. I dont agree that there is no choice. If i could just ask the the indulgence of senator klobucharo could i ask two more questions . F of course. Thank you. Let me just come back to the issue of transparency that senator lee was asking about a moment ago. When when google participates, when google itself participates by is buying or selling on the the auction, does google disclose g what it made to either party err during that transaction . We have contracts with advertisers, where advertisers a can see what fees they pay, andy we have contracts with publishers, where the publishers can understand what fees they y pay. There is transparency. They know how many dollars they have put out in the market and k they know howet many now h but theyow know so is you answer yes . Swer, they know what you, when google itself, im asking about you, because you buy and sell on the auction and do it on both sides. You doside it on the supply sidd the demand side. When im asking when you buy and sell on the auction, do you disclosea to the parties you represent what you paid . Senator, im not again, w have a series of let me ask it a different fet way. Do your clients know how much mh money google makes from acting transacting in the auction . Oe one of the reasons we publis published the blog that we published and im happy to shar that with you y you canou tell me here becaue youre under oath. Re its much more interesting to do it under oath. He tell me here, explain it to us. Im sorry, if you are a publisher and you make inventory available, you know what you have charged for that inventory. You know what you have received. Do they know what google why makes . Im asking do your clients know . What you make . You buy and sell on both sides of the transaction because you control the entire ad stack. Tac. You control the whole thing. T you control the exchange. You control the buying and the selling. So you buy and stell ostensiblyr representing other clients. Icli wantents to know do your cr know how much you have made when youre buying and selling on both sides . So if it is a publisher that is making their inventory available, they are aware of how many how much they both th re received for the value of their inventory and how much they paiu to us and other members of the e chain by which advertisements are sold. But they dont know what youh made . The value of the value transact you, you you,google, they dont that . That . Nt disclose im strugming with the beca question because i think there are soo manyy pieces of the ad tech chain, and so many different people that partic participate in it because it is an open architecture. You can use our publisher tools or other advertising tools from other providers. Its hard for me to say. S publishers arent generally aware of what the advertisers pay on that side of the equation. Advertisers arent generally aware of what publishers make. T its not herdisclosed other than each case, you have contracting parties who have signed s agreements with usig that make e clear to them exactly how much theyre paying to us andyre us themselves. The concern is senator clobutcl klobuchararklobuc has been extrs indulgent but because there isnt a transparency in the market you control end to end, you control prices, youre rofis making profits that nobody is aware of, and its hard to get r clear on. So they dont actually know, t your clients dont actually know what your role in the e in transaction is or what profit r youre taking away from it because you dont disclose that since you control the whole stack and you buy and sell on both sides, you are essentially privileged yourselves. With that, ill yield. Thank you. Uch. Thank you very much, mr. Harrison. According to the uks uk competition markets authority, s google has dominant market share positions in every market in the ad tech ecosystem, what i was talking about in my opening, with particularly high market et shares of at least 80 in both the publisher ad server and advertiser ad circuit markets. S. In the opinion of some experts, google gained these dominant di market share positions through acquisitions, buying double click in 2007, ad mob in 2009, invite media in 2010, ad meld in 2011, and addomitry in 2014. Thats quite the collection of t names. Although someection enforcers r competition concerns about thesi deals when they were proposed, e none were reallyd, challenged. With the benefit of hindsight, it seems obvious that these acquisitions were undertaken by the company in order to add to its market share and without explanation that i really cantt thinkio of anything else is thee for thisre series of mergers ov monopoly power it currently has. Mr. Harrison . Im sorry, senator sor the question is the question is what explanation is there for this series of mergers other than you were buying out what were or would have been evu event youll competitors . So going all the way back to the first acquisition, which is double click, we made a a commitment because we recognizee that a vibrant healthy publishet ecosystem was in our benefit to invest in our tools and the reason it is to our benefit its because if youre using Google Search, if there is one or two sites, were not a good value u. Proposition do you think that google would have had 90 of the publisher ad market if you hadnt bought double click. Respectfully, and weve read the cmas for the uks competition and market authorit report, there is a couple of things to note in that report. One, they found that competitord were able to succeed in this market. P apple, amazon, twitter, snap, they found that publishers used between all multihome that advertisers used four in six tools so there is tremendous choice. Each of the acquisitions that a youch outlined were us trying t find a piece of innovation. In connection with ad mob which is agood example. And so we recognized the chance to take ad mob technology which was nascent ant the time and anr our knowledge of large scale Computer Systems and we built at mob into a very effective vertis product for mobileer advertiser but we didnt buy it because there was an anticompetitive intent. Are you troubled at this point you have market share harw without any real competitor in this area . I just dont agree with the e market share. Ehare. If we could take one aspect and and i tried to address this earlier with senator hawley, sei that ad serving market, the b publisher and adot serving the actual tags, that has been oftes cited as where we have a 90 ar. Share. Ec when the e. C. Looked at this eyu issue with connection to double click, in house tools could tha easily be madeco externalized a are used by huge Companies Likee facebook that our market share dropped to 20 . When you look through each instance, again we have popular, products and i recognize that with popularity comes questionse especially good questions like the ones youre asking, but we dont agree that were dominantd there is aon tont of choice an think that markett is operating very effectively. Ng ve all right. O well, we disagree on the d dominance. Youtube has out, and this is nd outside of places like facebook and has a broader audience reacu that Facebook Youtube video adst they are a must buy for advertising agencies. Initially all demand side d bid platforms could bid to place ao on youtube but in 2015 Google Limited Access to only google ts dspdv 360 and this had a crippling effect on the googlee rivals because most advertisingp agencies prefer tor use one dspl and the limitation forces ad youtube ad inventory into google dsp, it had the affect of driving nonyoutube ad volume to google and away from the rival dsp. How does google justify the o decision to limit access of youtube inventory to its own affiliates . In in 2015 we were trying ton wrestle with new european rules coming forward on privacy. Y. And in response to that, we migrated to what we call a true view, a viewing platform that allowed a number of features like being able to click throughf ads and some of the some of the toolsls how you watch videos no that no longer made it compare applestoapples, with other inventory available on ad ex which is one of our exchanges. In so we have to make a decision r for our only tool because we didnt know how to make ope it operate a wide auction competine against other video advertising. And a couple of things that coe from the cma report, they found that youtube share of display video advertising was only 10 to 20 and looking at the same variables in figuring out what market share was. Re many there are many other companies that have beenbeen successful i selling their video advertising but why couldnt you have advertisers deal directly with youtube . They can deal directly with youtube. Im sorry, i dont understandnd the question. Im asking if youou wanted make youtube a walled garden, why not have them deal directly with youtube. As opposed to using our ad serving mmhmm. Our well, i think that is si that is the tooll that we put t advertisers in order to buy ads on our platforms. I think your proposing creating a separate tool and that didnt seem that doesnt seem to met to necessarily make sense. Cessarokay. So whenever we go through all oe the go things the answer is usut that google argues that it has no incentive to harm publishers, advertisers or users. If this is true, why are we hearing so many complaints . Why do we keep hearing this . H you dont hear complaints abouty companies all of the time. Ou but when you startbout hearing e overr and over again, it feels l like a canary in the coal mine l in people feeling there is not l even Playing Field because the buy side and ad side of the est stack andhi there is an inheren conflict of interest they see cs and it reflects the lack of competition. You have heard those complaintsa and what would you do if you were us . Senator, there is were a popular service, i understand sn that. And if i was you, i would do ani what youre u doing which is skaing the questions that youre asking. And one last point and i dent know which complaints youre i talking about, but in the same t period of time that we made this decision on true view, two platforms in particular, amazonr were able to grow and to become a larger platform than us rm tha without access to this inventory. I think Many Companies have their own successful products, u their own successful ways they could sell their advertising or able to do that effectively directly. But t again, happy to keep answering these questions. I think youll you be able answer them from senator blumenthal who is here. So senator blumenthal. Thank you, senator klobuch. Welcome to the Committee Even though it is virtual. I think with all due respect, mr. Harrison, youve been givenn a really thankless task of defending the indefensible. In google claims that what it does is, in effect, preside over a e open and free market but in no n other markets does the same s party represent the seller, the buyer, make the rules, and conduct the auction. And i think that is the nub of the issue here from an antitrust standpoint and seems unacceptable in a really free ee market and in a free enterpriser systemise which is why i hope te will be antitrust enforcement directed against google. The european authorities have ae already shown us the way in their leadership on these issues to protect consumers. And the point of antitrust law istrust l to protect consumers competition, not necessarily other businesses, but, in fact, otherer businesses are also victimized. Local newspapers,iness like thee hartford current and the new Haven Register so they could lo employee peoplecal locally and provide news to people like me. And provide their communities withmmunit a real public servic to sell those ads google ects collects sensitive commercial information about the newspaper andndnews readers. Ry si you know every Single Person who, like me, wakes up, reads the current and the register and other newspapers, and we trust a you to actn as their agent on te ad market. They trust you to act as their agent. But google has an immense conflict of interest. You dont just represent the any newspapers in theou trarnsactiog but in the advertisement as well and you run where the actual transaction happens. Tr youre able to use that information you have on all of e the parties to extract massive e possible value for google. Which is why you are so immensely profitable. Eur 40 on capital according to european authority. So let me begin by asking you, does google fire wall the register and other data from the rest of its client and operations . First of all, senator, i wao to say that were also highly committed to publishers and making sure that that industry, which is massively important industry, to a functioning democracy, weve committed to ct Building Products fort them to m help them transition to bscri subscriptions. We know thatt in time of covid be that advertising revenue is fal falling for newspapers so were helping themhe drive the subscriptions. And in the process ofroces enga in conversations worldwide to reset the conversation to make sure the publishers are quality journalism have financial support. One of the reasons we got into ad tech in the first place was in order to help mr. Harrison, i apologize. Im going to interruptrrupt you because as you know time is fau limited. Not there any fault of yours so under our rules. So l so let me answer the question et for you. The answer is no, google tags the current and the register readers and allows advertisers to target them elsewhere. Google if you dont want to pay their prices, ill help you youe target theyre readers still. S, that is in my view, a breach of trust. That money should be going to the newsrooms, not to google. Do you disagree with me . Senator, we published a blog on this. Ill be happy to share im information. News publishers keep more than 95 of the revenue that they e generate from the content that they sell. They do that because the option to sell it directly and many of them do, or they option to use our systems where the rates we take are far, far lower than the industry average. Your questions regarding data, data is subject to the agreementss we have with the publisher. I cant understand what you think that were doing incorre with that data. Youre using the data for benefit and not for the viewersr or theiv readers ab youre drivg them out of business. Not financially out of business butinancess engagingbut in coni cuts their payrolls, there are fewer employees at those newspapers nationwide, not just the current and the register, gd down the list in connecticut and around the country. And it is used to your benefit, not for the benefit of the the people who own that data. Senator, i respectfully dont see it the way that youre describing it. We we use revenue share with publishers who so we benefit when they sell adding. Adver our sole go is to help them make as much as they can so we in rtisem return have the rep share on the advertises they are selling. There is no conflict there, our interests are aligned. Re maybe not from your point ot view. Your interests are your aligned your company but notot with theirs. Let me ask you about the system of the amp and exclusion of ad companies. I know it sounds technical but e it has an impact on google and consumers. Google started a condition treatment on Google Search, a market where google has 88 s market share in the united i states,n on publishers adoptio of another google product, amp. And it did so right at the time when publishers finally found new toolsound to foster competio when google set theogle rules f amp, it had forced them back into googles own products, it conveniently also handed google a treasure trove of publisher data. Publishers were facingngtr a possible loss of 40 to 50 of incoming trafficc with the top news and speed update rules unless they cave to those rules. That is quite simply a stunningi abuse of google market power. And id like to know what your explanation is. Senator, wee. Introduced wha we call amp, accelerated mobile pages, which i think youre rer referring to as for a simple reason that when websites load slowly, and in particular when a the websites werend making a transition to mobile environments, where it was new technology and some of the pages were loading extremely slowly, if a page loads slowly, it did not monetize now. And people generally move away and often it is the advertisingh thatat interferes with that loa speed. We introduced amp to help help publishers to try to give load publishers a tool to allow pages to load more quickly and were proud of thethat tool. We never architected that tool w so it was a close the system. To all of the tools that we use in our ad tech stat have to operate because of the multihome with h every other product that in that is operating in the systems. Amp was no th different. We didnt design amp so that it would only work with google or design amp that it would close other ways to sell your inventory. It is about simply trying to ges web pages to load faster. Clear weve been clear since that amp is not required to use any of our tools. My time is expired, but if wi have anotherf round of questioning, i hope we can followow up. Thank you, mr. Chairman. Thank you. Senator klobuchar is going to go vote in a minute and so im going to let her go out of turn. I just have one question here. And to me and this conflict, mr harrison, is pretty obvious. And i know you see it di differently. But as you think about the fact of your companies arent a verb. Our c google it. They theyre not a verb. Youre it. And so that is fine. Except it is not fine when you are controlling as senator blumenthal just pointed out thi advertising side, you are the dominant side. When youre controlling the dominant one to publish and then you control the auction that those people, people participat in when it comes to determininge the advertising. So i guess one question i have, some people have actually compared the Digital Advertising exchanges to electronic tradinga in the financiall markets, whic are regulated to prevent conflicts of interest and inappropriate self dealing and trading on inside information. H this is not how you startedoit as a company and now are a verye successful one, but at some point regulators and people tryingoint to ensure those competition have to start to looking at models like that to make sure there is not a at conflict that advantages your company, one arm of your compant from the other arm. So why shouldnt the digital ldt advertising t exchanges be xchag regulated ines a way like that . Thank you, senator. And these important questions. O i think you look for regulationr in a market where you see market failure. And i dont want to sound like broken record but i do not see market failure in nine advertising. But im just going to i want you to be able to answer. But when the market failure may not be as obvious when you talk about the prices for your immediate productct which couldh have, the way, gone a lot lower but there is a market for the a contentre producers who arent g able to get advertising any morl because they went over to you and still trying to provide the content. Failur that is a big failure for them. L it is just something that methin doesnt quite look like you. So, i would highlight that the cma, the uk market looked at this and found that most p publishersub used between four n seven tools, most large order publishers used 25 to 30 tools to sell advertising. And the fundamental test is arel they getting valuable dollars de for the advertising that theyre selling and seeing that and i l think that is the case. Ts t i think you wouldnt have large Companies Like at t or verizon o participate in this spacen if they didnt think there was a chance for them to carve out a a meaningful Value Proposition ore small Companies Like the trade desk which grew to 20 million s in market cap becauseho they we able to carve out a good value e proposition in this same ad tech stack. I think therec is a tremendous choice and a lot of competitors. I think pri prices have comece. I talked about the fact that Online Advertising prices and our tools have contributed to this, are almost down 40 over the last ten ten years. So i dont see the market failure that would require regulation. Im happy tofa keep getting thek goode questions. I note that we continue to invest in research and dev development, almost 26 billion in 2018wh which is up 10x and because we keep vigorously for every place in the success of our products. And i would also note that in the u. S. , proud u. S. Company, ud weve invested almost 20 billion in the same period i of time in thellio united stated much of the innovation that timi weven produced is produced he. Thanknnovatio you. And again, i do not quarrel witq your success or the jobs youve provided. Im looking ate. Our job which r to make sure as we look at the longng haul that we are ncouraging new businesses to develop and right now not just in your area but across the board those businesses, startups were in a slump before the pandemic and were seeing more and more of that while sl other companiesum are getting m. And more dominant. And to me it is more than just s about google. It is a systemic issue because u our laws havent matched the sophistication of your company and others. Ur ourco regulators havent matcher it. And we are where we are and thac is whyhed i think we need to maa major overhaul. But thank you. Thank you. Of course the test isnt is whether publishers are getting dollars for ad space, the test is whether the dollars they gett are competitive rates or whether theyre suppressed because of co anticompetitive conduct like time. Am i mis missing something ther . I think when the uk looked ay this issue they found the industry average for how much red share was the share of rw theas publishers was around 67 . Our tools are at or higher than 69 . So we are certainly market . Competitive with the other toolh that are out there. Okay. Lets talk about youtube about google and youtube for a minute. As you know, your company has aa very strong position as an online publisher. Particularly with respect to youtube. This is an innovation, it is an asset that you have in occur co company thatmp is very valuable. And if an advertiser wants to place an ad on youtube, as i s i understand it, please correct me if im wrong, as i understand ie since 2015, the policy thats beenadv that the advertiser tha wants to place an advertise on v youtube has no choice pursuant to google policy but to use googles own ad buying platform. So ive got some questions about this. Qu about why google chose to le ch implement this restriction. T and whether that doesnt have some tendency to exclude competing demand Side Platforms from the market. So, for example, lets assume, mr. Harrison, that if youtube ue were an independent actor, and as such as an independent actor trying to maximize demand and d revenue, why wouldnt youtube in that circumstance open up its yo inventory to as many demand Side Platforms as possible and pop therefore as many bidders as osl possible. Make sense. Senator, i think it depends e on the goals of the platform, of the website. In this case, againin we were trying to balance new features thatth we were introducing thaty the fact these features were not offered by other platforms and inventory and it is hardbe to s that inventory sidebyside. I a i also think to answer your question, that a lot of examplee of Companies Choosing to selfprovision their own ampl inventory, facebook, snap, have pinterest is an example, they have required we use their toolr in order to directly purchase p nir inventory. Again, in many cases, and i kno this is the case with snap and t pinterest, theyrery trying to balance privacy and the issues around privacy with the sale of advertising and theyre very protective of that and i think the confluence of those two things gives a reason why people have chosen different ways in order to sell their advertising. Those companies arent musthave properties, though. Enh theyre different than yours, right . Again,yours, i dont know wht have in the this context means ability to reach consumers. I do think these are platforms that have their specific focus t but very important in order to reach their to reach consumers and point to the massive amount of choice that im in the ecosystem out there if f youre an advertiser and want to try to find a way to sell your product. I know you claimed that advertisers might end up bidding against themselves. But surely the Worlds Largest s Technology Company, that is your company, google, is capable of t create a workaround to prevent that. If advertisers, assuming the s l advertisers couldnt do it themselves, you being the ing th worlds Biggest Technology company, and the most successfu, one, surely you could figure at that out. How is this not just sort of a cynical effort to leverage the market power of googles prop properties likeer search and s youtube into something of a nopy monopoly in Online Advertising. Senator, i want to point outt that were not the largest arge Technology Company in the worldi there aren t at least three oth Technology Companies right now that are significantly largert than us. Okay. You get thehe point. Were not going to quibble aboue whether or not google is a large Technology Company. I get your point. Ur point if you want to split hairs there. That is fine. But my point is there arent many in the world with the skill and the expertise that youve got, right . Agreed. In the areas we compete in, yes. Go ahead. Im sorry, your question is . Myy question is why couldj you figure out a work around for that, so they didnt end up ding bidding against themselves . That sounds to me like something that is not really all that at difficult of a thing technologically speaking to unwind. Senator, that is a good question. Ti a lot on. This is a complex ecosystem, a lot of the pointss ive tried to make is complexity as a result of the fact that yo havehave almost 800 participant. The ecosystem. There is an issue with the fact that there are so many platformy on one side and so many d platforms on another that you haveveon advertisers bidding ino many different platforms that maybe aggregated demand from tha same sources that they end up competing with themselves. Ves. I think one of our criticisms of a tool called head or bidden when header bidden came out it. Was opaque andd better for publishers and i dont quibble i with that butse it was differen for advertisers because they ow didnt know how dollars were competing with themselves. And one of our issues was to try to stitch that back together with a new productn called opene bidding that tried to give transparency back to the adve advertisers. Rt i think with any large ec ecosystem, like with ad tech,cy the more likely you have this situation where advertisers could bid against themselves. Id there is one tool and then they have perfect transparency across the tools but that is not the state of the marketing. Today at dont think you want us to be that one tool. That would sort of solve the lvt issue that youre raising. Lets move on to a differentt issue. Mr. Harrison, it is my g that understanding that google does not provide advertisers specifio information on the effectness ov particular ads that they run su such as how manych clicks an adl received or how many people who happen to click on a particularo ad actually made a purchase. In other words how many of them resulted in closing a sale. In that seems like an important piece of information, important category of information rather for advertisers to have whetheri dos Comparison Shopping andso ac making Strategic Decisions about how when and what way and through what platforms to advertise. Hear, google pr competitors provide or allow third parties to provide this kindnd of information. Will google provide advertiserso with nonaggregated particular ad impressions . Senator,ed at im surprised this maybe because im not understanding you. We have whole teams that are hi dedicated tong nothing but helpg businesses on their roi for t. Advertising for dollars spent. The whole reason that google hae been able to successfully and a successful with small and mediu businesses, whether large com companies could only buy adio television or radio advertising, we allow Small Companies to spend smallery amounts of moneyy order to access the advertising ecosystem, there is a great of example of a Company Called t stride or bikes out of north dakota that sell 50 of the inventory internationally. Not only do weternatio provide t capability but we give them ve h many, many tools to figure out s whether or not theyre getting return onn their investment. Rn n so i am surprised. It is possible that im not understanding your question. But we give advertises tremendous tools to figure out whether or not there is value ie the advertising that theyre spending. Okay. So how do you respond to those claims that you dont provide them . How do you respond to claims pod that from advertisers that h you dont giveat them that information . Is thation. Just wrong . Well, i dont there seems to be, im sorry, if i sen understand your question, there are specific types of information theyre looking for. Im worried that either perhaps we restrict that information ede because it is privaterh data or one of the claims they make is that to the extent you provide them with some information about it, it isnt as good or robust or not as complete as from what they get. From your competitors. I would have to and by th way very happy to follow up with you in order to understand your question. We give them as much data as web can. It is possible that some of the data relates to specific behavior of the ad as compared d to specific users or aggregations of users and again we are careful to protect the md privacy t of people that use ou platform and there is a limit o how much we could share with advertisers. My time isexpi expired. S senator cruz is up next. Thank k you, mr. Chairman. R mr. Ch harrison, welcome and tc you for testifying at this hearing. Hear thank you. Google is at every stage in the advertising process. On the buy side google serves at ads and has a buying platform, on the sell side it has an ad exchange and is the publisher. No other company that im aware ofofno o is in every space and other company is nearly as prominent. Given that, you agree that google plays a dominant role in buying and selling ads online . Senator, i agree that we have built tools and, again, obviously tremendous success with our own properties in how we selling advertising on our v own properties and were re inv invested in the success of the e publisher ecosystem because we think that is a vibrant ecosystem is good for google and the publishers that participate in the ecosystem, that whether or not the question, the question is dominant applies some sort of abuse and all i see are sort no, i dent talk about. Im talking about the degree ofw market powerer you have. Ou hav by my measure, google is the 800 pound gorilla. Isnt that right . Any is there anybody even close . Well i think that there are s companies that are ate . Or larg size than us. But i also think that the la id of dominant in market power means the ability to raise the prices or lower innovation and l prices have fallen in our investment in innovation, againn 28 billion in 2018, that is up 10x over the last 10 years. What companies do you believe are at or more dominant in buying and selling ads online . Wells do y i think we have h competitors, i think facebook iy a very successful company. Succs i think amazon in building botha its own ad products as well as itsow supply side capabilities a capable competitor. They exercise constraint to charge prices or not invest in innovation and to me that is a healthy heal competitive enviro. Facebook and amazon and are competing with you in thee searh space, are they . Yes, senator, i would say they are competing with us in the search space. Ill confess, ive googled something today. Gled i havent facebooked it. It i havent i may have ordered something on amazon, but if im searching for something, i go to sites for different purposes. When someone wants to find out s some information, when someone e wants to find w out what is joe biden think about taxes, they search google. Xes, and the Google Search results are what they lookk to, is that correct . Senator,o, is i think it is greatse question. And, and if i could share. I think that we offer a general search engine. That is our Value Proposition and im happy that weve built a good search engine. Engine maybe 20 years ago we occupied a specific space and i know the a numbers are thrown around because people compare us to other general Search Engines but i dont think that is how the search for information begins. I think people decide they want to buy something, right. Ne. And then they have a choice. T im noto talking about purchasing something. Ey and i agree for online purchases, if youre buying leoks online, amazon has a d dominantt position. You took issue with dominance and said, well, gosh, google isnt abusive. Sai there is some discussion of this already during the hearing but earlier this year google used market position to threaten theo federalist which is a conservative website and f demanding that it remove the comments section, take it down or it wouldnt be able to use o google ads. If google isnt dominant, why t does it have the power to demand of a media publisher it disagrees with that it take down the comment site and why does ih expect immediate obedience . So we have an ads product ans that ads product has many policies that determine what we can show ad inventory against. Y i think if youre someone who makes child clothes and want tod sell child clothes using our advertise system, you do not want your childrens close to appear next to harmful or offensive information. Ne in the federalist case the ralit Comment Section had racist come commentary in it. Ntacis and thatt violated our ads poliy so we couldnt show ads next to that content and those policies are clear and published and and so how many other medis outlets do you demand they pullo down their comment pages. E any that was like in the racist information like the nots federalist. Were not asking to pull it down sosower googlee owns youtubh is a dom nantz immediate vau viewing platform. Youtube allows comments. S. Plat there arefo racist and offensivt comments onhe youtube. Imm assuming that google did demonityize publ we give three choices tom publishers. One they dont have a Comment Section. Secondly it is behind another click and by the way a large of news publishers do this like rs the New York Times, to get to the Comment Section, you click once and it is a separate web page and therere is no ads showe on that web page. The publisher is free to operatt and on a separate page or moderate their comments page. Pa this is what youtube does. Theyef heavily in one quarter, t remove most comments at the 99 mark before people see them or. As soon as they appear. T that is why ads could show nextt to that so in the past two years, how many websites, how many Media Outlets has google used its dia market position and market powet on ads to force them to take down or change their comment page. How frequently is what happened to the federalist happens to others. Im happy to get back to youw with that answer. I would point out that we do receive complaints on either ts side of the aisle on this issues we pull down videos on the daily show, on last week tonight and democracy now and have received complaints from those sites so we operate a wide platform and that has more views than probably ever expressed from v Human History in oneiews platf and we get complaints from bothp sides when we use our policies,d again clearly stated policies t. Pull down content. So mr. Stat harrison, iming follow up with you in writing and ask you for information and you just represented to this committee that google will formt provide that information. Ive asked youpresen for that a. Nformation before and google has stonewalled and refused to give an answer. Efused so im hopeful that your testimony here will bee followed up on by some, some modicum of transparency. Lets talk about youtube for a e second and our time is wrappingr up here. Sometime ago i visited with the youtube ceo who reports to google. And she described to me with h respect to stevenen crowder or another conservative libertarian orives li comedian talk show ho googled demonitized and described how the left was pushing youtube to ban him e to altogether and she sat in my gee office andr argued we should bd happy that youtube didnt ban y him, they simply demonitized him and she thought that was a ht middle ground even though she conceded that he had done that nothing to violate the youtube terms of service. Now i pointed out that the demands to sensor and silence are only coming from the left. That i was not asking or othersm were not asking her to silence i leftist or silence socialist is happy for them to speak as much as they like because i think theyre ideas dont with stand k scrutiny. The do you think it is acceptable for google and youtube engage in politically motivated and biasep censorship by using demonityization by punishing anybody they wh dont agree witw politicalith bias does not influence whether content appears or doesnt appear. Ewpoin whether it appears at the top, wherever it appears on our website. We have designed our policies sr that political bias is not partc of theal equation. We have whether it is youtube or search, we have a very rehearsed process to make sure when new experiments and new sut exchanges and we do 400,000 a year. So my time is expired. But as a final question, are you familiar with dr. Robert a epsteins research and how would you respond to his conclusions e that are directly contrary to what you just testified . H and yeah, senator, id love to follow up on that with a quick t answer. Im aware of the survey. I think we found that the rvey. Effective andsnt we actually ran our own we searches, sorry, our own o investigations actually into the senate to figure out whether or not we could find in any bias n youtube ads or search perform, and we cared both republican and democratic senators, and we found they were evenlyly balanced on both sides of the aisle in terms of engagement on youtube or how our click through rates worked on search so we dont agree with this and the economist has also reviewed both our search and found no evidence of political bias and d the f economist is an outside organization. Will you provide that study l to thisit committee . Yes, i will. Thank you. Senator hawley. Thank you, mr. Chairman. Mr. Harrison, let me come back i to the issue if i could of ad time, which is what senator lee was asking you about about a moment ago. We talked about how youtube and search, you have dominant nd positions in both of those areas and platforms and that you havee to use a google ad platform in order to place advertise. S on adver search or youtube. Which means an awful lot of a people are using tools like google ads and dv 360. My qu my question is do your demand Side Platforms like dv 360, do u you offer volume discounts to advertisers . You mean do large marketers for instance, do we provide different rates . Is that the question . N . Do you offer volume discounts . We do have programs that allow very large advertisers or very large agencies, which i believe are industry standard, reduced rates. Im not sure whether that is a volume discount but reducing v rates when they buy our ha advertising. Areolume these volume necesso get the discounts iff they increased over time . Im sure that as our systems have grown, they have grown as well. In fact it increased so muchd that you cant meet the volume a requirements just by advertising on youtube or search, you now actually have to use googles demand Side Platform to advertise on third party platforms, isnt that correct . Cr imec sorry, senator, i don know the answer toll h that question. It doesnt sound like it is the case to me. t but sou i will need to get back you on how back that works. Wouldnt that be a problem if that were correct . You be wouldnt you be using your posi dominant position in youtubeti d in search in order to incentivize and monopolize the . Ad market. Senator, se i dont see it way. If largeway. Advertisers, brand that we know and love or agencies by a lat amount of advertising, it is a good thing for the various networks that ht could participate in that advertising to to benefit bf from the increased demand. And so, yes, we and many other companies if not all other er Companies Selling advertising use programs that progra incentc largeal scale ad purchases beca were in the business of sellini advertising, but i dont know t that that is harmful from the perspective from our self Side Platforms. It is harmful because it d gives you an advantage be that v nobody else has. Has. You have the youtube and search platforms that other companies do not have. Ot you not only own those platform but as has been discussed at some length now,w, you control u entire ad stack from top to tack bottom as well. And youre using thur dominant position to givee yourselves a dominant position in the ad, ank not just on the ad side, but also on the supply side. Ad because as you drive so much oni tove your demand Side Platformd creates then strong incentives on the supply side for publishers to use the supply side, not least because of tremendous amounts of consumer data and there are great efficiencies that you create if publishers will use your supply side given the volume you have driven to the demand side, the right . Thismand looks like tieing to l the ooksantitrust l context. Am i wrong . Senator, i dont agree. First of all these are very small percentages that are usedp only with the largest argest advertisers. I think you will find that anyone who sells large amounts of advertising and i think i of would include some of our tha largest competitors, including some of the competitors that mpi also operate largeto supply sida platforms as having similarin sent incentive advertisers that you would encourage buyers to buy more seems appealing from a business perspective and given the choice that ive outlined it terms of both publishers and advertisers using all sort of ep different platforms to buy or sell advertising, i dont know where the harm is. I think the concern is that i you control youtube and search which are the dominant platforms, you control massive u amounts of consumer data that f you have harvested from your ved other consumerfacing platformo gmail, google maps, gsuite and use those advantaged in the ad stack at every single layer, every layer of which you exercise dominance in. Ay thiser o looks like monopoly up monopoly and in a classic case n of tieing. Well see. Were going to find out, i hope. As these antitrust investigations proceed. But the these appearance, i thi very troubling. Ance i thank you, mr. Chairman. You, senator klobuchar. Yep, since were still goinge here. Going i had a question on the privacy front and maybe talk a little fr bit about googles use of s consumer data. As you know senator cantwell and i have andnd a number ofof othe are trying to work out privacy legislation. N. It has been hardt to pass and tp companies for a long time have n beenie sayings no and then suddy states are doing individual legislation and then all of a sudden there is a cry for federal privacy legislation to i preempt the states and i get th logic but i want to make sure everything that we do is as strong as possible. Ng so google has a lot of personali data frombl many of the popularo consumerf businesses that weve just been discussing, senator hawley just brought up some of them, chrome, google maps, android and gmail and youtube f including data as i mentioned on location, gender, buying habitsb et cetera. Et cet and the user consents to allow google to collect this data are extremely broad and allow for practically any use. E. It doesnt seem like most people really understand what is goinge to beople doing. I know this feeling you get on a a site and you click the box and no one really understands what is going on or what theyve lly consented to. First of all, two questions, tin thiss, seems like a big probleo me. Do you realm thinke. Think peopp understand that and do you see y why wereou trying to drive som kind of privacy legislation . Yeah, so, yes, this is it is always beenth a serious issub but it is especially serious issue especially as were seeing legislation emerge in european and the u. S. In e first of all, from the beginning, but certainly in a na push over the last five to ten e years we design all of our products with choice, transparencyt and control. We try to make it as clear to users as possible what they ares consenting to. It is i take your point that at times it appears confusing. It but what theyre consenting to, how we use their data and then they have the control whether or not they want to delete the da or provision ads against that ha data. What kind oft ads were putting against this data. And and i think were Getting Better and better. Have you ever done a aou stua see if they understand what is t happening to their data and told them afterwards this is what happened, did you understand that that is what youerward sig for . P so, we have almost a billion users nowve that have gone to their google accounts page to check their privacy settings. We have 20 Million People a day going to the google account to check and verify their privacy settings. We just released our new versiot of android which is trying to do a much better job of making mu sure. Ch okay, i just asked that. Ad i made up that question here ons the spot. Tion you have done the studies wherey you have done what you agreed ts do. We do user studies with any change thatat we would make. So any one of the changes that i just talked about, im sure that we have product managers presentedond it and studied it and looked at it closely and try to make choices in the best interest of our users. We want our users to make the decision on how they control and use their data. U andse do you have get why wy have concerns about your pending acquisition of fitbit because it would just be more data to add to googles trove of data and te then that continues this big tis data problem t with one company . So, i do understand that you have d concerns. And like any acquisition that wy do, that will be subject to b regulatory review both inoth i u. S. And in europe. I want to be clear, that ear, acquisition is not about data. And we are willing to commit and im committing today that we will never mix that data with our adscommitti data in a way t show ads towards towards usr users of these things. It is about and im not sure youre wearing one, you are i i wearing nkone. And youll have the data if you buy that company. This deal is about devices. It is about health care and making sure that were providing Good Health Care and decisions t to the people that use these products and not about ads. Se p rodu okay. There are companies out there doing a very good job and apple is one of them, of d developing Innovative Products in this space. We think peoples expectations of how they interact with computers is changing and they want watches and things to wearh on their chest and glasses and l that is what this deal is abouth okay. Ats and ill ask on the record so wl could get moving with our witnesses some questions about dynamic allocation and the double click feature and how that may be unfair to other c competitors. And we could go over thatomnd w all right. R. Thank you. Senator blackburn. Nator thank you so much, mr. , chairman. And mr. Harrison, thank you forn being here today. Being i want to know, is there any single competitor to googles Online Advertising business that offers services in every level s of the ad stack . There are competitors at each portion of the ad stack. But there is no single competitor that is Offering Services at every level of that ad step . I think there are a few competitors that have tools thao have both buyrs side and sell se tools as well as the tools that allow for the provision of advertising. I dont want to say a name because im worried i will get it wrong bu i could come back to you. I thinkcome b this ad is imp as we look at this issue, because what you basically have built is a way that you are u ae controlling the entry into that ad stack and because you are dominating at every level in that. Let me ask you about this. In 2007, googles general counsel Derek Drummond told thee u. S. Senate in the context of the double click acquisition, nb control over the advertising, no ownership of the data, that comes with that is collected in the process of the advertising. The data is owned by the stome customers, publishers and and d advertisers and double click or google could not do anything o with it. Th but in 2016 google reversed course and merged users browsins detail with search history. Many stakeholders complained that google treats the consumer and pricing data as its own. Very subjective on this. Own. Do you agree that the Data Collected by google in your ooge business double click is owned by the customers, publishers and advertisers and is not owned by google . Senator, i believe that we need to provide our users with control over their data, clear control over their data and cond sent when we want to make nt wh different uses of that data. Ses in the case that youre talkingh about, we did make changes in 2016 about how double click datk operated and google data ope operated. We got the consentn of goog allr users to any changes that we tc made and if users did not ny ch consent to the change then id i ask the question to you this way, when you are using a a Google Service online, who owns your virtual you, is it the user or google . Gle . Users own their data. And we do we have instituted a whole bunch of tools to make i sure that the choices theyre making, that the uses are es a transparent to them so they could control. You could go on to your google account right now, assuming ntoo youre a google user and delete your data. Let me ask you this. Does google collect and retain any of my data when im using am your service . Do you collect it and do you retain any user data . Reta and do you collect any of this from Third Party Websites that i may go on and search a website through Google Search . Senator, it is a broad a question. But to the extent that we collect data on a user, a signed in user, we make sure that the user knows exactly what we collected and how we use it and gives them theus control to chae that use or to delete it if they want to. Okay. And letchange me ask you this, could look at your service and say, well you all have some conflicts of interests when it comes to google Advertising Technology services. And are you how will your r Advertising Technology Services Play by the same rules as other third party Advertising Technology services if you say f you have these competitors e within the ad stack . So, at each part of that rt journey, right across the ad tech stack from sell side to bud side, there are many different participants. Ive listed off the participants. But large Companies Like at t, verizon, Small Companies and growing quickly like the trade desk, they all have a specific o value adn. Proposition and datat they bring together to define that proposition and compete with each other to derive the r best value for advertisers or best value for publishers. The rules that are market rules are designed to make sure that people entering into agreements that make the most money for the website inin youreag a publisr the most return on investment or advertisement if youre an gen advertiser and the marketer is operating effectively to make sure that both sides of that equation get value. It is working effectively fo you. And for google. Butffecti i think that all shou providing some assurance that, you know, with chrome, with their use, thatat going to create a fair ecosystem and nos preference google ads and i think for many users you have not been able to do that. But thank you for being with us today, mr. Forrman. Chairman, i yield back. Senator blumenthal. So thank you so much, chairm. And i real want to thank you ank the Ranking Member for having this hearing. I think it has been extremely ts enlightening and i think youre willingness to have this kind oe very Frank Exchange is very important. You know, in a sense all all business like all politics is local so let me bring this downt to a very local level. I was at the long wharf theater just yesterday in new haven, wellknown to many of us who have some connection to yale in new haven. When the long wharf theater in e new havenn. Wants to advertise s one of the localcu papers, say e new Haven Register or the s hartford current, they sell an ad onon spaces other than googlg lets say the theater puts a maximum bid on google ads for ds 10 and google saids the ad spot for to them for 9. Google might find that ad on itt exchange for a lower price. Lets say 4. Google then keeps the spread between those two auctions, thea benefit doesnt go to the long wharf it doesnt go toe the publishers of those newspapers. The uk Competition Market Authority found that google is t keeping the spread. Hethat st doesnt that strike you as an abuse of market power . R . Ab senator, first of all, im f not aware of that finding. Secondly, we have ever sincel we started all of our ad products, we have relentlessly making sure that they got a mak return on investment on what it is that they were advertising. R that we know that over the long run, in order to keep small ine businesses interested inre usin our services, they have to see return on the investment that th they amake. If they were overpaying for advertising, then perhaps a publisher wins inn that moment, but over the long haul, that will actually do damage to both their faiths in the advertisings systems as well as their faith in google. Inding well, that was a finding, an. I apologize for interrupting, but i am limited in time and we. Have another panel of the uk officials. Let melet me go on to another ay what i think is a grave conflict of interest. Th google competes with publishers to sell ad space, and increasing portion of advertising revenue is being directed toward search, youtube and other google properties. Given that google operates the exchange acompetes with publishers, thats a classic example of insider trading. Has google every used the cts product to develop products or steer advertising revenue toward its own properties . S . Ad senator, first of all, at a higher level, we dont were invested in ad tech, where were trying to increase the vibrancy of that system. Not only because we have rev share agreements, but it means for every declare, they make te, cents, 15 cents. Va , but not only because of that, but we think if there are many e new publishers, if there are many google tretailers people w google to find goods and services. And so to answer your specific i question, it is sometimes t i complex to talk abouts s data, i dont have a precise answer and i am willing to follow up. Im w the way you described it, that h doesnt sound like wee would u that data in order to somehow advantage the selling of search ads. Most search ads are directly the connected to the context of the search itself. Itse you look at the query, the words in the query, and then you look to match the ad with the you language of what is being asked for. For. That is i dont want to givet a percentage thats a large amount of the formula by which a we search ads is is it your testimony to this committee that google has never merged or used Data Collected about publishers and their readers for its own commercial benefit . T im sorry, senator. Thats such a broad question that i dont i cant say yes or no to it. Well, i think that is precisely what is at issue here, that in fact you have used that data for the benefit of developing new products or ducts steering advertising revenue toward your own properties. I think that, again, goes to the heart of the kind of antitrust standards that have to be enforced here. Enforce has google ever changed its products to steer investors or i Better Direct them away from the open web, and toward its own content . T . Open senator, just to quickly picp up your prior point, i meet with news publishers all the time ast a regular part of my job. Im not aware of that illi accusation, but i am willing and will following up with you on that. I sorr appreciate that. Repeat your second question. Has google ever changed its products to Better Direct its sa visitors away from thewa open w and toward its own content . I think in to answer yourn question, in 1999, 2001, we had a very simple product, which was ten blue links. These were web sites arranged if order of how our search algorithm believed they should be presented in terms of king relevancy. Map. Over time we have evolved this. We now show a map. If youre asking where is a gas station or local restaurant near me . We might show a calculator. If youre asking a question a u about aes location, we may showm map. If youre asking for a restaur restaurant, we may put that tht restaurant in the context of an area around you. I these are improvements that we think have made search better, more relevant. On mobile phones its particularly important, but you have very small realtant estat operate in. Ht these have increased, you know, the health and innovativeness of our search engine. Now i know people out there have complained that sometimes that diverts. We think its a better search tter experience and a natural searchr experience in order to utilize s technology as d it develops anda peoples expectation change. Thank yous for the answer. My time has expired. I just want to say this is not a criticism of your products, and its not a criticism of your businesses. It is very, very grave doubts about how those businesses are put together and how the power h that they give you is used to benefit the Company Rather thane consumers and potentially stifle innovation. I think it is classically the function of antitrust law to l protect competition and consumers, which is what will be necessary in a court of law. Thanks, mr. Chairman. Thank you, senator blumenthal. We have a second panel of f witnesses that has waited ha patiently for quite a long time. So ive got one more question m for oryou, mr. Harrison, and ths i owill, in the interest of tim, choose to direct the remainder of my questions to you in n for writing and for the report. Be before wef go to our final panep mr. Harrison, in your written t testimony, you make the point that prices for digital ement advertisements have dropped by h 40 over the last ten years. S. But isnt arguably the more important metric, the more more relevant metric a different one, one that focuses on how much advertisers have to spend to o achieve the same number of sales . In other words, what good is it to say that advertisers are paying less money per ad if they have to buy more of those same ads for each conversion to a sale . Senator, its a good question. I think that if you look at the percentage of advertising in gdp, if you go back 20 years, it was almost 1. 4 of gdp. Now its 1 . Advertisers can get their products to market and advertise authorities products easier and more costeffective than they were in the past. N so i think youre asking the right question. Ight think that we have seen no only a fall in advertising ad ei tech t fees, the fact of ties. S. Advertising has fallen in the aggregate. Like i say, i have a number of additional o questions. If its all right, i will send i those to you in writing so we can moveo along to our next ver panel. Thank you very much, mr. H, harrison. Thank you. T with regard to our second s panel, youre already at the table so if youll stand and be sworn. If yo be sworn. Do you affirm that the testimony youre about to give to the committee will be the truth, the whole truth and nothing but the truth so help you god . Yes, i do. Thank thank you. Ordinarily what we would do is give you a brief introduction. Given we may end up having a ha vote in another hour or so, we want to avoid leaving you all hanging, if we possibly can. We im going to, only in the interest of time and for your ir convenience, dispense with that introduction, and i assume thatt in your opening remarks, youllo be able to tell us a bit about yourself. Se welf a know who you are, so we hand it over to you. First to mr. Heimlich and then move to our right, mr. Denali and mr. Salbo after that. Push the red button, if you will. H hows that . Much better. All right. All right now there are americans e thinking about switching their t mobile Service Provider or buying a usedmo car, refinancin their mortgage, joining a virtual gym or subscribing to an app. Businesses need to reach these r people in order to pitch what p. They offer. Traditionally the only way to reach an audience and persuade themem to buy a product involve wasting tons of money. In digital we aspire to not waste any money using powerful o software and anonymous data, wer try to limb tightsments to the audience who care about our products. O findeen m thats been my job for 20 yearse when the toughest part of that drove from traditional advertising. But as digit at matured, for s search, display and social, google changed. The company lagged behind the pace of innovation and display. Google was not a key player in the invention of that. The ability to be precisely effective in display defense on ad exchanges. Exc without friction a million times. Us as you load a web page that any creator can monetize the attention he earns and any business can maximize the impaca of its ad dollars. Ximum t the ad exchange echo system ed thrived as long as the participantsterested were mural interested in a level playing tield. The display exchange is nicknamed the open web because its a free market. A a company has to be its like owning a stall. Customers can easily compare your features, quality and price of those witheature other selle within easy reach. Antitrust investigations have s. Produced clues of google strategy for ad exchanges. It seems google saw the market efficiency as a threat selling a ads. Gne mid the fewer dallas would end up in googles hands. Dollar it was to combine products to google planned like a shady stocks broker who steals every t clients, would use to discourage Comparison Shopping. For example, a great new bidder is less enticing if your current bidder is tied to your ad server, which has almost no competition. Google never caught up. T instead it leveraged the market power to slowed pace and makes e Exchange Buying less attractive. It did this in a web extensive enough to entangle the entire market space. O ent google also broke the privacy o standard by linking consumers n name from gmail to the i. D. Numbers assigned to browser for what had been Anonymous Exchange transactions. Continuously google came up with new ways to pollute the exchanga echo system they previously seemed to embrace. Pollution came in the form of restrictions and exclusions thaa made the open web less efficient for buyers and sellers. D by not hobbled by the exclusion an restrictions. The to enteroperate between buy, sell sides and measuremente soft way became a capable exclusive to google. Now progress on innovation is squeezed to the margins of the q industry and new ad tech is rare. Theres more at stake than most people realize. The more efficient the ad market, the more likely it is ts that superior new products will find customers and thrive. When the ad exchanges function properly, the size advantage ish offset by quite oater voicese this tilts the incentives of pre2016 under intense and re privacysp respectful. Google could have copied with these developments without use the market power destructively. There is nothing to stopopec go from exiting the arena or ena competing within its open standards. Whether or not googleting wi coe with othert big tech firms is irrelevant to the harms they er, have caused in the 150 billion open web display market. It was official when tools and r Service Providers interoperated. Innovators of a great new product or service could accessp a globaler marketplace of l thousands of buyers and sellers quickly at low cost. At Small Businesses with great s ha ideasd had a short ramp to succeed, now funding has been drying up and the pace of innovation slowed down. The number one concern i hear is googles domination of the market my Company Operates in. For years theyve beenperates b existing efficiencies and preventing the development of new ones. Many expect google to mislead th regulators about the content in the open web. For im grateful for the opportunity to help scrutinize their claimsg google should be forced to exit the Ad Exchange Market or compete within its open standards. Thanks. Mr. St ginelli. Thank you, chairman lee and Ranking Member klobuchar and other members of the subcommittee for conducting thig hear today. My name is david dinielli, on behalf of omidyar network. Specifically im here today to explain why it appears likely a that google has violated current u. S. Antitrust law by opoliz monopolizing the market for digital display advertising. Im not a technologist nor an economist. Im a litigatorechno i represen expertise, to the extent i have in is determining whether private actors have violated the United States antitrust laws. Ta i have no ideological or financial skin in this t particular game. Partic this is what we know about this market. Millions and millions of times each day someone in america opens a web page on their mobile phone or laptop. When they do that, portions of those pages are populated with Digital Advertising. Opulate advertising of this sort is a very big business. In some estimates are that in the United States 139 billion was a spent in this market in 2019. El for example, i dont think line, as one example, we all know that newspaper circulation has fallen as more and more people get their news online. N eac outlets in each of your ts, so districts, some of which have been mentioned today, whetherer it be the deseret news in salt lake city, or in tennessee, which bills itself as the socalled nt voice of the greatest county in america, all of these outlets ty depend on Digital Advertising to support their critical news gathering. Rtisin. Health care grow providers, car dealerships, moving companies, o restaurants, and we expect this need will only increase during the economic recovery from the pandemic. Online advertising also can be good for consumers. When done rice it providing relevant information for people who may find utilities, and it t reduced their costs. In short, its critical to our economy and our democracy. As i indicated in my written ed testimony, i recently coa coauthored a series of papers with the yale economist about the two digital platforms. We relied on information made public by the uks cma, which has also come up today, but we looked through the lens of current u. S. Antitrust law. Our analysis let us to that concluding that theres a strond basis that google has maintained a monopoly in digital cifical advertising. Specifically we concluded that u google usesse that position to expand for what is called the aa tech stack. Theck through a series of goo acquisitions, googlegl occupiese everyr layer of this ad tech stack, with market shares as res high as 90 . Fr from the standpoint of an wyer,t antitrust lawyer, this is a big red flag. Are pric moreover, google appears to have undertaken and vast data vang advantages to exclusivees competitor. If you are an an advertiser, or if you are a publisher, all roads lead to google. We described 20 different of instances, including googles 2015 decision to make its youtube inventory available to advertisers exclusively through its own techch tools. Hat in our paper we also describe less obvious examples such as deny of interoperability and pricing arbitrage. We have heard google assert theh Digital Advertising market is tg thriving, there are many play players, theers, prices have gos down. Its even cited increased innovate. Lettinin me preview my me responsibilities by saying this. These are precisely the sorts of arguments that nearly every t whenever it iss accused of any t order of wrongdoing. Theres nothing new here. For example, google says it facin vigorous competition. Thats like a company that holda a no moply in billboards defending itself that uy m advertisers could buy magazine inserts instead. Its simply not a sense. Ou google also says prices have tiu gone downst and output has bk as a antitrust lawyer, i am concerned about what the world would lookok like, the butfor world. What innovations might google og others deployed if google had th faced real competition. Te what service improvements, suchr asov privacy protections would that Platform Market offer . Would local new outlets be al getting a bigger piece of the pie . N we dont know exactly what thi marke would look like but for k. Googles apparent monopolization, but my hope is this could bee an examination o how we could get to that world. Im happy to answer questions s about this path forward, and i thank you. Ti memb my name is carl zabo. Im an adjung professor of internet law. I am very excited to be here, because i really appreciate as a law professor, especially what t the Judiciary Committee does, and, you know, working in this area, im very excited. You talk about the important of the standard we have here in the United States we didnt achieve and comes to the standard for antitrust law at the outside. It took us a while. O we had failures. Utse in fact antitrust experts acrosm the political spectrum recognize the standard is the best reco standard for the world. Why is that . Ger wel well, thats because its an objective standard. We base it on economics, we basn it on facts. We dont base it on feelings, opinions or innuendo. Home at home i play board games with my son all the time. Ge in t somehow the rules always change in the middle of the game, in at way that benefits my son. Den we call that the aiden rule. Here we see efforts in europe, in antitech advocates to do thu aiden rule. They want to change antitrust law away from the clear objective standard we have todad to a subjective, i know it when i see it standard. Why is that bad . Youre swinging a sledgehammer of antitrust law to the benefit of corporate competitors or populist policies. If we open up antitrust law awaw from the well fair standard to i know it when i see it, its f essential weaponization. Rpos todayes probably has the buta fortunatelyv we have an antitrut standard that does not allow political policies to interrupt the free flow of enterprise what is the consumer well fair we standard . We havents real l really abuset market power . And if you look at what happened just a month ago over at the or house Judiciary Committee there was no real showing of market power. Of ma likewise there want an effort to show consumer harm. So it all come down to how you define thehe market. A we talked about the uk cma report. If you really asked the cma, i they woulds recognize its a wildly flawed report. It uses the phrase might over 100 times. Ed its based on data they only dd used in the uk, and they narrowed the definition of defn market so smallit that it produo the outcome they sought. So what is the market then . Well, the market is actually all advertising, because you have to look at itu in the consumer welfare standard in the eyes of thehe consumer. Re what are they doing . Oing . They are using their time differently. So lets look back this past sunday. Football is ison. Cials. You see commercials, youre watching the game on your tv, you might even be listening on the radio, because you like their commentating better. E at the same time advertisers are simultaneously competing across three different advertising ooge palace fo platforms. S. Second, even ifif we werese to narrow it down, lets look at the total revenue in digital qut away and itse 10 , who is actually taking market share fm away from google. None of them come anywhere here the 75 market power. Lets look at consumer harm . To us consumers, we get amazingt free services, so we benefit. To advertisers, advertising tisr prices have plummeted. They are down 40 . Thats an undisputable fact. Could they be lower . Maybe. Are theyd they lower than they otherwise would have been . Yes. Re th lowe publishers who otherwise couldnt sell unused ad space can now easily sell it away. We v google is the alpha and the the omega of it is supplyside, so we talked about the difficulties these include Companies Like rubic rubicon, pub magic, ad nexus. Ndz they also use another half dozen different advertising platfors o the New York Times andrk the Washington Post are so effective that they have actu actuallyal abandoned thirdpart advertising systems altogether i and returned tosi inhouse ads. T so its hard to see how publishers are beholden to google and how google has this market power when these advertiser are using multiple platforms, when the publishers are using simultaneously mum pal platforms. Sososo since there is no market power when you look at the reale market. Since theres ther clearly no consumers harm, which has been recognized as the best standard we have for antitrust law, and is thee standard that should bet usedha which shows that frankly theres not a case against inst google . Thank you, mr. Chairman and r. Members of the committee. We welcome your questions. Thanks so much. I appreciate your opening remarks. Egin well ourbegin our sevenminut onynd. In your written testimony, you g seem to suggest that google hasd not violated antitrust laws, cu because customers have benefitep from its products and its services, but its not really ot what the consumer well fair standard means, is it . Consumer well fair standard is part of the analysis performed s by enforcers of our antitrust laws under the rule of reasons,w that weighs the harm from exclusionary conduct against anf procompetitive benefits, is that accurate so far . C soth means that when assessing thor harms, we looked at the epps aggregate impact of those harms and those benefits on customers, consumers, not sociat justice goals or political on ss projects. So its easy to make the statement generally but are eight a direct results of their allege alleged the do they outweigh harm on that conduct . So, mr. Chairman, i dont t think thatth theres a ties situation here. That one of the things that i dont think isis fully appreciated, a something, you know, i didnt appreciate when i first got inth this whole area, is when you use one side of the google ad stack, you can just use that one side. You dont have to use the entire stack. A similarlog analogy isy buyin home. I can find find a realtor to he buy a home. To i can use a realtor to sell my home, but i dont use the same person on both sides. The google ad stack operates similarly. So even if you side with google in that analysis, you do agree g that applying the consumer welfare standard doesnt give you a freebie card . It doesnt give google a freebie card, thats not the end of theo analysis, right . End the job is on the prosecution to show consumer harm. Fact the facts laid out show that adl prices have decreased substantially. You can show that publishers are generating revenue that they otherwise wouldnt, and then ow finally you can show that you, me and other consumers get treat products. So we need to identify a ogle if google has monopoly power in a welldefined market, and ii it is engaged in tying one product to another product and its done so with the intent s or with the effect, rather, of maintaining its mo in the hospital reply in that market to the detriment of consumers, thap is aoly violation of section 2 the sherman act, correct . Yes, if google did all those three things, that will satisfyt all three elements of the law. O its not about tying the two sites to the platform, tying the two sides of the platform. Atform its tying the ads for advertisers. The harm would then be a higher pric qualitye adjusted price for the consumers and for the do you advertisers . Do you disagree with me on that . Once again, we need to show n theres been an actual loss of o revenue for each of them. One of the things thats beenen ca shown and this came out of the cma report googles ad is percentage is about 30 . What that actually is is that its below some of the other owf competitors. Now, if they were a t a mo in tu hospital ldreply, they could pre above competitors. Thats not what were seeing ing the market itself. The so the statement of these priceh are higher for consumers isnt t really being born by the facts were seeing on the ground. Fac e couldnt it be worse off, compared to the butfor world . Couldnt they be worse off in s other ways . So the but for google being e there now, one of the thingse one of the thing that is not is made clear, advertisers do not just use one platform. They use four to six i think is theto number that came out o the uk. Simultaneous ad platforms. What that means is, if google is not getting the best bid, the advertisement will go to a different adad platform to be placed. So you have Competition Among those ad platforms. Has pricing by competitor been skewed by googles down b i think itec has been. Its been skewed down. Re crea o its a quality product what mr. Dinielli, how do you see this analysis shaking out . Agree do you agree that the consumer welfare standard is the right tool here . Thank you, senator, its an adequate tool to bring an tool enforcement action to this case. The cma recognized a number of harms to consumers that are cogniz able as consumer harm in the United States. Assuming that the analysis is tt correct that google is acting as a monopolist, that means it can raise its prices above the competitive level to theabove advertisers and pay a lower price to the publishers. S. We have heard that prices went down and isnt that a good pric thing . Yes, it is, but we dont know what they would have been abseni that conduct. For ex for example, if advertisers are paying higher than competitive o prices, then economic theory dn would presume that at least somm of that o is being passed down r their products and their services. Heir pcompetit than they would, then both u. S. N law, presume they will invest less, local news reporting to consumers. Finally, bought google can fre property what going 8 has the ability of our quality adjusted. Ice is higher thank you, mr. Chairman. Aw when you look at whats going on for have interpreted the laws in certainly weighs. That is applied all over the ad world, yet as far as google that uses a welfare standard, they te decided they should investigate and do something about it, using the term consumer welfare ing a standard, but if we say everything is fine an expert looked at a 15year period ending about ten years ago and found that plaintiffs were zeroe of 16 in bringing antitrust ases cases in front of the u. S. Me terpre court under the conservativeta bork interpretatn of what it means, and senator nd lee and i probably disagree about this, but when bork talk about consumer welfare, he at te expressed the view the only jet goal of antitrust is the maximization of consumer. Welfare. That sounds great, but he as defined it as minimizing restrictions of output and fice permitting efficiency how gaineo to have its way. He equated consumer welfare, no with welfare for actual living, breathing consumers, but with pure efficiency and the maximization of wealth. H when i look at how they cases have come down and the views that Justice Gorsuch and Justice Kavanaugh have brought to the court, more and more decisions are being made to not bring antitrust cases. Case that is the very reason that i l believe, yes, we should up or et enforcement, and thats part of the work that senator grassley h and i are doing on other members of the committee to add resource to the ftc and the justice jus department,tice or we will neve able to take on the issues of our time. Yes, we should do our best to use theb laws we have, but im g sorry, when you look at the changing economy and wheeze ng, happening through outhistory, the herming act withdraws was not static. Ey add they added multiple bills over time to try to get at what was happening. I thinkrelying relying on the c right now when you look at everv decision, you cant say that, h oh, this is going to be taken a care of. Oog and google and the facebook issues are just going to be taken care of by this consumer welfare stad standard, giving how the courts are interpreting it. It i really want to get to my google questions. Consunks, senator. Im clearly going to disagree with factyou. The fact that its been 120 is not indicative of a failed standard. Da itsrd. Potentially indicative a flaw the prosecution, or in mot cases, its civil suits. As done one of the things it has done it given america the bedrock of submit greatest innovationovati. Europe has a different standarde europe is fundamentally ndamen different. I would not say europe is terribly e innovative in the te space. They operate until the english a rule. That helps to eliminate frivolous lawsuits that waste court t time, taxpayer dollars, and defendants money, so if we were to even consider heading down inin the european model an away from the consumer welfare standard, we must be ready to take on the decrease in innovation and the basically you think there was a decrease in innovation when we brought up at t . So at t i dont think is a spoton example. The rea the reason i say that is at t was essential a governmentcreated monopoly to begin with. They allowed a lot of the localt telcosel to consolidate and th approved thembe because they we the mainod ones. I dont think its a good example of breakup and di subsequent innovation. And a also, do you think legislation like the bill i have to update the antitrust laws would help enforcer the type of exclusionary conduct that were refer to . Thank you, senator, i do agree that this new economy in n whichce we live requires a multitude of tiles. It requires enhanced of enforcement, including some of those that you that yourself has authored and proposed. I also think the new could remember new powers. S. On the point of consumer welfare, i agree with the senator that this is a standarda that sometimes has not served us well. My point was simply to say that should not stop the prosecution of google. Agreed. With the breakup of at t, i would agree that led to at innovation, but that came about in the context of regulation in which the Telephone Companies were, for example, required to enter opera interoperate. For exastifying mr. Heimlich, thank you for testifies. As i listened toth you, i wonde what questions you would have asked mr. Harrison if you were i sitting up here. I know it must be frustrating t hear in your position and hear senators, as good as we are, asking a ton of questions but ge without maybe have been the kind of experience that you have. Alk could you talk a bit about thata and whatt other things you thin we need to get at, and what your reactions were and what your comebacks would have been to mri harrisons statements about howo prices are going down and everything is good, and they dont really have market nce bec dominance, because theyre usinr other places to advertise, as we just heard. Eard. Whats your reaction to all of , that . Thank you, senator, thank you for having me. The one that really jumps out ad me is mr. Harrison said that Header Bidding was good for publishers. He kind of threw that away. Its really hard to get your t hand on the butfor world, but Header Bidding was an example. Lr specifically publishers wanted o all of them to compete directlye and google refused to deliver that. So Header Bidding was a hats that put all the billeders in the hat to compete directly. Hea two things happened. Gs publishers made 20 to 30 more money. But me, on the buy side, i dnt didnt see a hit, so what that u tells you is that money was going somewhere else. Either in the middle or we s experienced as a quality increase, it stopped cream ming skimming when these headers went into place. I would love for everyone to dig in on the rare example of the ad butfor world. It was not a fullblown solution the if amazon or ad nexus was able to develop a product or a javascript tag, i think it would have been more powerful. Been thats a rare example of google for failing to dominate. Fa on the definition of the industry, im not a lawyer, but i thinkim no it might be helpfl the lawyers to understand that s programmatic has its own teams. M peoples titles are programmatic. From isnt money moving from social, billboards into programmatic willy nilly. A theres separate teams, and program matt tick tech n, progr commitments. Our market is not to be glossed footnote in advertising. As far as i e inknow, without o claiming to understand the legal definition, its a market and google dominates when you see e those 90 percentages and 60 wh percentages, thats my experience of whatis its like prayed operate in that market. The bigge biggest reasons price down is mobile advertise sergeant cheap ing is cheaper. B but theres also what came up is the quality difference, right . If quality is going down and prices are going down, then e gi thats not good atng all, right . So i believe economists have shown that cream skimming causee all prices to go down. You e right . If you havence th experienced t quality is going down, you knowo i used to pay 4 and now its d not worth 4 anymore. Im going to bit down to three, right . I think mr. Zabo made a statement that google what id hear when he says that, google. Was gaming auctions, winning with lower prices, which forced everyone to bid down. They claim it as a win that all the prices are down. Thats why senator blumenthal is so upset about hi lots paper being unable to make money. Google is using this huge wealth of ththirdparty data coming f places that has nothing to do s with ad tech, and refusing to home to skim cream. What do you think the best way would be to fix it . When i read about u. S. Versus microsoft, and interoperability was part of cl that, i thought h there was aad clear precedent. Movie h to me thats a clear precedent r to what would work. I think ultimately the solution should be that they exit this ue marketplace and be t Like Companies who let the open and market compete with them. Mr. Dinielli, you want to add to that . To i would go back to the point, of interoperability, senator. Another option would be data markets. Right now google is using the threat oft privacy litigation ad the actuality of privacy europ regulation ine europe as an hat excuse to claim theres no way d that it could open itself up so that others could learn from th data it gathers from its various consumerfacing products. Facing if hoards that data for itself. There were questions to mr. T harrison about the amount of data and the kind of data, for t example, that advertisers can access about where their money goes and what happens to their s ads. Ated in actuality, they had created the google ads hub. It allows you to basically to go into a clean room, look at data that google has about you and d your advertising campaigns, but you cant take it out. Nor could a competitor game access to that. In a truemarke functioning mar there could be requirement that the data be sold on fair conditions and prices to competitors, to allow them to o come in, use some of that data, which google has said belongs tots users, not to google, and then use that data for the benefit of the market. Very good. Chairman lee. Thank you. Mr. Heimlich, lets turn to u you rnnow. Now. In his testimony, mr. Harrison said that googles ad tech is interoperable with its ology. Competitors technology. Is that your experience . Well, there are many cases n. Where its not. There are some case where is it is, but many, many cases where its not. Its frustrating that google mh keeps saying that when theres so much documentation. I cant talk about some of the ones that have been talked about least. The buy side ad server is like a referee in the competition of te buying. Its a hub s and all the other platforms are spokes. The buyside ad server points tp the spoke thatokes produced eve sale. So google is the referee, but theyre also a competitor. Y this is one of the markets thefh 90 share. I cant get another ad server, no one can compete. Ntegrate theres a bunch of reasons its hard to switch. G to even if im going to use googles ad server, and i dont want you to do the referee thing, right . You used to be able to download the ad interaction data and sent it to all your parents. You guys go through this data so you can see how google is eferee referees and makein sure you geu as much credit as you can. Do as of 2018, you cant even do that. Thats my data. Lic i licensed google ad server to r be they hub, not only do i want. To be able to download it, i want an api out of it, so everyone can see the ad interactions. So the adtition f Server Market measurement market, thats a market that doesnt even come up. Its significant, too. T its determinant of who else gets money, so google massivelya dominates it. They control it in a way that could be easily solved by interoperability. Other ad servers have api, where it can go wherever you want. That would solve the problem. I hear that google has proposed blocking thirdparty tr tracking in its chrome browser. H and that this could be the eady equivalent to rules already in effect for apples safari and o Mozillas Firefox . Thats a great question. The answer is no, its not the same. Its anreat example of qu how ge weaponizing privacy regulations. Theyre supposed to protect consumers. Regu so our privacy laws say if youre doing business with a company, they can use your datar for advertising. Thats why your bank is always g sending y you credit card offer offersrs for loans. You cant opt out of that. Our laws say you gave them the n da data. Data y in you give data to google so you can use search, and theyre using it to scream kim off the hartford current, right . Re so the way that other browsers have handled this problem, theyd say no one can track. Google cant track, competitors cant track. K. Its a level play it is field in safari, level Playing Field in firefox, none of this nonsense. When google is talking about doing that in brchrome,owse tha going to block other peoples tr cookies, but theres still a chrome login, probably a map i, login, and the privacy policiei make clear they haven merged al this data, and there is no meaningful to use what would amount to a massive advantage on auctions in the chrome browser. Do do you want to answer that one as well . Th is. Yes. D warmup things mentioned earliec by senator klobuchar was the pv increased concern about chrome competes heavily with safari, firefox, and brave is another one thats entered the marketplace. What do they s feature . They feature privacy. So google, in suit, has enableda privacy as a core feature of the chrome browser. Its being turned into an ing antitrust action. Thats not whats happening her. With chrome. Hats the second is, why does it track you . Ith well, because that way it can better optimize my results. O thats something i can opt out of and deactivate and go incognito. Why did chrome make this move . B because of robust competition and because the competitors are fighting on privacy that sounds. Like thats something we would want to encourage, but now itst being used by people who dont f like it as a sign of anticompetitive behavior. T thats a real vise that these sh competitors are being put atin. Can you tell us what the marketcies looks like for ad agencies working on behalf of at advertisers . Are this he free to use any software . This refers to mr. Hawleys e questions on commitments, whichr i am happy to address. My job at a large agency was sit choosing thehe buyside platfor. I had a colleague at another bit policy, with another deep policy. We all had the same experience invo involving the lvagencys youtub commitments. As mr. Zabo said, theres nothing unusual about a mmitme commitment for a certain amount of youtube. Ntlion you buy a billion of youtube, you get the 10 upfront rate. Thats really important for thes agencys competition, because big advertisers will ask, what a isdv your youtube rate . They understand it as part of a use you are negotiating power. Te you can meet your commitment for a billion for by also moving mo. G money through db 360. Thats weir and the other weird thing is that the deal is increased 100 a year. 4 billion, 8 billion were supposed to spend in youtube. Its like being for fed. It happened to me and colleagues at other agencies. The ceo called us and said you need to put some money in dv 360 immediately. Take it out of trade desk. I dont care what trade desk is. Take it out of nexus. I dont care what you sold our clients, move it into 360 because our google rep called me and said they are going to claw back youtube rate for 10 to 12 and owe them 900 million if you dont move this money over now. My response would be like, this is a haunlg problem for me. I sold my clients into what i thought was the best platform for them. How do i tell them now were going to use dv 360. Everyone knew they were an inferior. In 2016 they cut youtube out of everywhere else. Now if i wanted to buy Youtube Program a. That was how 360 got a foothold in the big agencies. By the time i left that agency, it was the primary dsv on the trading desk. The most spent. I tried not to work with them at all. How about publishers . Does it have a similar effect on publishers. Stickiness for publishers is exclusive demand. Publishers care about two things. Their prices they can get, their cpms and their volume. Mr. Szabo talk about them adding more and more platforms and more and more platforms. They are trying both, those that hire cpm and raise their volume. Any publisher will tell you a huge funnel of low cost, highvolume bids coming in. Right . They are coming in through Google Search platform which also lets you buy display. Long unsophisticated advertisers that dont know so much what they are doing on display. A huge type of volume. If you get rid of googles exchange, you lose that volume. Publishers are stuck with Google Exchange and sell side stack even though, and i hate this, google mysteriously wins a huge amount of options with low bids. So when mr. Szabo talks about adding more and more demandSide Platforms and why bidding and google forced to innovate open bidding, because publishers are trying to solve this problem of this waterfall of google demand winning tons of options with low bids. When you say mysteriously, tell me what you mean by that . Its supposed to be that the highest price wins, right . Incremental google claiming making the option more and more favor. They used to have last look. They bid last. Thats an easy way to cheat. If you bid last you can win a the lo of options at low cost. Get rid of last look, asynchronous, allow bidding. What hasnt happened, publishers will tell you the number hasnt gone down and average cpm google wins hasnt gone down. So thats mysterious. Senator klobuchar. Very good. Thank you, senator. I think we have another vote so ill ask a few more questions here. I mentioned this earlier. But over the years the budgets of both federal antitrust agencies, fdr and department of justice have failed to keep pace with the growth of the economy despite an ever increasing workload. Theres numerous studies showing increased mergers, increased complexity, and then actually less staff than we had during Many Republican president s of the past. And so that is why and this is something thats been declining over the years thats why i mentioned senator grassley and i introduced one bill fee modernization act to ensure that Companies Engaging in mega mergers pay more of the share of what our increasingly billion dollar mergers. As you know we have two companies over a trillion dollar that are companies. Also, we could just simply budget more money because so much money comes in from these antitrust investigations, and it can basically pay for itself. Mr. Dinielli, given the complexity of digital markets, do you have a view on whether fdc and antitrust division could use Additional Resources . Thank you, senator. I didnt make this clear in my Opening Statement but i did briefly work antitrust division as special counsel so i have firsthand knowledge of the incredible workload those people were facing even back in 2011 and 2012 when i was there. They work extremely hard, probably much harder than they should given the importance to our economy and to our business life. There is no doubt they could benefit from additional staff, additional expertise and additional funds. I am not an expert in their current levels of funding, and so my knowledge is second and thirdhand. What i hear is that people remain continually overworked and that there are not enough resources to investigate fully the kinds of mergers that have gone through nor to bring the kinds of Enforcement Actions that we see. These are difficult actions to investigate. They require lots of economist time, lots of lawyers time, lots of investigators time. We know this by the fact its been reported the department of justice has been investigating google for 16 months. There are public reports that the staff thinks they need even more time. These are complicated markets, and they deserve all of the resources that congress can allocate for them to do their job. Mr. Szabo, you raised your hand. Yes, thank you. Previously i worked for an ftc commissioner way too long ago. Yes, they do great work at these agencies. I think the funding question is a good one to ask, if they dont have enough funds to do this research. I will tell you that both mr. The ftc chair have been positive about adding more resources, yes. I think one thing that would help is a clear delineation of authority. Right now we have two agencies basically doing the same job. One of the things we can do is move merger and acquisition exclusively into the federal trade commission and make enforcement exclusively an arm of the department of justice. That will free up resources without increasing costs and make taxpayer dollars even more efficient. One idea is to, as i said, change the Legal Standard so its easier to bring cases and get the resources to investigate. Again, senator lee and i disagreed about this. I dont see this given all the priorities we have right now that weve discussed today with privacy and everything else, that this is all about a crossjurisdictional fight. This is about a major shift in our economy when the Tech Industry alone now is, what, 20 of the stock market and we havent upgraded our laws or talked about our laws or figured out how were going to do anything when we have some bipartisan agreement that something has to change here. So mr. Dinielli googles history of ad acquisitions which ive gone through is certainly one of the reasons that i think weve seen, as mr. Heimlich has explained, this dominance. More effective merger enforcement as we look back might have prevented that. Thatsen wo of the reasons i introduced a different bill, the consolidation prevention and competition promotion act to restore the clayton act to spot competitive problems before they fully ripen. The bill would create a different standard, more favorable to allow the agencies to take action. It includes to shift to merging parties under certain circumstances in major cases where they have to prove that the transaction not that it doesnt say Public Interest but simply it doesnt hurt competition. Its not anticompetitive as opposed to having the burden on the government. Would reforming the Legal Standards for assessing the competitive impact of mergers help to prevent market dominance, do you think . We also could look at lookbacks at least when consent decrees are reached and the like were able to look back at whether or not they are truly working. Theres all kinds of things we could do, including in the case of facebook, whatsapp and instagram and what that has meant. Mr. Dinielli. Thank you, senator. Many of the bills that you have sponsored would be enormously beneficial to the enforcement community. Im thinking in particular, for example, about the change in the merger standard from a requirement that the transaction be shown substantially to endanger competition materially. I think this is important especially in fast moving markets because its difficult to predict the future, which has often required, to a high degree of certainty in merger cases. We just saw a significant merger case be denied by a Federal District court in york in the case of the mortgagor of two Telephone Companies. One of the problems is that its difficult to know whats going to happen next. So a change in the standard would benefit merger enforcement. I also think that the conducting of hearings such as this airs the issues that we all should be thinking about and how the various players in these markets are acting. I also will say that politically weve been through a period in which we tended to give Technology Companies the benefit of the doubt. They were new. They were chic. They seemed to be ever growing. They were exciting. I think that we have a public consciousness now that its time to think about are they doing harm as well as benefits. The economic literature is just beginning to grow, and i hope that will continue and aid the enforcements going forward. Were going to have to get the media interested in covering these hearings. I think they are very focused on something that happened on cnbc this morning. I dont want to go into it. I was just looking at twitter to see if anyone was looking at our hearing. Maybe some reporter can show me they are. But instead we have this major issue in front of us, and i dont think thats what they are covering today. So i hope that youre right and that we can get more focus on this. I think doing investigations both congressionally and the agencies is going to make a difference. I really think people have started to have it. They see that there is too much consolidation and they understand theres not enough competition. They understand all these Small Businesses are being bought out, and its on us. I dont think that senators in the past, like senator sherman said no one gets this. They are mad about the economy. They are not going to get this so were not going to do anything. A republican senator. And i dont think that some of our predecessors said that in these agencies. So i think its on us, for people that care about entrepreneurship and competition, its on us to take this on. Thats what im hoping well be doing next year. If i could just add, i will comment at one point railroads were new as well. Thats right. But now i know 90 of the freight traffic, i believe, is carried by four carriers, which is the exact number of railroads on the monopoly board. Mr. Szabo, did you want to respond to what mr. Heimlich was saying . Which comment. In response to my question before senator klobuchar. If not, thats fine. Ive got another question for you. Yes, real quickly. When were looking at the definition of market, the argument is that money has been flowing away from television, radio, and print media to online ads, then clearly those are interchangeable goods for the definition of market. They are clearly interchangeable goods means that the definition of marketplace must include all advertising. We cant just narrowly define it to be google, because, yes, if you define the market as google, guess what, its going to be the monopoly. Thats kind of what you saw out of the cma report in the uk. Mr. Szabo, i have heard complaints from news publishers on occasion that they are struggling because they cant adequately monetize their content due to what they characterize as googles monopoly. Do you think its also possible they might be struggling because the news industry is itself infected with widespread bias and Many Americans simply arent inclined to spend their hardearned money, or their time, reading biased reporting. Is that a possible explanation . I think one of the Biggest Challenges that news media is facing today is the number of options available and the fact that the notion of a reporter could be somebody as simple as having a camera and a cell phone p. And the conception of a newsroom being the alpha and omega of where we get our information has grown away. Thats a dem okaytizati demo, you can have News Agencies or inform sources. Thats the thing. Yes, maybe some of the old Legacy Industries need to change and update, and i hope they do. But at the same time we have seen the New York Times and the Washington Post do quite well recently, so clearly they can make it through. Yes, its going to be harder for local News Agencies when i can go to movie phone. Com and not have to open up the newspaper to get the movie times and stuff like that. All right. They called another vote. We have to wrap up in a second. I have one more question to ask all members of the panel to describe to me briefly. If, in fact, google is operating its ad business in an anticompetitive manner, what would be the appropriate remedy . Well start with you mr. Szabo, then mr. Dinielli, then finish with mr. Heimlich . If under the circumstances monopoly power and causes consumer harm, i think the remedy would be the least damaging to the entire ecosystem if its an inner operability fix. I think the smallest fix we could shoot for would be the best one. A breakup or threaten a breakup will be detrimental not only to the ecosystem, it will increase prices and decrease efficiency. One of the things often misunderstood about Teddy Roosevelt, at the end of the day he didnt want to break up the oil barons. He realized dogs so would create a dozen Small Oil Companies with decreased efficiencies. If a remedy is sought, it should be the smallest remedy possible. I do cite to that Teddy Roosevelt quote in my testimony as well. Okay. A nondivestment requiring remedy. The smallest change possible because unintended consequence of downstream to all consumers. Mr. Dinielli. Thank you, senator. I think one difficulty in designing remedies is oftentimes the process of enforcing the law is what teaches us exactly what is wrong, what has gone wrong and how the best fixes might be developed. So my answer, senator, would be we need to start with the most vigorous enforcement of section two of the sherman act as we possibly can. That enforcement action, in my view, must include the Search Market and digital ad market. Weve heard a variety of people testifying today about the connections between these two markets. I could explain them in detail if we had the time, but i know were wrapping up. But i will say that is the place to start. We should see what that evidence is that the department of justice has gathered. We should examine it. We should read the complaint, and then we should have further hearings. If during the course of that enforcement action there are opportunities to think about additional changes to the law, we should enact them. If there are opportunities to provide Additional Authority to regulators, we should provide them. But we must start with the enforcement action and the disclosure of all of the evidence thats been gathered over the past 16 months. Finally, mr. Heimlich. Thank you. I agree with everything mr. Dinielli said but i go even further. I think this has gone on so long, unfortunately, that the remedy is going to have to be very significant. Some break up or forced interoperability in ad tech market, yes, but we cant forget android and chrome. Its an enormous amount of data thats playing in this market and really fits the same pattern of nonad Tech Products feeding googles power in the ad tech marketplace. But the ad tech is where the revenue comes from, Something Like 85, 90 of the revenue. Fogoogle makes most of its money from ad, searching youtube, then ad tech. Easy solution to separate those. The deeper ive researched, im concerned significant data from android and chrome also being tied into this ad tech market such that even if you separated search and youtube from ad tech, they would replace what they had already done with data from android and chrome. Just a few things, mr. Szabo, the Oil Industry Case was successfully resolved and the oil industry, standard oil was broken up under president taft. That case went on for a while. Isnt that right . Yes. You think what Teddy Roosevelt lionized as trust buster, important to look at his intent. I think its important the record reflect they did break up standard oil going enthusiastic these cases but thats my political view. We will eventually get to the place we have to go if i have anything to do with it. I also want to point out that simply because we want to have new standards in place that fit our economy doesnt mean that we are antibusiness. It certainly doesnt mean you go into it saying everything should be broken up. I dont. Ive tried to be responsible by putting forward bills that i think could fit regardless of what i think of a particular company. I think thats an important point to make. And the third thing is im glad theres some interest in beefing up resources on everyones part, and i hope that were going to be able to make sense of all this, because i think for too long people have just thrown up their hands and said these are Cool Companies so its okay. I dont think its okay anymore. Its not going to be okay as we see these growing monopolies, and it is on us to make these changes. I just want to put on the record before we go vote, mr. Chairman, a letter from Consumer Reports that is dated september 15th to the two of us on their views on the subcommittee and their concerns about what is happening with Online Advertising. That will be admitted into the record without objection. The record for this hearing will remain open for one week. The committee stands adjourned. Thank you very much for your participation and your testimony today. Thank you. Youre watching cspan3, your unfiltered view of government created by Television Companies as a Public Service and brought to you today by your television provider. There are a couple of Campaign Rallies to tell you about on cspan3. This afternoon joe biden will be in manitowoc, wisconsin. Live coverage at 3 15 eastern time. Later President Trump holds a Campaign Rally in dayton, ohio. Thats live at 5 00 eastern. You can watch online at cspan. Org or listen free with the cspan radio app. Weeknights this month featuring American History as preview of whats available every weekend on cspan3. Tonight its a look at history through film. Filmmaker discusses history of nonfiction in television from late 19th century Thomas Edison films to 21st century reality tv. Watch tonight starting at 8 00 eastern and enjoy it every week on cspan3. Next a hearing on nasas cybersecurity during coronavirus pandemic, nasas reliance on outside institutions such as private companies and universit