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Google executive defends online ad practices amid bipartisan scrutiny

A Google LLC executive defended the company's advertising business practices and pushed back on the idea of regulating digital advertising exchanges during a U.S. Senate hearing on Sept. 15.

At a hearing focused on assessing whether Google has harmed competition in online advertising, Senators on both sides of the aisle questioned the company over perceived dominance in the online ad market, suggesting the company's market share is monopolistic or harmful to competition. The hearing comes amid intense antitrust scrutiny across the federal government towards the Alphabet Inc. unit and other leading online platforms.

A June report from the market research firm eMarketer found that Google's share of the U.S. digital ad market will be 29.4% by the end of 2020. By comparison, the same study projects that Facebook Inc. will have a 23.4% share and Amazon.com Inc. will have a 9.5% share by the end of the year.

In prepared testimony, Donald Harrison, president of global partnerships and corporate development at Google, called the ad tech space "crowded and competitive," and he argued that Google's products help businesses grow. Specifically, he claimed that in 2019, Google's search and advertising tools generated $385 billion in economic activity for U.S. businesses and nonprofits.

However, Sen. Amy Klobuchar, D-Minn., the lead Democrat on the Senate's antitrust subcommittee, asked Harrison about whether digital advertising exchanges should be regulated similar to electronic trading in financial markets.

"I think you look for regulation in a market where you see market failure and ... I do not see market failure in online advertising," said Harrison in response. "I think there’s a lot of competitors. I think prices have gone down ... I don't see the market failure that would require regulation," he added.

Sen. Josh Hawley, R-Mo., a frequent critic of Google and big tech, asked Harrison if Google was using market dominance in search and video to "boost and maintain a monopoly in the ad space as well."

Harrison responded by saying that there are a lot of companies, both big and small, that "are doing very well" in online advertising. He specifically cited Amazon, whose supply-side platform he says has grown so much over the past three years that it is now larger than Google's.

Harrison also disputed figures cited by Hawley from a 2019 interim report from the United Kingdom's Competition and Markets Authority, which is carrying out a market study of online platforms and the digital advertising market. The report found that Google controls more than 90% of the search advertising market in the UK.

"I do think that they use too narrow a market definition in looking at how to construct the market there and I also don’t think they took into account that if you tried to raise prices, that there were so many other options out there that publishers or advertisers would just flip to one of these other options," he said of the report's findings.

Despite Harrison's efforts to push back on lawmaker claims of market dominance, Sen. Richard Blumenthal, D-Conn., who is the lead Democrat on a consumer protection subcommittee in the Senate, called for antitrust action against the company, noting that Google operates at every layer between advertisers and websites. Its tools are used both by publishers looking to sell ad inventory and by advertisers looking to buy. It also operates the exchange where many of these transactions take place and sells its own search and video advertising inventory.

"Google claims that what it does is, in effect, preside over an open and free market, but, in no other markets does the same party represent the seller, the buyer, make the rules and conduct the auction," said Blumenthal.

This, he said, seems "unacceptable in a really free market ... which is why I hope there will be antitrust enforcement directed against Google."

The New York Times reported Sept. 3 that the U.S. Justice Department plans to bring an antitrust case against Google as soon as this month. The department's investigation has looked into Google's "control over many aspects of the ecosystem for online advertising" and dominance in search, according to the report.

While a coalition of 50 states and territories support antitrust action against Google, state attorneys general are split on the timing of moving forward with investigations, largely along partisan lines, according to the report.

On the other side of Congress, a U.S. House antitrust subcommittee has been investigating competition in digital markets since June 2019 and could release a report with findings in the coming weeks.

The committee has said the point of its investigation is to document competition problems online and to assess whether the current antitrust laws and enforcement levels are adequate.

In addition to possible recommendations for legislative reform, the committee's report could also be used as evidence against the companies in court, Avery Gardiner, who has served in the Antitrust Division at the Justice Department, previously told S&P Global Market Intelligence.