    [Senate Hearing 118-112]
    [From the U.S. Government Publishing Office]

                                     ______

                                                            S. Hrg. 118-112

                               COMPETITION IN THE
                         DIGITAL ADVERTISING ECOSYSTEM

    =======================================================================

                                    HEARING

                                   before the

       SUBCOMMITTEE ON COMPETITION POLICY, ANTITRUST, AND CONSUMER RIGHTS

                                     of the

                           COMMITTEE ON THE JUDICIARY
                              UNITED STATES SENATE

                        ONE HUNDRED EIGHTEENTH CONGRESS

                                 FIRST SESSION

                                   __________

                                  MAY 3, 2023

                                   __________

                              Serial No. J-118-15

                                   __________

             Printed for the use of the Committee on the Judiciary

         GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT

                            www.judiciary.senate.gov
                                www.govinfo.gov

                             _______

                 U.S. GOVERNMENT PUBLISHING OFFICE
     53-539              WASHINGTON : 2025

                           COMMITTEE ON THE JUDICIARY

                       RICHARD J. DURBIN, Illinois, Chair
    DIANNE FEINSTEIN, California         LINDSEY O. GRAHAM, South Carolina,
    SHELDON WHITEHOUSE, Rhode Island             Ranking Member
    AMY KLOBUCHAR, Minnesota             CHARLES E. GRASSLEY, Iowa
    CHRISTOPHER A. COONS, Delaware       JOHN CORNYN, Texas
    RICHARD BLUMENTHAL, Connecticut      MICHAEL S. LEE, Utah
    MAZIE K. HIRONO, Hawaii              TED CRUZ, Texas
    CORY A. BOOKER, New Jersey           JOSH HAWLEY, Missouri
    ALEX PADILLA, California             TOM COTTON, Arkansas
    JON OSSOFF, Georgia                  JOHN KENNEDY, Louisiana
    PETER WELCH, Vermont                 THOM TILLIS, North Carolina
                                         MARSHA BLACKBURN, Tennessee
                 Joseph Zogby, Chief Counsel and Staff Director
          Katherine Nikas, Republican Chief Counsel and Staff Director

       Subcommittee on Competition Policy, Antitrust, and Consumer Rights

                        AMY KLOBUCHAR, Minnesota, Chair
    SHELDON WHITEHOUSE, Rhode Island     MICHAEL S. LEE, Utah, Ranking
    CHRISTOPHER A. COONS, Delaware           Member
    RICHARD BLUMENTHAL, Connecticut      CHARLES E. GRASSLEY, Iowa
    MAZIE K. HIRONO, Hawaii              JOSH HAWLEY, Missouri
    CORY A. BOOKER, New Jersey           TOM COTTON, Arkansas
    PETER WELCH, Vermont                 THOM TILLIS, North Carolina
                                         MARSHA BLACKBURN, Tennessee
                   Keagan Buchanan, Democratic Chief Counsel
                      Wendy Baig, Republican Chief Counsel
                                C O N T E N T S

                                  ----------

                               OPENING STATEMENTS

                                                                       Page

    Klobuchar, Hon. Amy..............................................     1
    Lee, Hon. Michael S..............................................     3

                                   WITNESSES

    Alford, Roger P..................................................     7
        Prepared statement...........................................    41
        Responses to written questions...............................    47

    Henderson, Todd..................................................    13
        Prepared statement...........................................    54
        Responses to written questions...............................    60

    Kint, Jason......................................................    11
        Prepared statement...........................................    65
        Responses to written questions...............................    70

    Lynn, Barry C....................................................     9
        Prepared statement...........................................    75
        Responses to written questions...............................    97

    Srinivasan, Dina.................................................     6
        Prepared statement...........................................   100
        Responses to written questions...............................   224

                               COMPETITION IN THE

                         DIGITAL ADVERTISING ECOSYSTEM

                                  ----------

                             WEDNESDAY, MAY 3, 2023

                          United States Senate,
    Subcommittee on Competition Policy, Antitrust, and
                                       Consumer Rights,
                                    Committee on the Judiciary,
                                                        Washington, DC.
        The Subcommittee met, pursuant to notice, at 2:32 p.m., in
    Room 226, Dirksen Senate Office Building, Hon. Amy Klobuchar,
    Chair of the Subcommittee, presiding.
        Present: Senators Klobuchar [presiding], Blumenthal,
    Hirono, Booker, Welch, Lee, Hawley, and Tillis.

                OPENING STATEMENT OF HON. AMY KLOBUCHAR,
               A U.S. SENATOR FROM THE STATE OF MINNESOTA

        Chair Klobuchar. All right, I call to order this hearing of
    the Subcommittee on Competition Policy, Antitrust, and Consumer
    Rights on ``Competition in the Digital Advertising Ecosystem.''
    I'd like to welcome our witnesses, and thank Senator Lee, and
    his staff, for their work in planning this hearing. He cares a
    lot about the major bill that's the subject of this hearing, in
    addition to many other pieces of legislation.
        We are living in a time of rapid innovation and
    technological change that is reshaping our economy and
    transforming how we interact with each other. And we are now
    seeing how quickly things can change when we leave here. We're
    having a briefing on artificial intelligence systems, and I
    think we all know that it's all tied up in the discussions that
    we have today.
        Now advertising, which is really at the center of this
    market, digital advertising pays for many of the apps and
    websites we use throughout the day to read the news, look up
    recipes online, and stream movies. And like much of the digital
    economy, there is a lack of competition in digital advertising
    markets that it has been harmful to small businesses and
    computers.
        Today's hearing is about the consequences we are seeing
    from the unchecked consolidation and a reluctance to enforce
    the antitrust laws, and it's about what we can do about it.
        Although Facebook and Amazon have significant ad
    businesses, there is one company that dominates digital
    advertising like no other, and that is Google. The ad
    technology ecosystem connects advertisers like your local
    coffee shop with publishers like your favorite online newspaper
    via systems that price and sell ad space and place display ads
    on websites.
        Within that ecosystem, Google dominates the market for
    platforms and services on the publisher side, that would be the
    ads that publishers want to place, as well as the advertiser
    side. So you have the coffee shops that want to put the ads in,
    and then you have your local newspaper that's displaying the
    ad. So they dominate both sides as well as the ad exchanges
    that connect them. So it's like a three-pronged--and I can see
    the witnesses nodding, I must be getting something right--a
    three-part domination.
        Google has a 90-percent share of the service that
    publishers use to sell space on their sites. It has a 40-
    percent share of the services that advertisers, like the coffee
    shop, use to buy ads, and it has a 50-percent share of the
    market for ad exchanges that connect those advertisers and the
    publishers. This end-to-end control gives Google unique access
    to information about virtually all digital ad transactions and
    allows it to extract a higher percentage of revenues than they
    would be able to get in a competitive ad technology market.
        For example, publishers using Google AdSense to sell their
    ad space must give Google 32 percent of the revenue generated.
    That's a pretty big cut. Research has suggested that Google may
    be taking between 30 and 70 percent of every advertising dollar
    spent by advertisers using its services, depriving providers of
    original content that are, in fact, struggling to receive their
    own compensation.
        This includes many of our news outlets. We have a separate
    piece of legislation Senator Kennedy and I have on negotiating
    news content rates, something that's worked successfully in
    Australia.
        But the other piece of this is just the overall advertising
    market that involves news organizations and many other sites.
    Google's ability to take a large share of the revenues
    generated by publishers' ad space is contributing to the near
    collapse of advertising-based revenue models for many news
    organizations.
        And this threatens more than competition. It threatens the
    viability of a free and independent press, which is essential
    to our democracy. And it is especially hurting the small local
    radio, TV, and newspapers. Google's market dominance, combined
    with its huge advantage in consumer data, gives it the market
    power to exclude its ad tech rivals and maintain its monopoly
    power.
        This strategy has been very lucrative. As they say,
    ``Follow the money.'' Last week, Google announced first-quarter
    results that included, in just ad revenue, $55 billion--not
    million--$55 billion dollars in ad revenue in the first
    quarter. And you wonder why we are losing what will be a third
    of the Nation's newspapers in just over a decade? You can look
    right there: $55 billion. That is where the revenue has
    shifted.
        And when you don't get paid for your content, and you're
    not able to crack into this trio of monopolies with the
    publishers, and the advertising, and the people in-between,
    it's a recipe for disaster.
        It was about $100 million less the $55 billion, than in the
    first quarter last year. But $100 million is about a rounding
    error when you look at numbers that big. What I bring that up
    for is that it shows that it is consistently that high.
        The Justice Department recently brought a case claiming
    that Google has engaged in anticompetitive conduct to establish
    and maintain monopoly power in these ad technology markets.
    State attorneys general have also taken action, brought a case,
    but we know that there are difficult cases to win, which is why
    this conduct has continued.
        We all saw what enforcers are up against last week when the
    D.C. Circuit upheld the dismissal of New York's Federal
    antitrust claims against Meta, citing the Supreme Court's
    decision in Trinko. One of our arguments here, my arguments
    maybe, not Mike's, is that the Supreme Court decisions have
    narrowed the possibility of bringing these kinds of cases,
    which is another argument for making some changes to the laws.
        The good news is that there is a bipartisan desire to take
    action. Last Congress we passed the bipartisan bill Senator
    Grassley and I led, that Cicilline and Buck led in the House,
    to modernize the merger filing fees to make more resources
    available to the antitrust agencies.
        We also passed the bill that Senator Lee led, and I was the
    Democratic lead, to empower State antitrust enforcers. And when
    these bills were included in the end-of-year funding bill,
    Senator Lee and I led an amendment to ensure that the merger
    fee reforms took effect this year. That passed with an 88-to-8
    vote. It's just happy memories of the end of the year, I'm sure
    you're remembering this--me calling you at midnight, texting
    you at 6 a.m.
        [Laughter.]
        Chair Klobuchar. Okay. To address the issues we are
    discussing today, I'm working with Senator Lee on the AMERICA
    Act to improve competition and transparency in ad technology
    markets. This legislation is a key part of the work this
    Committee has been doing over the last few years to rein in the
    market power of a handful of online gatekeepers that are
    dominating our digital economy.
        I would note some other bills. The American Innovation
    Choice Online Act that Senator Grassley and I have introduced,
    making it the first tech competition bill last year voted out
    of the Committee since the dawn of the internet. We did the
    same with the Open App Markets Act, something that Senator
    Blackburn and Senator Blumenthal are leading, along with
    myself. And then I mentioned already the Journalism Competition
    Preservation Act.
        I know that on this Committee, we are ready to stand up for
    American consumers, small businesses, and innovation. I see
    Senator Booker and Senator Welch here, two examples of people
    who are willing to take on consolidated power in many ways
    across the economy. We have other examples that I've mentioned
    on the Republican side. We thank Senator Durbin and Senator
    Graham for their leadership on these issues, having voted, both
    of them, or been Co-Sponsors of a number of these bills.
        I want to introduce the witnesses before turning it over--
    maybe I'll let Senator Lee make a opening statement. Then I'll
    introduce the witnesses.

               OPENING STATEMENT OF HON. MICHAEL S. LEE,
                 A U.S. SENATOR FROM THE STATE OF UTAH

        Senator Lee. Thank you, very much. Two-and-a-half years
    ago, when I was Chairman of this Committee--this Subcommittee
    at the time, we held a hearing to explore a number of
    competition concerns rising in the digital advertising market.
    At the time, it wasn't clear exactly what the solution was, but
    we wanted to understand the problem before we figured out what
    solutions might exist.
        And since then, it's become more clear. And here we're
    going to discuss that today. The solution lies in the
    Advertising Middlemen Endangering Rigorous Internet Competition
    Accountability or AMERICA Act. This is one of the acronyms of
    which I'm most proud with legislation.
        Very grateful, not only to my excellent team in helping to
    put this together, I'm also very grateful for my Co-Sponsors,
    starting with my lead Democratic Co-Sponsors, Senator
    Klobuchar. We've also got Senators Cruz, Blumenthal, Rubio,
    Warren, Schmitt, Hawley, Kennedy, Graham, and Vance. And we're
    just getting started. We'd love to get Senators Booker and
    Welch on board with us, as well, and hopefully today's hearing
    will help with that effort.
        Now, some may be asking: Why focus on this? Why all this
    fuss just about digital advertising? After all, this isn't
    necessarily the most high-profile market. Consumers don't
    necessarily lay at wake at night ruminating over whether their
    favorite website is earning enough money from selling digital
    advertisements, or whether the shoes that they just bought
    online might have been a little bit cheaper if the manufacturer
    had saved a fraction of a penny on 1,000 impressions last month
    that they paid for in their advertising budget.
        Instead, we do lay awake at night worrying about other
    things. We spend a lot of time as Americans worrying about
    things like how Big Tech firms sometimes track our location--at
    all times, following us to work, to school, on dates, to
    church, to the doctor, everywhere else in-between. And we worry
    about large trillion-dollar corporations that control our
    phones, our watches, our movies and our music, our wallets, our
    books, our thermostats, appliances, home security systems,
    cars, even baby monitors, fitness routines, and a whole lot
    more.
        We worry about Big Tech firms giving computers to schools
    to give to our children, whom they then track and monetize by
    feeding them endless streams of social media, pornography, and
    other mindless entertainment, shaping their thoughts and
    psyches, sometimes with devastating or even deadly
    consequences.
        We worry about how these companies might use artificial
    intelligence to shape and influence how we think, feel, and
    interact and communicate with the rest of the world, ensuring
    it's only in ways that are profitable for them, of course.
        But the fact is that all of this technological and
    financial hegemony rests on one thing: digital advertising.
    Because digital ads are how you turn data into money. This is
    the lifeblood of the tech sector in many respects.
        That's why the first step toward reining in the power and
    the predation of the monopolist tech companies is to bring
    transparency and competition into the digital advertising
    market.
        This is a--this is an important thing. Without that, you
    can't really do that. This is the lifeblood of the tech
    economy, which is why the AMERICA Act does what it does to rein
    in the power and the predation of these companies.
        Now, the Department of Justice, along with 33 States and
    Territories and numerous businesses, have all seen some of the
    same problems and have brought antitrust lawsuits trying to
    address these issues in court. Antitrust litigation, of course,
    can be an effective tool to bringing an end to significant
    intractable competition problems.
        But these sorts of things take a long time. This litigation
    will likely take many years to complete. And even assuming that
    enforcers are successful at the end of the day in that
    litigation, it's only going to result in an injunction that
    applies to a single firm. Congress could solve the problem
    tomorrow and do so in a way that ensures today's monopolist
    isn't necessarily replaced by tomorrow's monopolist doing the
    exact same thing.
        I'm very grateful to our panel of witnesses here to educate
    us and enlighten us on these issues, and I look forward to our
    conversation and ultimately to helping advance the AMERICA Act
    one step closer to the President's desk. Thank you.
        Chair Klobuchar. Thank you, Senator Lee. I was just noting
    with our great staff here, Avery, and Mark, and Keagan, that we
    don't usually have any natural light in these rooms. So we can
    say we're shedding light on this very important issue as the
    curtains are open for the first of many, many hearings.
        Okay, I'm going to introduce our witnesses here today. I
    want to also thank Senator Hirono who's with us, who's been an
    early leader on a number of these bills.
        With us today are Dina Srinivasan, who is a lawyer and a
    fellow with the Thurman Arnold Project at Yale University.
    She's also the author of ``Why Google Dominates Advertising
    Markets: Competition Policy Should Lean on the Principles of
    Financial Market Regulation.''
        Also, Professor Roger Alford. He is a law professor at
    Notre Dame Law School, where he teaches about international
    antitrust issues and is a former deputy assistant attorney
    general for international affairs.
        Barry Lynn is with us, a frequent flyer on this Committee.
    He is the executive director of the Open Markets Institute, a
    non-profit research and policy group that focuses on addressing
    monopoly power and modernizing our antitrust laws.
        Jason Kint is the CEO of Digital Content Next, a trade
    association serving digital content companies, and is chairman
    of TrustX, a cooperative digital advertising marketplace.
        Last, but not least, Todd Henderson is a law professor at
    the University of Chicago, my alma mater. Thank you. Professor
    Henderson's research interests includes corporations,
    securities regulation, and law and economics.
        If the witnesses could please stand and raise your right
    hand?
        [Witnesses are sworn in.]
        Chair Klobuchar. Thank you. You can be seated, and I will
    now recognize the witnesses for 5 minutes of testimony each.
    Ms. Srinivasan, please, begin. Thank you.

     STATEMENT OF DINA SRINIVASAN, THURMAN ARNOLD PRO-JECT FELLOW,
                YALE UNIVERSITY, NEW HAVEN, CONNECTICUT

        Ms. Srinivasan. Thank you, Senator. Chair Klobuchar,
    Ranking Member Lee, and distinguished Members of the
    Subcommittee, thank you for the opportunity to testify before
    you today. The AMERICA Act is really just a simple piece of
    legislation that'll fix a major problem at the heart of online
    markets. The problem that the bill aims--I'm sorry. The problem
    that the AMERICA Act aims to fix is simple. You see, entire
    sectors, as we've discussed already, of the U.S. economy depend
    on being able to buy and sell online ads.
        And this includes entrepreneurs who might buy ads to reach
    new customers and grow their businesses, and it includes
    content creators and media businesses selling ads to fund their
    operations and to keep their subscription prices for consumers
    low. It's an industry today that is not small. It's worth
    hundreds of billions of dollars.
        Now, people used to buy and sell ads in person. Say the
    local owner of a restaurant calling his newspaper and haggling
    over price. That is no longer the case.
        Today, as we've begun to discuss, ads are bought and sold
    at lightning speed on sophisticated exchanges. Ad companies
    have modeled their exchanges after stock exchanges that we're
    familiar with, like the New York Stock Exchange.
        So now the owner of the local restaurant must go and use an
    ad broker, just as he'd have to go use a stockbroker, like
    Fidelity, to buy ads from his newspaper that are now trading on
    exchanges. And he must trust his broker to act in his interest
    and to fetch him a good price.
        The problem today is that the companies that operate the
    new ad exchanges and brokers operate without any of the common-
    sense rules that Congress has enforced on Wall Street for
    nearly a century. There are no rules that manage conflicts of
    interest. There are no rules that require brokers or exchanges
    to be open, honest, and transparent with their own customers.
    The industry is most certainly not policing itself. That's the
    essence of the problem.
        I'd like to share a few concrete examples of what's wrong
    with the picture. The company that owns the major ad exchange,
    also operates on the sell side, also operates on the buy side,
    and also sells advertising itself. They don't even bother
    keeping the different divisions internally separate from one
    another.
        So imagine that restaurant hands $1,000 to its broker to go
    buy ads for its business, and that broker turns around and uses
    its customer's money and information to trade against that
    customer, to force ads to clear on its own exchange, even
    though that decision is bad for its customer and costs its
    customer more money.
        For many years on the other side of the equation, websites
    and apps were at the mercy of the largest broker using
    deceptive tactics and exploiting information advantages when
    routing trades to exchanges, resulting in those websites and
    apps making up to 50 percent less revenue than they otherwise
    would. This might sound abstract, but imagine for a minute if
    The Washington Post is suddenly making 50 percent less revenue
    than it otherwise would.
        As Senator Klobuchar mentioned, the harmful behavior not
    only hurts the bottom line of these online businesses, but it
    has broader implications to institutions critical to the
    strength of our democracy.
        In dollars and cents terms, the burden on the public is
    real. Financial exchanges charge far less than 1 percent on a
    typical stock trade. In advertising with no rules, no
    transparency and runaway conflicts of interest, the broker's
    exchanges and exchanges in the middle, take anywhere between 30
    to 50 percent of each and every trade.
        Now, there's nothing inherently wrong in a capitalist
    society with exchanges and brokers charging what the market
    will bear. The problem, instead, is that in advertising they
    are only charging that much because they're not managing their
    conflicts, they're trading on inside information, and they're
    not being open, honest, and transparent with their own
    customers.
        Those practices impede the process of competition itself,
    and they cause prices to soar. And when the cost to buy and
    sell ads soars, that increases the prices of all goods and
    services being advertised.
        One thing that I thought might be helpful to mention is,
    sometimes these things, again, are abstract, and we might think
    stock exchanges are different than--or, stocks are inherently
    more important than stocks, but entrepreneurship, the last time
    I checked, was a fundamental source of wealth creation for
    Americans, and advertising is really a critical part of that.
        Thank you for your time today, and I look forward to
    answering your questions.
        [The prepared statement of Ms. Srinivasan appears as a
    submission for the record.]
        Chair Klobuchar. Thank you, very much. Professor Alford?

     STATEMENT OF ROGER P. ALFORD, PROFESSOR OF LAW, UNIVERSITY OF
                    NOTRE DAME, NOTRE DAME, INDIANA

        Professor Alford. Thank you, Senator Klobuchar. I've
    actually read your book, and I'm a huge fan of that book and
    the work that you're doing with respect to antitrust
    initiatives. And----
        Chair Klobuchar. And I assume you've read Senator Booker's
    book, as well, and----
        Professor Alford. I've read that. And----
        Chair Klobuchar [continuing]. Senator Lee's book, what
    happens----
        Senator Booker. That was the most obsequious comment I've
    heard in 10 years as a Senator.
        [Laughter.]
        Professor Alford. And Senator Hawley's book, as well.
        Senator Booker. Just want to mark my protest.
        Chair Klobuchar. And Senator Hirono's book.
        [Laughter.]
        Professor Alford. So I'm a conservative antitrust scholar
    and former deputy assistant attorney general in the previous
    administration, and I'm here today to speak in support of the
    AMERICA Act.
        Let me begin by saying that everything about online display
    advertising is enormous. According to the DOJ's complaint filed
    in January of this year, publishers sell more than 13 billion
    advertisements every day. The daily volume of digital display
    advertisements grossly outnumbers by several multiples the
    average number of stocks traded each day on the New York Stock
    Exchange.
        Not only is the volume staggering, the margins are also
    staggering. While the New York Stock Exchange, as Dina just
    mentioned, makes less than 1 percent, less than $5 on a
    $100,000 stock trade, Google intermediaries make approximately
    40 percent, or $40,000, compared to the NYSE's $5 on a $100,000
    ad campaign.
        As a result of Google's revenue, it makes approximately
    $280 billion a year, or $767 million a day. It makes more
    revenue from ads in 1 week than Twitter makes in a year.
        A third aspect about online advertising that it's enormous
    is the enormity of the problem. It is almost completely
    unregulated market, with neither litigation nor legislation
    curbing the harmful conduct. Nearly identical practices in
    financial markets would result in severe fines and even
    criminal sanctions in the case of insider trading, but are
    completely unregulated here.
        Just as insider trading in the early 20th century was
    commonplace, according to one commentator historian, taken as a
    matter of course without indignation, without even a passing
    comment in the early 20th century, today we have the exact same
    problem in the display advertising markets. Google makes
    billions in revenue from its dominance at every level of the ad
    tech stack.
        Some will tell you that these markets are competitive
    because they are vertically integrated. But vertical
    integration can be beneficial if it eliminates double
    marginalization. Here, Google is enhancing triple
    marginalization with high margins on the sell side, high
    margins on the buy side, and high margins on the exchange in
    the middle.
        As introduced, the AMERICA Act prohibits entities with
    significant digital advertising revenue, only the largest of
    the large advertising players, from owning and operating
    entities across the ad tech stack.
        In the digital ad tech market, there are several advantages
    to structural separation. Let me offer just a few.
        First, structural separation recognizes the limits of
    regulatory behavioral remedies that are difficult to devise,
    implement, monitor, and enforce. The same reasons they prefer
    structural remedies in merger review is the same reason that
    it's important here.
        Second, structural separation eliminates or minimizes the
    conflicts of interest, as Dina just mentioned.
        Third, structural separation eliminates or reduces the risk
    of cross subsidizing and steering--steering products and
    services to your preferred exchange, rather than to a more
    competitive exchange.
        Fourth, structural separation improves transparency and
    information flows.
        And fifth, structural separation eliminates or reduces
    incentives to restrict competition.
        Finally, let me close by emphasizing why conservatives
    should support the AMERICA Act. I want to emphasize that the
    legislation is consistent with conservative antitrust values,
    and the list of Co-Sponsors that have been garnered already
    just in this early stages of the bill underscores that point.
        While litigation is appropriate to curb Big Tech abuse of
    power, it is not sufficient. I obviously am a strong supporter
    of litigation. I'm involved in the case brought by Texas
    against Google, but it is not enough. Attorney General William
    Barr, in his memoirs, has a whole chapter on Big Tech. And
    there are two reasons, according to Attorney General Barr, why
    targeted regulation of Big Tech is important as a complement to
    antitrust litigation.
        And again, remember, this is after having brought the
    search case against Google and recommending the ad tech case.
    So according to Attorney General Barr, these markets have
    powerful network effects, prone to monopolization, and second,
    they impact not just competition, but the collection of
    personal data and the free flow of information.
        According to his memoirs, let me just quote, ``I have
    natural reservations about imposing a regulatory framework on
    market activities, as most conservatives do, but the reality is
    that some markets and market conditions require a degree of
    regulatory intervention. In this case of Big Tech's major
    platforms, it is hard to see how the challenges they pose to
    competition, privacy, and the free flow of information can be
    addressed in the absence of a regulatory framework.''
        I look forward to taking your questions. Thank you.
        [The prepared statement of Professor Alford appears as a
    submission for the record.]
        Chair Klobuchar. Thank you, very much, for those startling
    statistics, Professor. Thank you. Next up, Barry Lynn.

       STATEMENT OF BARRY C. LYNN, EXECUTIVE DIRECTOR AND CHIEF
       EXECUTIVE OFFICER, OPEN MARKETS INSTITUTE, WASHINGTON, DC

        Mr. Lynn. Chair Klobuchar, Ranking Member Lee, Members of
    the Subcommittee, thank you for inviting me to speak on this
    extremely important topic. It's good to see you all, again. The
    AMERICA Act is a very smart idea that would do much to properly
    structure a market for online advertising.
        We at Open Markets strongly support this idea and commend
    Senator Lee for working to restore traditional common-sense
    regulation, and to ensure transparency and eliminate conflicts
    of interest.
        Open Markets also supports the ideas behind the America
    Innovation and Choice Online Act and the Journalism Competition
    and Preservation Act.
        We view these as vital also to rebuilding a more
    competitive and open internet and more democratic markets for
    news and debate. That said, we do not believe these ideas, even
    taken together, are sufficient to address the full array of
    threats posed by the power and control concentrated in Google,
    Facebook, Amazon, and Microsoft.
        None, for instance, addresses the power of the middlemen to
    manipulate what citizens read or whether they read at all.
    Consider Facebook's dramatic reason shift from news to video.
    None deals with the use of platforms to censor and manipulate
    debate. Consider Elon Musk's seizure of Twitter and his gleeful
    use of that platform to silence critics.
        None deals with the routine extortion by these gatekeepers
    of every company and individual who depends on them to get to
    market a form of theft that is often booked as advertising.
        The people in this room and the wider community fighting to
    protect democracy from monopoly have made great advances these
    last 7 years in understanding the nature of the threats posed
    by monopoly power and control, and the source of monopoly, and
    the ideas of Robert Bork and his allies in building enforcement
    capacity, and the ability to cooperate across the aisle, and
    bringing lawsuits to limit the powers of these corporations.
        But the time has come to admit one big failure, which is,
    to recognize that corporations like Google and Amazon have
    today become essential infrastructure for communications and
    commerce. This failure has allowed these corporations to
    develop business models based on forcing users to pay them to
    open the gates to the market for goods, for news, for ideas.
        In short, we allowed these corporations to develop forms of
    political power that are overtly autocratic in nature and that
    pose far graver threats to democracy and liberty than any
    plutocrats of the gilded age.
        That's why Open Markets believe it is so critical that
    enforcers in Congress move now to impose a system of non-
    discrimination on these gatekeepers, one that will require them
    to provide essentially the same service to every individual and
    business who depends on them.
        This principle of absolute equality of treatment traces to
    the Declaration of Independence. It is a core goal of the
    Constitution. It is the practical foundation for how Americans
    regulated every network, monopoly, and other powerful
    gatekeeper throughout our history.
        Senator Sherman, in a speech backing the bill that bears
    his name, explained why: It is the right of every man to work,
    labor, and produce in any lawful vocation, and to transport his
    production on equal terms and conditions and under like
    circumstances.
        This is industrial liberty and lies at the foundation of
    the equality of all rights and privileges. But in the 1980s and
    1990s, Bork and other radical pro-monopoly actors, overturned
    these principles.
        Today we face the consequences. And now, the reckless and
    chaotic imposition of generative AI by Google and Microsoft
    threatens to make these threats worse.
        The good news is, we have an almost all-purpose solution.
    One the American people has proven time and again in use on
    technology after technology, the railroad, the telegraph,
    electricity, broadcast, the internet itself.
        In November 2017, Senator Franken, when he was a Member of
    this Committee, pointed in the right direction: ``As tech
    giants become a new kind of internet gatekeeper,'' he said, ``I
    believe a basic principle should apply here. No one company
    should have the power to pick and choose which content reaches
    consumers and which doesn't.''
        The time has come to take up Senator Franken's mission and
    finish the job of making Google, Facebook, and Amazon safe for
    American democracy and American liberty.
        [The prepared statement of Mr. Lynn appears as a submission
    for the record.]
        Chair Klobuchar. Thank you, very much, Mr. Lynn. Mr. Kint?

       STATEMENT OF JASON KINT, CHIEF EXECUTIVE OFFICER, DIGITAL
                    CONTENT NEXT, NEW YORK, NEW YORK

        Mr. Kint. Thank you, Madam Chair, Ranking Member Lee, and
    Senators. My name is Jason Kint. I'm the CEO of Digital Content
    Next. DCN is the only trade organization dedicated to serving
    high-quality digital content companies that manage trusted
    direct relationships with both consumers and advertisers.
        Our membership includes more than 60 media companies and
    thousands of brands from every segment of the market, from
    large to mid-size companies, some who have been around just
    less than a decade, others for more than a century, all
    creating original news and entertainment over the internet.
        Our members include The New York Times, Wall Street
    Journal, Washington Post, Disney, Paramount, Philadelphia
    Inquirer, Vox Media Group, The Daily Caller, The Financial
    Times, among others.
        As background, I spent my first 20 years of my career
    running major digital media businesses, beginning with the very
    advent of the web in the early 1990s.
        Our DCN members create trusted original content funded
    primarily through advertising.
        Yet, while advertising is woven into everyone's digital
    lives, most people have only a vague idea of how it works,
    including how closely its plumbing has evolved to resemble a
    stock exchange.
        In barely three decades, digital advertising has quickly
    evolved into a high-speed marketplace in which a variety of
    pricing, placement, targeting, and auction levers are pulled in
    milliseconds as we go about our digital and physical lives.
        This is now the largest advertising market, trading at more
    than $200 billion of advertising per year in the U.S., executed
    in real time entirely by machines.
        And, like in the financial markets, brokers buy or sell on
    behalf of clients. To guard against fraud in the stock
    exchange, Congress enacted common-sense rules nearly a century
    ago. These rules prohibit the biggest companies from operating
    on both sides of the market. These rules also require
    transparency and impose a duty on brokers to get the best deal
    for their client.
        In short, these are rules that every American can
    understand and support. Unfortunately, there are no common-
    sense rules in the digital advertising marketplace. As a
    result, the supply chain is murky and rampant with fraud,
    insider trading, and hidden fees. Ad tech companies often
    arbitrage over users' data to use on behalf of other clients or
    for their own profits.
        Google, the most dominant company in the digital ad
    marketplace, enjoys a stranglehold over the entire supply chain
    since they offer the most popular software for advertisers to
    buy ads, for publishers to sell ads, and the most dominant
    exchange where bids are placed and winners are chosen.
        Google's dominant position is so problematic that a group
    of bipartisan State attorneys general have filed suit to end
    the monopoly.
        And earlier this year, the Biden administration's
    Department of Justice filed a similar suit, which was the
    result of an investigation by the Trump administration.
        Perhaps the best illustration of Google's dominant position
    was the quote that's been mentioned in Government suits. Yes, a
    Goo-gle executive said the analogy would be if Goldman owned
    the stock exchange. I kid you not.
        How that plays out in reality, in the lawsuit allegations
    and industry conversations, is when Google tells a publisher
    that, ``Hey, if you want to have access to all this advertising
    demand over here that's your lifeblood, then you also have to
    give me access to all your user data and your browsing history
    across the website,'' a.k.a., ``tying.''
        Digital advertising is a critical driver for our economy.
    That's why DCN wholeheartedly supports the AMERICA Act, which
    was introduced by Senator Lee and co-sponsored by many of the
    Senators mentioned. The bill would require transparency,
    promote competition, reduce obvious conflicts of interests, and
    stop market abuses by the most dominant companies.
        The bill lays out basic common-sense rules for the digital
    advertising marketplace that, once again, all Americans can
    understand and support.
        Ultimately, the focus of the discussion around this
    legislation will be the breaking up of Google. That will be the
    headline. Don't get me wrong, it's certainly a necessary and
    good idea.
        But there will be also some who argue, ``Why not just let
    the courts, let the antitrust lawsuits first follow through
    before we pass new laws? '' Well, I have two reasons.
        First, as it relates to Google, we don't have time for a
    long appeal process as they've increasingly sucked the oxygen
    and the potential for profits out of the news media industry.
        Second, the legislation isn't merely about the behemoth. It
    also importantly addresses transparency and eliminates
    conflicts of interest for even the middle-sized ad tech
    companies, so that all brokers have to serve their clients'
    interests. By lowering costs for publishers and advertisers,
    the AMERICA Act will also lower costs for consumers, and it
    will help protect consumers' privacy.
        As Senator Lee previously said, ``This is not a bill that's
    either liberal or conservative. It's not Republican or
    Democratic. This is just a good business process bill.''
        We agree wholeheartedly. We applaud your work on behalf of
    the free and local press, small and large, old and new. Thank
    you for inviting me here to testify today. I look forward to
    answering any questions you have.
        [The prepared statement of Mr. Kint appears as a submission
    for the record.]
        Chair Klobuchar. Very good, thank you. Professor Henderson?

     STATEMENT OF TODD HENDERSON, PROFESSOR OF LAW, UNIVERSITY OF
                       CHICAGO, CHICAGO, ILLINOIS

        Professor Henderson. Thank you for having me. It's a great
    honor to be here. I have three points to make for the
    Subcommittee today.
        First, monopolistic markets are associated with rising
    prices and restricted output, but digital advertising has, in
    recent years, demonstrated the opposite, with ads becoming
    cheaper and more effective.
        Second, ads are not stocks, and any claim that they should
    be regulated the way stocks are is based on a fundamental
    misunderstanding of how securities regulation works and why it
    exists.
        Third, the divestiture portion of the Act may have perverse
    effects on competition and innovation. Congress should
    carefully consider what this market would look like if this
    bill is passed.
        First, let me talk about the market for open display ads,
    which, it's worth noting, is a small part of the online ad
    market, which is, in turn, just a small part of the overall ad
    market, which is just an even smaller part of the overall
    marketing budget.
        Senator Klobuchar mentioned $55 billion for Google. That's
    a giant number. That's all of their ads, which include search
    and other things. The open display portion, which is what the
    AMERICA Act is about, is much, much smaller. I think it's about
    $7 billion.
        This market is dominated by a couple of big firms, Google
    and Facebook. But as Senator Lee has repeatedly warned, big is
    not necessarily bad. We have to understand why and what harms,
    if any, flow from bigness. Importantly, these intermediaries
    are vertically integrated and operate in two-sided markets, and
    they're trying to optimize across that entire operation of
    advertisers and publishers.
        I understand why The Washington Post is upset that 50
    percent of--they see a 50-percent reduction in their ad
    revenues, but there's advertisers and consumers on the other
    side. One has to think about the net effects on all sides of
    that market. When you do that, you can see in the last couple
    of decades, just in the last 10 years, digital ad spending has
    grown about 20 percent per year on average, and prices have
    fallen 4 percent per year on average.
        These are consistent with a highly competitive market, and
    as the UK Competition Authority found, the 30 percent number or
    70 percent number that Senator Klobuchar mentioned, Google's
    was at the industry average. The evidence needed for a massive
    remaking of a giant industry should be compelling and
    overwhelming, not based on anecdotes and hypotheticals.
        Let me talk about the analogy to stock markets. The logic
    is simple, and we just heard it from Mr. Kint. Google should be
    barred from acting as a broker on its own exchange, just as
    Goldman Sachs is prohibited from owning the exchange on which
    stocks are traded. But this is factually false. Goldman Sachs
    does not own the New York Stock Exchange, but it does own a
    different exchange called SIGMA X.
        If your broker recommends you buy a company's stock and you
    accept their recommendation, that broker can route your stock
    trade to the New York Stock Exchange, they can route it to
    their own wholly owned exchange, SIGMA X. Or, even more
    remarkably, they could fill your order from their own
    inventory. About half of stocks are traded in venues owned by
    stockbrokers.
        It's because of the lack of physical separation in stock
    markets that the SEC has adopted the best-interest rule. That's
    Rule 611 of the National Market Securities Rule passed in 2005.
    It's worth noting that, notwithstanding the fact that this has
    been a rule since 2005, it has required a massive bureaucracy
    inside of firms and in the Government to try to enforce it.
        And yet only 43 percent of trades happen at the national
    bid offer price, which is the best-price rule. In fact,
    exchanges market to their customers tools that allow them to
    sell at something less than the bid ask, the national best
    price. So, invoking this in stock markets, is one thing where
    there is one price for Google, and that price is the same for
    every person on planet Earth at a particular time.
        In contrast, in the ad markets, every ad, at every second,
    on every webpage, for every different person, is priced
    differently. Ensuring that stock market trading is fair is a
    monumental task for regulators. Doing this for online ads is
    unimaginable.
        There's a bigger issue with the analogy. We have aggressive
    regulation of stocks because they are--the importance of stock
    prices to consumers and--stock markets are the nerve center of
    the capitalist economy. Stocks are the largest source of
    savings for individual Americans. And while advertising is
    important, it plays nothing like the role stocks do in our
    society.
        The stock market, by the way, is also 700 times bigger than
    the online ad market--700 times bigger.
        The last thing, and I have to close, I'm running out of
    time, is the net effect of this bill on competition might be
    really perverse. Amazon is building its own business
    internally. They did this and routed trades through Google.
    Once it got big enough, they stopped doing that because they
    built a rival business that was important.
        Walmart and Target are doing the same thing. If you make it
    such that once you get to a certain size, then you have
    basically got to get rid of that business, you're going to
    impede companies from trying to build their own internal
    improvements. I'll close there.
        I'll just say, I like the transparency aspect of this bill,
    and if my vote mattered, I would vote for that. The other parts
    are more troubling to me. Thank you.
        [The prepared statement of Professor Henderson appears as a
    submission for the record.]
        Chair Klobuchar. Okay, thank you, very much. I'll get
    started. And I want to thank Senator Tillis and Senator
    Blumenthal for being here. And Senator Blumenthal, we mentioned
    your leadership on the App Store bill. Thank you.
        As the daughter of a newspaperman, I have watched closely
    as local journalism has seen its content and ad revenue
    siphoned off by digital platforms like Google and Facebook. You
    mentioned this, Mr. Kint. How has Google leveraged its monopoly
    power to squeeze publishers like local newspapers out of ad
    revenue that they would receive if there was a competitive
    market?
        Mr. Kint. Over time, Google and Facebook, in particular,
    have absorbed most of the internal growth in the industry, and
    they've done that by pervasive collection of data across the
    web.
        Google has tags, and pixels, and listening devices
    basically on nearly 80 percent of the top one million websites.
        Facebook does across 8 million plus websites, according to
    regulator data and research. So they're collecting and mining
    data across the web and using that to generate the most profits
    possible because they dominate the supply chain.
        Chair Klobuchar. Mm-hmm. From your perspective working
    directly with publishers, what are the biggest threats to
    publishers from a few tech giants controlling almost every
    aspect of the tech ecosystem? How are you addressing those
    threats?
        Mr. Kint. Well, antitrust is, you know, key to us because
    most of the downstream harms that we've seen, whether it be,
    you know, lower quality content, disinformation, not being able
    to fund journalism in newsrooms, data abuse, concerns about
    censorship, and the way--those are all downstream harms from
    what's upstream, which is, you know, a perverse amount of
    market power by just a couple of companies.
        And so anything in the area of antitrust or data protection
    that actually aligns the consumer's interests with the content
    and the news entertainment that they actually want to consume
    is very valuable.
        Other legislation, like what you're working on with the
    JCPA, where there's a duty then to correct imbalances in
    bargain power, is also very important to the future.
        Chair Klobuchar. Okay, thank you. One of the concerns that
    we have discussed here, and I've heard from both publishers as
    well as advertisers, is that there's no way to verify limited
    data that Google and Facebook provide about where ads are
    shown, to whom, and for what price. Even you, Professor
    Henderson, that doesn't agree with this bill, have noted that
    transparency is a good thing.
        One example of this, Facebook was sued by advertisers in
    2018 for lying about how many people an ad could reach. What
    information about ads do you think should be provided to
    advertisers and publishers by ad platforms? And the secondary
    question, how has a lack of competition empowered Google and
    Facebook to limit transparency?
        So why don't you get at that? Because I believe that this
    bill would help give advertisers greater insight into what's
    going on and whether their digital ad campaigns are even
    effective. It's hard to know. So anyone want to take any bit of
    that, about what information you think it should be provided,
    and also what we could do better?
        Ms. Srinivasan. Sure. Thanks, Senator. One thing that
    Professor Henderson mentioned, and this is sort of thrown
    around a lot, is that the price of ads has just gone down. So,
    you know, nothing to see here, folks.
        One of the things that the bill does which I think is great
    is, is it requires brokers to disclose certain information to
    advertisers. And that information will allow them to audit
    whether what they're buying is good quality or whether what
    they're buying is bad quality.
        And so, one of the things that might happen is, finally,
    we'll be able to actually measure whether, in fact, the
    effective price of ads is going down or whether it's going up.
        Chair Klobuchar. Mm-hmm.
        Professor Alford. Can I just add one other small comment?
    And that is that, you know, you would think the publishers and
    the advertisers would both know what the price was for the
    impression that was sold. The advertisers know what they paid,
    the publishers know what they received, but neither the
    publisher nor the advertiser know what the costs in the middle
    were.
        And so there's a disjunction of knowledge about what
    publishers received and what advertisers paid, because these
    intermediary margins are really, really large----
        Chair Klobuchar. Mm-hmm.
        Professor Alford [continuing]. And it would be like having
    a stock trade without knowing what the price--the ultimate
    price was, or a sale of a home without a closing sheet. And so
    that's a very simple example of transparency.
        Chair Klobuchar. Mr. Lynn?
        Mr. Lynn. Yes, thank you. In an earlier life I ran a
    magazine called Global Business. It was a 100,000-circulation
    business--I mean, magazine. It was four-color, perfect-bound,
    96-page monthly magazine. We lived 100 percent off of
    advertising.
        One of the things that we did in this, very--this period a
    long time ago is, we spent about 7 percent of our revenue every
    year sort of auditing our readership to make sure that
    advertisers understood exactly who they were getting and how
    they're getting it.
        That was a long time ago. That was essentially before the
    internet. I would say that advertisers back then were better
    served than they are right now.
        Chair Klobuchar. Okay. Very good.
        Professor Henderson. Just--oh, go ahead.
        Chair Klobuchar. No, go----
        Professor Henderson. No, please----
        Chair Klobuchar [continuing]. Professor Henderson. I'll go
    back to--I've one last question our colleagues have to----
        Professor Henderson. Okay. I just want to add, I said it
    was for transparency, and I think that's fine. I think Louis
    Brandeis said it well, like, you know, shine a light on things,
    as you said, Senator Klobuchar, when we started. I should note,
    though, that's a little bit misleading, because, as I
    mentioned, Google, the UK Market Authority found that Google's
    rate that they charge is in line with their competitors.
        And if nobody had any idea how much these intermediaries
    were taking, they would have incentives to jack--you know,
    Google could get away with charging anything because nobody
    knows what they're charging. They're charging a market rate,
    the market rate of their competitors.
        And I'll note that the average large publisher will use six
    different ad platforms in a year, and the average advertiser
    will use three different platforms. So it's not like this is
    the only game in town. And if Google is fleecing everybody--I'm
    from the University of Chicago, so I'm contractually obligated
    to say that I believe in markets.
        And if the Google was absolutely fleecing people, given
    that the average person uses six or three or six different
    other alternatives, they would be taking their business to
    those places. Now, if they are, as you said Senator, committing
    fraud by deliberately misleading people, then we should have no
    tolerance for that.
        Chair Klobuchar. Okay.
        Professor Henderson [continuing]. We should go after them.
    But the threshold for breaking them up, I think, should be a
    lot higher than that.
        Chair Klobuchar. Okay, Mr. Kint. You want to respond?
        Mr. Kint. I was just going to say that, you know, I heard
    the point earlier from Professor Henderson why, you know,
    stocks are different than advertising. I don't think we're
    arguing they're the same thing. But advertising in digital is a
    high volume. We heard the numbers from Roger that, you know,
    the volume of advertising impressions per day at that rate, the
    average ad translates to about less than a penny per
    advertising. That's ripe for fraud.
        Those are the types of markets, large volume, low price. A
    CEO of an ad tech company recently told me that Google and the
    trade desk are non-transparent black holes. Nobody has any clue
    what's going on inside them. So we need to actually have some
    transparency, because the way it translates-----
        Chair Klobuchar. Okay.
        Mr. Kint [continuing]. Is that local publisher gets a check
    every month from Google, and they have no idea what's behind
    it.
        Chair Klobuchar. Okay. One last example I want to use of my
    own experience with this, and why I know that they have info
    and they're targeting people.
        One of the ways that Google is able to leverage its market
    power to disadvantage its competitors is by drawing on that
    vast amount of personal data it has on people, as well as the
    lack of any Federal privacy legislation to limit how it can use
    the data. So you have this twofer problem.
        So I wanted to show this ad, only because--so this is a
    pop-up ad against the self-preferencing bill. Okay. And I only
    find it funny because I do want to thank the lawyers of Google
    who put that little ``could'' in there.
        [Laughter.]
        Chair Klobuchar [continuing]. So it says, ``Senator
    Klobuchar''----
        [Poster is displayed.]
        Chair Klobuchar [continuing]. With the little--my
    colleagues will enjoy this--``could break Google Maps.'' Okay?
        [Laughter.]
        Chair Klobuchar. This gives me a lot of power. Senator Lee,
    go ahead.
        Senator Lee. Just the context throws me.
        [Laughter.]
        Chair Klobuchar. I know.
        Senator Lee. You don't want it to suggest you could break,
    that's not--that's not the message----
        Chair Klobuchar. Well, I--that's exactly--I do wonder about
    it. And if we want to look at the other ones and show these--
    I'm going to get to the punchline in a minute. These are harder
    to see, but these went all over the place.
        [Poster is displayed.]
        Chair Klobuchar. That I would ``erase Amazon Basics'' and
    that I would ``break''--this one is interesting--``could''--
    another ``could''--little ``could''--``could break FaceTime.''
        Okay, so who saw these? Members of Congress saw these. So
    these were targeted in Washington, DC, for Members of Congress
    when they were home, against the bill. And this is part of the
    over-$200 million advertising campaign put forth by Chamber of
    Progress, or as I call them, Chamber of Lack of Progress----
        [Laughter.]
        Chair Klobuchar [continuing]. Which is the Big Tech
    companies' front group.
        And so--but what is interesting to me is, I heard about
    these ads from who? Other Members of Congress. They were
    targeted, so they saw them. I'm not going to put their names
    forward on this thing, but I had multiple calls by Members of
    Congress.
        So I guess I would ask you, Ms. Srinivasan, if that
    surprises you, that they would be able to have this data to
    target people so they scare them from supporting our bills
    because they don't want to have these really scary ads that
    they're breaking into be put up on sites where people are just
    looking up TV shows like I was doing. Okay, go ahead.
        Ms. Srinivasan. It doesn't surprise me. When Google bought
    DoubleClick way back when, one of the things that it promised
    to do was to keep customers data separate. Of course, it
    purchased DoubleClick, and then after it gained market power,
    it started to use that information.
        And it can use that information now for different trading
    purposes, whether it's to hyper-target ads like that, that is
    data that's originated on the publisher side, on the seller
    side, that Google is gaining by virtue of its position as
    publisher's broker. And now it's using it on the other side to
    target ads and to inflate its trading revenue. And so that's
    one of the things that this bill would target and prohibit.
        Chair Klobuchar. Exactly. And of course, the ultimate
    interesting part is, they're using it to target people on a
    bill, using their own monopoly power to target a bill that
    tries to do something about their monopoly power. So I just
    think it shows what we're up against, but it also has to be
    revealed to the public. So with that, I'm going to turn over to
    Senator Lee.
        Senator Lee. Thank you. Ms. Srinivasan, let's start with
    you.
        You've looked at the ad tech industry from multiple angles.
    You've looked at it from the inside, as within an ad tech
    company, and you've also looked at it from the outside, as a
    legal scholar. And--so Ms. Srinivasan, in your assessment, what
    are the biggest harms to competition that we currently face in
    digital advertising? And do you think the AMERICA Act would be
    effective in addressing those harms?
        Ms. Srinivasan. I do think the AMERICA Act would be
    effective. Based on my research and studies, I'm not aware of
    any exchange market that is vertically integrated the way ads
    are. The biggest problem, to answer your question directly, is
    that they're not self-managing conflicts of interest and
    there's very little transparency in the market.
        And so we don't know whether prices are going down, whether
    prices are going up, whether what I bought was good, whether
    it's fraudulent, whether it existed, whether it didn't exist.
    And the bill addresses all of those problems.
        Senator Lee. Thank you. Mr. Alford, sometimes we expect
    vertical integration, in most markets, in fact, to create some
    efficiencies--some efficiencies that can end up benefiting
    consumers, enhancing consumer welfare. But it's not always the
    case. Is it? I mean, when there are substantial barriers to
    entry, and/or when there are switching costs, it can also lead
    to foreclosure that keeps out new competition, and either
    entrenches or expands monopoly power.
        How has this worked out in ad tech? Is it more what we
    would expect in some industries where it increases
    efficiencies, or is--we have substantial barriers and switching
    costs leading to foreclosure?
        Professor Alford. Yes, thank you for the question. So yes,
    the prevailing wisdom about vertical integration is that it's
    beneficial because you eliminate double marginalization. You
    don't--the wholesaler takes one profit margin, then the
    retailer takes another profit margin, and you eliminate that if
    there's vertical integration.
        But of course, that's assuming you're all on one side.
    Right? In this situation, we're talking about vertical
    integration, as Dina just mentioned, in an auction on both
    sides across the spectrum. And in that situation, you have the
    ability to arbitrage your fees. And basically, where there's
    competition in different segments of the stack, you can lower
    your prices, and where there's not competition, you can raise
    your prices.
        Todd Henderson calls it subsidization, but it's really
    arbitraging and recoupment, not in a future time, but actually
    in present time, just in a different segment of the stack. And
    so you have massive conflicts of interest.
        Imagine the buyer trying to get the best price at the--I
    mean, the best quality product at the lowest price, and the
    seller trying to get the highest price. And they're calling
    that vertical integration. That's just not the way that you
    typically think of exchange markets working.
        Senator Lee. Mr. Kint, what are the challenges that
    publishers face in their unique world? The vicissitudes of that
    business are somewhat unique. What do they face when it comes
    to navigating the digital advertising ecosystem?
        Mr. Kint. I think the, you know, the primary challenge is
    the scale that comes with Google and Facebook and the lack of
    transparency into the supply chain, coupled with--you've got
    the scale that makes it really easy to buy, coupled with this
    pervasive collection of data in which an individual publisher
    can't compete.
        I think one of the things that people often miss is that
    Google and Facebook, according to the regular report that
    Professor Henderson keeps referencing, which was quite damning
    for Google and Facebook, by the way--it also concluded that
    most of Google and Facebook's data actually doesn't come from
    people using their products. It comes from third parties when
    people are actually choosing to use other products. And so that
    underlying collection of data is a way that an individual
    publisher can't compete.
        Senator Lee. Now one tech firm--as we were preparing for
    this hearing and talking about this bill, one tech firm told my
    office that separating the buy side from the sell side of the
    ad tech business to eliminate conflicts of interest could
    actually cause publishers to pay more. Do you share this
    concern, and what's your assessment of it?
        Mr. Kint. No, I think that word, ``could,'' is being placed
    again in a very operative way. You know, ultimately, I mean,
    that's why the second tier in the legislation is so important,
    the best-interest and best-execution obligation, because it
    aligns then the interest with the principal on the end. And so
    that will ultimately drive down price with competition.
        And, you know, the idea that by having a single company
    that controls the entire supply chain that has a duty to
    maximize--it's not even just Google. The entire ad tech
    landscape are for-profit companies trying to extract as much
    value out of that supply chain from the consumer, and
    publisher, and the advertiser on the endpoints. And so having
    actual competition and best-interest obligations is a huge win.
        Senator Lee. Okay. On that topic of collecting data on lots
    of people, Ms. Srinivasan, I've heard allegations suggesting
    that Google cuts off publishers who don't consent to having
    Google collect data on their web visitors, their visitors to
    their websites. How would the AMERICA Act address that problem?
        Ms. Srinivasan. Currently, publishers don't really have a
    choice when they're using an intermediary on the sell side.
    Google's intermediary on the sell side has over 90 percent
    share of the market, and that's why it's being sued by so many
    State attorneys general and the Department of Justice.
        So what the bill does basically is, it will create
    competition, both on the sell side and on the buy side, and
    then the exchanges in the middle. And that competition will
    cause firms to enter that offer better terms with respect to
    data. They'll start competing to offer better privacy and
    better terms.
        Senator Lee. So would it be fair to say that, you know,
    perhaps counterintuitively, or it's not necessarily obvious to
    someone looking casually at this legislation, you could end
    up--through this bill that focuses on competition policy, you
    could end up enhancing the privacy interests, the ability of
    consumers to protect their own privacy, the ability of people
    who operate one website or another, to protect the privacy of
    those who visit their websites. Is that fair to say?
        Ms. Srinivasan. Absolutely. I would expect it to have that
    immediate effect.
        Senator Lee. Okay. I see my time's expired. Thank you,
    Madam Chair.
        Chair Klobuchar. Okay, very good. Good questions. Thank
    you, Senator Lee. Senator Hirono.
        Senator Hirono. Don't you love antitrust? You say,
    ``What?''
        Chair Klobuchar. No, it's great. Go ahead.
        Senator Hirono. Thank you for holding this hearing. So, I
    heard you say, Professor Alford, that vertical integration,
    when we're talking about the digital advertising, is not how we
    usually think about vertical integration in the, say, in the
    antitrust case where the refinery owns the gas stations. So
    that's so much easier to understand than vertical integration,
    if there's such a thing even, in the digital space. Can you
    explain a little bit more why there's such a tremendous
    conflict and what's going on in digital advertising?
        Professor Alford. Sure. Yes, happy to do that. Thank you
    for the question. So again, this is a situation where you have
    multiple monopoly practices going on. You have unbelievable
    power with respect to the information that is provided to make
    the ads targeted advertisements. You have monopoly power with
    respect to the publisher side.
        So if you're going to try to offer your services, a
    publisher has to pretty much use a Google broker.
        And then you have extraordinarily high shares in the
    exchange in the middle, and then you also have just
    unbelievable power on the buy side, on the advertiser side.
        And then above and beyond all of that, then you have their
    own owned-and-operated products, like Search and like YouTube,
    where, if you want to use YouTube and do digital advertisements
    on YouTube, you have to use Google broker products.
        And so, as a result of that, because of the multiple layers
    of control that they have, they can basically steer people to
    Google products, and they can charge prices across the stack to
    their advantage.
        And equally important, they can use information over here,
    and take that information and use it over here, and basically
    arbitrage the information and the price that they're going to
    adjust.
        So it's not just insider trading where they're using it for
    their own advantage. They're using that inside information for
    the opposite side of the transaction's advantage. And so it's a
    really, really unusual environment, and we just don't see that
    in auction markets.
        Can I also make one final comment in responding to Todd
    Henderson? He says, ``Well, it can't be that big a problem
    because prices are declining.'' Well, he's assuming that it's
    only monopolization on the sell side, but obviously you can
    have a monopoly on the buy side. That's called monopsony power.
    And if you have all the power on the buy side, then the result,
    you would think, would be prices are going to be reduced.
        And we see that with the DOJ's challenge to the Penguin
    merger. There was a concern about monopsony power. Just because
    prices go down, if you're the buyer, that's exactly what you
    want as a monopoly.
        Senator Hirono. So I'm assuming that the rest of you agree
    that the way the professor is describing what's going on in
    digital advertising, that this kind of complexity where so much
    of what happens is owned by--is controlled by entities like
    Google and Facebook, do you agree that that's a pretty good
    description of what goes on? Yes. What does the----
        Professor Henderson. I don't agree, but----
        Senator Hirono. You don't?
        Professor Henderson. Well, let me just--I just want to
    respond very quickly to two things that were said. So first of
    all, Ms. Srinivasan said there is no market with this vertical
    integration. As I mentioned in my opening remarks, this is the
    stock exchange. It has the same features. Goldman Sachs
    represents buyers. It represents sellers. It owns exchanges
    where things are traded. I have a paper that I've submitted to
    the Committee that's 54 pages that lays this out in detail. So
    you can take a look and see if I'm right or not.
        One other thing to respond to Professor Alford, yes, this
    market seems strange because it has this vertical integration.
    It's not just about double margins on both sides. It's about
    economies of scale and network effects----
        Senator Hirono. Professor Henderson----
        Professor Henderson [continuing]. If you were building an
    ad market from the ground up, you would make it centralized.
        Senator Hirono [continuing]. I am not looking for a debate
    among our--the people testifying. I'm trying to clarify some
    things in my own mind. I understand that you have a very
    different perspective of what needs to happen.
        So, for--okay, I have a question for Ms. Srinivasan. There
    was a non-profit last year called the Center for Intimacy
    Justice, and they released a report alleging that Meta was
    systematically blocking advertisements about women's healthcare
    products on its platforms because it was classifying them as,
    quote, unquote, ``adult content.'' If there were many different
    digital advertisers, that would be less problematic. But Meta
    is a dominant player.
        So for Ms. Srinivasan, you've highlighted a number of
    problems with the dominance of a few platforms. What do you
    think about the idea that these platforms are gatekeepers of
    their advertising--of advertising, who can decide what kinds of
    ads can be placed on their platforms? And will the AMERICA Act
    prevent that sort of thing from happening?
        Ms. Srinivasan. Thank you for the question. You know, I
    guess we see--it's a simple answer, but basically when we have
    more competition, two things happen. You have competition on
    price, and you have competition on terms and conditions.
        And so if we fix competition, we would expect firms to
    start competing to be more intelligent about these types of
    decision-making that could be sloppy. So yes, I would expect
    the Act to address and fix that problem.
        Senator Hirono. Thank you.
        Chair Klobuchar. Thank you, very much, Senator Hirono.
    Senator Blumenthal.
        Senator Blumenthal. Thank you, Senator Klobuchar. Thanks
    for this really important and informative hearing, and to the
    Ranking Member, as well. I support all three bills that are
    before us today, and an additional bill, the Open Apps Market
    Act. I want to thank all of you, particularly Ms. Srinivasan
    from Yale, for being here today.
        And you have highlighted what I think is a central
    challenge here in your testimony, how to go from the abstract
    to the real--not just in this hearing room, but for the
    American public. Because there is a fundamental difference
    between what's happening here and the stock exchange, which is,
    people make or lose money every day.
        And they watch what's happening on the stock exchanges, and
    it's sometimes confusing, and frustrating, and enraging, but
    they have tangible results. And I think the challenge here is
    to go from that abstract to what in real life makes a
    difference for them.
        Because Senator Lee has said that, and I have said that,
    this 40 percent that's added by Google and others, that's a
    tax. That's money that they should know is added somehow to
    their bill. How do we inform them?
        And Ms. Srinivasan, you've written about the hidden fees
    and the opaque financial practices. How do we make clear to
    them that their newspapers are going under? The New Haven
    Register, and The Hartford Courant have been hit hard by these
    online advertising practices. It makes a difference in their
    lives.
        And I know this is not in your job description, but it is
    our challenge in trying to pass this legislation, which all of
    you agreed meets a problem that we need to address. So I'll
    just throw that open-ended question to you.
        Ms. Srinivasan. I think one of the best things that this
    bill does is it just shines a lot of sunlight on what's
    happening in the middle. So one of the problems today is that,
    if I'm an advertiser in Connecticut and I buy an ad from
    Google's broker, from Google's exchange, often I don't even
    know where that ad ended up.
        So I don't know if it ended up on The Hartford Courant, or
    I don't know if it ended up on, you know, a Russian website
    that is not--that I don't need to advertise my products to. And
    so one of the things that it does is it requires disclosure so
    that advertisers can know what they're buying.
        Another thing that it does, with respect to transparency,
    is it forces the brokers on each side to actually tell their
    customers what bids they submitted and what the bids cleared
    for. So today, The Hartford Courant might use a broker to sell
    ads, and those ads might sell at let's say, at $20 cost per
    thousand, and The Hartford Courant might get a $2 cost per
    thousand, and might not even know that that's what the
    advertiser paid, or what the delta in the middle was.
        And so the transparency section of the bill requires
    disclosure about basic things, like price bids and what was
    sold. And that itself should reduce a lot of fraud and generate
    a lot of competition.
        Senator Blumenthal. Thank you. Others? Mr. Lynn?
        Mr. Lynn. Yes, I think there's a--there's a reason I
    brought--one of the reasons I brought up discrimination--price
    discrimination is because in many ways the problems that have
    been so well-described thus far, they're actually worse than we
    understand. Which is, in this system there is no pricing.
        When you have a monopoly and when one actor in the system
    has all of the power, has all of the data, has a specific
    relationship with each actor, none of the pricing is being set
    within a marketplace. It is being set between the master and
    the subject. So the problem is actually vastly graver because
    we can't even measure the economic harms that we're dealing
    with here.
        Senator Blumenthal. Thank you, all. This is a topic which
    really deserves a lot more--a lot more explanation and
    exploration, and my time has expired. But thanks, again, to
    Senator Klobuchar for all her work--very thoughtful work on
    this issue.
        Chair Klobuchar. Thank you. Senator Lee and I were amused
    as you and Dina were geeking out on Connecticut with the Yale
    and Hartford references, noted by Professor Henderson, as well,
    I note--the rivalry, you know. Okay. Senator Lee.
        Senator Lee. I mean, the University of Chicago is close to
    your home State, and it is your alma mater. I'm sure it's
    littered with monuments, statues, and plaques honoring Senator
    Klobuchar.
        [Laughter.]
        Senator Lee. Mr. Alford, what does antitrust law have to
    say about when under what circumstances, divestiture, or
    structural separation is an appropriate remedy for
    anticompetitive conduct?
        Professor Alford. Yes, thank you for the question. So
    obviously, divestiture is a preferred approach with respect to
    any sort of merger analysis. Administrations on Republican side
    and on Democratic side preferred divestiture because it's so
    much easier to monitor and to avoid these sorts of conflicts of
    interest and to promote effective competition.
        Divestiture is also a common remedy that occurs in the
    antitrust context. There are lots of examples--famous examples
    of divestiture that occur in the litigation context. Of course,
    with respect to the ad tech litigation right now brought by the
    Department of Justice and by the different State AGs, they're
    all requesting divestiture as a result of the misconduct of
    Google.
        If I can comment on Professor Henderson's comment that
    divestiture is inappropriate here, he says two things that I
    think need to be clarified.
        One is, Goldman Sachs can own the dark web exchange, but
    that is in the backdrop of regulatory limitations. Right? He
    mentioned transparency, but obviously the best-interest duty
    and all the other sort of duties that would apply.
        So it's almost like he's saying, ``I'm fine with everything
    else about the bill except for the divestiture component of the
    largest companies.''
        But if you're going to allow that, then you have to have
    these other things that provide the backstop to protect against
    it. And, of course, this bill only deals with the very, very
    largest ones having those restrictions. Everyone else below
    that, the middle and the smaller ones, can do exactly what he
    said.
        So, you know, we're not talking about a radical proposal
    here with respect to divestiture. And what we're doing is
    similar to what you would have in antitrust competition cases
    where there's a serious problem.
        Senator Lee. So it's more of a safety valve at the top of
    the market.
        Professor Alford. Exactly.
        Senator Lee. And when it's a safety valve at the top of the
    market, it makes sure that there can continue to be a lot of
    other things happening----
        Professor Alford. Right.
        Senator Lee [continuing]. Below.
        Professor Alford. Notice he did not say that Goldman Sachs
    could own the New York Stock Exchange. Right? He did not say
    that. He said that they could own certain small, minor dark web
    exchanges.
        Senator Lee. Well, the----
        Professor Henderson. Can I just, since he said----
        Senator Lee. Sure, sure. I thought you were----
        Professor Henderson. Because I just want to just clarify
    what I said. So first of all, ``dark web'' is the wrong term.
    They're called ``dark pools.'' But they're alternative trading
    systems under a regulation passed by the SEC. So this is not
    some nefarious place. And moreover----
        Senator Lee. Illegal stock trading.
        Professor Henderson. Yes. And 50 percent of stock trades
    happen on alternative trading systems--50 percent.
        Senator Lee. What's it called? What was it?
        Professor Henderson. Dark pools.
        Senator Lee. Dark pools. Okay.
        Professor Henderson. And the reason they're dark pools,
    they're just called that because you can trade anonymously,
    because sometimes people want things other than price.
        Just one other thing I wanted to note. I feel a little bit
    like we're having, you know, just trains passing in the night
    here. Comments are that Google just completely is the master,
    and the poor New York Times is the servant, and they just have
    to take the terms that Google gives them, and this is just not
    correct.
        The New York Times has innovated themselves in creating
    header bidding. So they sell their own ads on their space.
    There are plenty of competitors, as I've mentioned numerous
    times, and the big competitors here, Amazon, AT&T, Facebook,
    they all preference their own sites and give their same
    preferences that Google's doing. So Google's behaviors, whether
    they're good or bad, that's for other people to judge----
        Senator Lee. But Google blocks header bidding.
        Professor Henderson [continuing]. They're all the same.
        Senator Lee. It blocked header bidding.
        Professor Henderson. For school----
        Senator Lee. That's part of the lawsuit.
        Professor Henderson. That's right, and in certain
    locations. But now they've agreed--I think it was with the
    French Competition Authority, and now they're--they've changed
    on that, is my understanding.
        Senator Lee. They've repented worldwide of that?
        Chair Klobuchar. Because of Europe. Because they----
        Professor Henderson. Yes, that's fine. And if antitrust
    regulators find particular conduct that is bad, then that would
    be--that's fine. But we're talking about something that is, you
    know, that's treating an illness. This is just lopping off the
    head in surgery here.
        Senator Lee. All right, I want to put a pin in that----
        Professor Henderson. Yes.
        Senator Lee [continuing]. And we may come back to it, if we
    have time later.
        Chair Klobuchar. The lopping off the head.
        Senator Lee. But--but, and I also want to get back later.
    I'm not sure your comparison to the stock exchanges works. It
    is, as you pointed out, a market that is 700 times larger than
    this market. And the market concentration is a lot less
    significant there. Anyway, I want to get back to that, but
    let's go back to Mr. Alford for a minute.
        I noticed that in his recent memoir, former Attorney
    General Bill Barr described a possible approach that Congress
    could take to laws dealing with Big Tech. And he suggested it
    could involve, quote, ``ordering platforms to divest certain
    previously acquired firms with the aim of reducing the
    platform's market dominance and promoting competition, not
    directing specific divestitures by name, but defining the
    particular characteristics requiring divestiture.''
        And the law that he describes could also impose rules,
    quote, ``governing the collection use and analysis of personal
    information,'' he writes. Now, I did not put him up to this. He
    did not consult me when writing his book. But that sounds a
    little like the AMERICA Act. Does it not?
        Professor Alford. I think it is--I think it is the AMERICA
    Act. You know, as he was finishing his tenure there, he was
    actively wanting to also pursue ad tech litigation. And they
    were in the middle of that investigation, and it was picked up
    by the Biden administration. Of course, they filed suit this
    past January. But absolutely. And I'm sure if you ask him--I'm
    sure you know him--you could say, ``Yes, this is exactly the
    kind of legislation that I think I was writing about,'' because
    it's what he was saying in his memoirs.
        Senator Lee. Now, Mr. Kint, one of the defenses that we
    hear of Google, and specifically Google's ad tech business, is
    that they pointed to all the innovation that has occurred, and
    that innovation brought to the marketplace has lowered the cost
    of advertising. Prices have gone down.
        It seems like--I'm not sure that argument holds water
    because Google tends to buy up those who do new things.
        Google isn't necessarily introducing anything new on its
    own. It acquires firms that do, acquiring up would-be nascent
    competitors--nascent competitors so they can get their
    innovation. The innovations originating from Google seem to be
    more focused on building gigantic walls, fences, moats with
    alligators, crocodiles, and sharks with lasers mounted on their
    heads around their market position.
        And then the lower prices get, and the lower prices are,
    they don't account for the need to buy more ads because of the
    declining quality of the ad placement.
        So people are having to pay more per ad, having to buy more
    ads overall, because the quality of the placement impacts the
    impact that they have. Is that consistent with your
    observations of the market?
        Mr. Kint. Absolutely. And, you know, there's a lot of
    jargon that can be thrown out, a lot of different metrics that
    Google can throw out. Frankly, I've seen it all. I installed
    the first ad server back in 1996 before Google, and before
    DoubleClick, and I've seen every sequence of every single
    company that's tried to create some sort of new angle into the
    ad tech landscape that Google has then typically acquired and
    squashed, in different ways, which is well-documented in the
    various antitrust lawsuits.
        And so I take you back to kind of a real-world example, and
    it's from Europe, actually, with their privacy law, GDPR. When
    it came out you had Europe trying to innovate around consumer
    privacy, and even the largest publishers, including the one
    that Professor Henderson mentioned, they had no control over
    how privacy law rolled out.
        They basically had to wait until Google--literally, when
    they had 2 years to tell the market what they were going to do,
    1 month before GDPR rolled out, Google said, ``You're going to
    get us consent as a publisher. You're going to give us all the
    data. We're going to bundle it, and we're not going to tell you
    how we're going to use it, and you're going to be liable for
    it.''
        And so that was how Google decided to roll out privacy in
    Europe. And they decided--and you think about the informational
    advantages asymmetry in the data and the value of that that
    continue to flow to Google at a point when, you know, there was
    a lot of risk for Google if GDPR played out the wrong way
    because it would--sorry----
        Senator Lee. Right.
        Mr. Kint. Go ahead.
        Senator Lee. But instead, they use GDPR as----
        Mr. Kint. That's exactly right.
        Senator Lee [continuing]. Additional mortar for the moat,
    and the wall, and the other moat, and the other wall----
        Mr. Kint. So they do. Exactly.
        Senator Lee [continuing]. And the sharks with the lasers on
    their heads.
        Mr. Kint. Yes. Yes, consistent.
        Senator Lee. Pretty well--it's played, and further
    entrenched them.
        Mr. Kint. Further entrenched them around something that
    should have been better for consumers.
        Senator Lee. Electrified fence, also. We won't go too far,
    but----
        Mr. Kint. They still have access to as much data as they
    want, and they can use it however they want. And at the end of
    the day, they just created an obstacle for publishers that
    extracted more value for Google.
        Senator Lee. Right. That seems troublesome. And it also
    seems like the kind of thing you could do. You couldn't get
    away with that if you didn't already have a degree of market
    dominance.
        Mr. Kint. Exactly. And your legislation--excuse me.
        Senator Lee. Go ahead.
        Mr. Kint. Your legislation, I mean, that second tier that
    says, you know, even if you're above $5 billion of volume, you
    have a best-interest obligation, you no longer can take that
    data and then use it for an entirely different purpose, in an
    entirely different context, for a different client, or for your
    own profit enrichment.
        So it--the legislation directly, I think, improves that.
    And I think that's--you know, you mentioned this earlier, but I
    think there will be consumer privacy benefits out of this
    legislation.
        Senator Lee. [Speaking off microphone.]
        Chair Klobuchar. Okay. Why don't I just go now?
        Senator Lee. Yes.
        Chair Klobuchar. Okay.
        Senator Lee. Thank you.
        Mr. Kint. Thank you.
        Chair Klobuchar. Just for the record, Bill Barr didn't
    consult me before he wrote his book, either. I just wanted to
    say that.
        [Laughter.]
        Chair Klobuchar. Just get it out of there. Although I am
    in, it's not that bad.
        Okay, so why don't I start? I thought I'd mentioned
    something about AI here, Mr. Kint. In addition to Google's
    power in digital advertising, it looks to have an early
    advantage, along with Microsoft and other monopolies, in
    deploying AI, like Bard.
        Those systems are trained on content developed by many of
    the publishers in your coalition. You know, AP, News Corp, USA
    Today, you name it. Are you concerned that Google could use its
    advantages in digital advertising, consumer data, and computing
    power to deploy AI in ways that is going to exacerbate what
    we're already talking about here today?
        Mr. Kint. Deeply concerned. And there's a pattern of
    behavior there that we've seen with, you know, with Google, and
    we saw it with Facebook. You know, it's, treat all websites,
    all webpages, as an interchangeable commodity, layer on your
    targeted advertising.
        So, if they can absorb the entirety of the web--and they'll
    say that the publishers you just mentioned are just a very,
    very small fraction of what's out there on the web, when the
    reality is that's the signal and the noise, that's the
    instructional data from the journalism--that's deeply
    concerning.
        So, we're thinking about, kind of, three things. We're
    thinking about, how do you protect that intellectual property,
    and that art of the journalists, and the photographers, and our
    various members? We're thinking about--and so that plays into
    copyright. We're thinking about other----
        Chair Klobuchar. And we know there's an exception under
    Section 230 for copyrighted material. But the answer just can't
    be that--having talked to one of my small, smaller newspaper,
    nothing like the size of The New York Times, Professor
    Henderson, already on its back because of the issues----
        Mr. Kint. Right.
        Chair Klobuchar [continuing]. That we're raising today, and
    really badly needs this--the bill that Senator Kennedy and I
    have passed, the Journalism bill.
        Mr. Kint. That's right.
        Chair Klobuchar But it's--but it--they don't have the kind
    of resources that the big guys have----
        Mr. Kint. Yes.
        Chair Klobuchar [continuing]. To take this on. They're not
    going to be able to sue. Just hearing them talk about--and the
    conversation about something totally different, but hearing
    them talk about how they're doing experiments to see on some of
    their own stories what is right now on ChatGPT, not a Google
    product, or some of the other sites, and they're looking at
    what's going to happen here, and seeing echoes of their own
    news coverage, which they know is deeply local, getting picked
    up on this. So continue on as your descriptions of what some of
    the solutions are.
        Mr. Kint. Yes, so that's right. It's protect that--the
    ability for them to say, you know, ``You can or cannot use our
    content in order to train your models,'' which is really hard
    to do against market power, especially when they, you know, a
    company dominates in search, which is the subject of a
    different antitrust lawsuit with Google.
        But number two, how do we advance the future broadly for
    professional news entertainment? Because this is part of the
    future. And in that vein, I think there is opportunities and,
    you know, revenue opportunities for premium publishers that do
    create high-quality news entertainment that need to also be
    explored. But you have to come to the fight without your hands
    tied behind your back against monopolists.
        Chair Klobuchar. Exactly. And I guess I'd go to you, Mr.
    Lynn. We talked about what we're seeing with journalism. I
    mentioned the stat that a recent study by Northwestern
    University predicted that one third of the U.S. newspapers that
    existed roughly two decades ago will be gone by 2025.
        Senator Kennedy and I introduced a Journalism Competition
    and Preservation Act to allow news outlets to band together, to
    negotiate free compensation from the platforms that are
    monetizing their news content for free. Talk about why this
    legislation is needed to strengthen local news across the
    country.
        Mr. Lynn. Thank you for that, Senator. This legislation is
    necessary because the newspapers are being starved. It's like
    the middlemen have established themselves, just very simply
    put, in-between the advertiser and the publisher, and they are
    diverting the money into their own pockets.
        Chair Klobuchar. Mm-hmm.
        Mr. Lynn. And so what's happening is places like the
    Minneapolis Star Tribune, and the Seattle Times, and the, you
    know, Dallas Morning News, pretty much every single newspaper
    in America is being starved. And this is, as you know, is bad
    for democracy. But it's--so this piece of legislation that
    you've put forth is actually the first piece of legislation
    that is taking a step in the right direction of preventing this
    extreme concentration of power.
        And just to be clear, we don't--whatever The New York
    Times--The New York Times is in a privileged position. But
    having one newspaper left in the United States is not the
    outcome we would like to see.
        Chair Klobuchar. And I will note there's been support from
    both big news organizations in the ilk of New York Times,
    Washington Post editorial boards, but also very small news
    organizations as well, and everyone from News Corp, on very
    different political ideologies, not only of the Senators that
    support this bill, but also for those news organizations, and
    that this is pretty much an across-the-board belief.
        And it's, to me, I see this as a duo approach: one is the
    Newspaper bill and then the other is the AMERICA Act--in these.
        And the final thing that I think is worth very much talking
    about is the American Innovation, Choice and Online Act. So
    Google, as we've noted many times here, advertising giant, also
    gatekeeper, like, on search, where it has a 90 percent market
    share, or on its app store.
        I've worked on this bipartisan legislation now with Senator
    Grassley. We mentioned it, that would require digital
    gatekeepers to compete fairly with small businesses and stop
    anticompetitive self-preferencing that allows companies like
    Google to drive traffic to their own websites, which drives up
    their advertising revenue.
        I guess, Professor Alford, would this kind of legislation,
    would this reform lead to healthier, more competitive set of
    digital marketplaces generally?
        Professor Alford. Yes. I think that the different types of
    legislation that you're proposing, the AMERICA Act obviously is
    targeted specifically at one specific market, and I think that
    would be incredibly beneficial. But there's a lot of benefits
    that you're talking about with respect to the Innovation and
    Choice Act. You know, specifically, you mentioned the self-
    preferencing problem.
        Self-preferencing problem is very, very acute in this
    market. We see it all the time, that they're steering clients--
    their own clients to their exchange instead of a competing
    exchange, even though the clients would be better served if
    they were allowed to go to other exchanges. That's what Senator
    Lee was talking about when he said they're trying to kill
    header bidding. And so if you had limitations on that ability
    to do that, then it would be definitely an improvement in the
    market.
        Professor Henderson. Can I just say one thing about
    newspapers? Yes? Is that a yes?
        Chair Klobuchar. You can, yes, but you keep mentioning one
    newspaper----
        Professor Henderson. I'll--I'm going to mention----
        Chair Klobuchar [continuing]. That isn't even covered by
    the Journalism bill.
        Professor Henderson. I'm going to mention your hometown
    paper, Senator.
        Chair Klobuchar. Yes.
        Professor Henderson. So first of all, love newspapers. I
    subscribe to four at my house, including two local ones. So I'm
    all for newspapers. Antitrust law is not supposed to be about
    newspapers or producers. It's about consumers.
        So just--that's an important thing to keep in mind, is
    focusing on consumer welfare, not producers. I understand why
    the newspapers don't like Google. We're talking about consumer
    welfare here. But I just want to mention one fact.
        Chair Klobuchar. I think there's just many of us have a
    very strong belief
        Professor Henderson. That--that----
        Chair Klobuchar [continuing]. In the First Amendment----
        Professor Henderson. I'm with you, Senator.
        Chair Klobuchar. Professor Henderson, and that consumer
    welfare, in my mind, is about the consumers and the people who
    participate in this democracy, their own welfare. And that
    means they have to have local news that is covering corruption
    on a city council, or covering when a business is closing down,
    or covering when a football team wins the championship in their
    local high school league. So I----
        Professor Henderson. We 100 percent agree.
        Chair Klobuchar [continuing]. It brings people together in,
    not only as a news source for understanding what's happening,
    but it also brings them together in terms of being members of
    the same community.
        Professor Henderson. I totally agree. I just want to
    mention this. Minneapolis Star Tribune, while we were talking--
    and this claim about Google being a monopoly and really hurting
    local newspapers, you can go to Star Tribune's website [holds
    up cell phone], which I've pulled up here, and look at their ad
    agencies that they use, their online ad platforms.
        And its pages, and pages, and pages of Google's
    competitors, including Google. So the Star Tribune uses dozens
    of ad platforms, including Google, and it's publicly available
    information you can look.
        Chair Klobuchar. Mm-hmm.
        Professor Henderson. So the idea that the Star Tribune,
    when it's placing its ads and selling its real estate, is
    limited to just Google, and that Google is able to use that in
    a kind of master/servant relationship, as we've heard discussed
    here, is just false, and the Star Tribune's own website will
    show you that it's false.
        Chair Klobuchar. Mr. Lynn, what is about the market share
    of Google right now, of the search engine market?
        Mr. Lynn. Depends who's counting, but it's probably about
    90 percent.
        Chair Klobuchar. Mm-hmm. That's what I thought. Okay.
        Mr. Lynn. Actually, could I make one quick----
        Chair Klobuchar. Yes.
        Mr. Lynn. The idea that antimonopoly law is not pertinent
    to protecting the free press is an outrageous statement, and it
    stands contrary to the entire history of the United States,
    going back to the Constitution, which established the postal
    service as an independent and neutral system for the
    distribution of, mainly, news.
        Chair Klobuchar. Okay----
        Mr. Lynn. So----
        Chair Klobuchar [continuing]. Thank you.
        Mr. Lynn [continuing]. We have used antimonopoly law time
    and again to protect American journalists and publishers
    against concentrated power, sir.
        Chair Klobuchar. Okay, thank you. Mr. Kint?
        Mr. Kint. One quick point. Thank you. You know, all those
    ad tech companies that are being brought in on the page of the
    Minneapolis site are being mostly ushered in by Google. So
    Google is still a choke point that's just a disclosure that all
    these companies are touching the page.
        And then second, I think we use newspapers as a proxy for
    news, generally. Our organization is entirely focused on the
    digital world in the future.
        Chair Klobuchar. Mm-hmm.
        Mr. Kint. I don't care in the same way about the actual
    printed newspaper. I'm focused on the future. And I can tell
    you that the digital-only companies, the ones that launched in
    the last 10 years, are seeing the exact same issues. BuzzFeed
    News just shut down last week. It's not--the business has
    underlying problems. It's not related to printed newspaper.
        Chair Klobuchar. Thank you. That's a good point. And again,
    I just want to emphasize, as Senator Lee is aware, just the
    different ideology in elected officials being willing to take
    this on, which includes, of course, State attorneys general
    with very different beliefs.
        And Professor Alford, both the Justice Department and many
    State attorneys general have sued Google for monopolizing the
    ad tech market. You've been involved in some of that
    litigation. Could you speak to the need for both litigation and
    legislation to address those market issues?
        Professor Alford. Yes. So I think everyone that is
    concerned about these markets is supportive of both regulation
    and litigation. They are complementary to one another, not
    competing with one another.
        Obviously, antitrust litigation focuses on the most
    egregious harms of the largest, biggest players, whereas the
    regulation that is being proposed here, and the other
    regulation that you've been involved in, tries to look at the
    larger picture and try to deal with larger questions. Right?
    Not just harm to competition, but also public discourse
    concerns about privacy, and also conduct not just of the very,
    very largest, but other players that might not be in the
    dominant position.
        The litigation is slow, it's cumbersome, it's
    extraordinarily expensive. You have to have very, very certain
    thresholds you have to meet with respect to monopoly power. And
    even if you win, you'd have no guarantee whatsoever what kind
    of remedy you're going to get, if it's going to be some sort of
    injunctive relief or some sort of divestiture. And even then,
    there'll be an appeal to the circuit courts and then appeal to
    the Supreme Court.
        You know, thanks to your work on the Venue Act, you know,
    Texas is trying to get back to the Northern District of Texas.
    But we started that case in 2020, and we're not even scheduled
    for trial till 2025.
        Chair Klobuchar. Yes.
        Professor Alford. And we barely started discovery. So, you
    know, they're complementary. I mean, your very--your very
    first----
        Chair Klobuchar. Yes, I'm just picturing as all these news
    organizations----
        Professor Alford. Yes.
        Chair Klobuchar [continuing]. Are folding, and we're
    waiting for this litigation----
        Professor Alford. Right.
        Chair Klobuchar [continuing]. And we're just sitting there,
    and that's to the benefit----
        Professor Alford. I mean, I would----
        Chair Klobuchar [continuing]. Of the companies.
        Professor Alford. The litigators support regulation, too. I
    mean, the Department----
        Chair Klobuchar. Yes.
        Professor Alford [continuing]. Of Justice has written in
    favor of litigation--of----
        Chair Klobuchar. They've--they've written in favor of the
    Self-Preferencing Bill.
        Professor Alford. Yes.
        Chair Klobuchar [continuing]. They've written in favor of a
    number of these bills, yes.
        Ms. Srinivasan, just a few hours ago the FTC announced that
    it is seeking to modify an order about how Facebook monetizes
    data about its users. I believe there's actually a connection
    between having that market power and then the way they handle
    sensitive data. Do you think if there were more competition in
    the digital ecosystem companies might compete to be better on
    privacy?
        Ms. Srinivasan. Absolutely, Senator. I think more
    competition, we've seen empirically in the market, lead to more
    privacy. It's something that I spent a lot of time studying,
    especially with respect to Facebook. When Facebook faced
    competition it offered much higher levels of privacy, and it
    competed explicitly on privacy.
        Chair Klobuchar. Exactly. But when we have Mr. Zuckerberg
    making statements that the House discovered, during their
    lengthy hearings on this subject, ``I'd rather buy than
    compete,'' in reference to his purchase of several other--what
    were then small competitors--I think you get the results when
    there--when you don't have laws in place that can police this
    or any enforcement.
        And now there's been a shift, as we've all noted, with
    cases going on in both the last administration and this
    administration.
        By acting on the buy side and the sell side of the ad tech
    stack, Google faces an inherent conflict of interest that's
    been referenced by Senator Lee and myself.
        While publishers want to sell their inventory at high
    prices and advertisers want to pay as little as possible,
    Google makes more money if advertisers pay a high price, but
    publishers actually receive a low price. Plus, Google is also
    selling its own ad space.
        Ms. Srinivasan, what evidence have we seen that Google uses
    its position in these markets to maximize its profitability and
    increase its market power?
        Ms. Srinivasan. Well, we could chat about this for a while,
    I suppose. I also----
        Chair Klobuchar. It is 4:10 in the afternoon, so you can
    keep the answer short, I'm sure.
        Ms. Srinivasan. Gosh, there are--I mean, there are a bunch
    of examples. Senator, what were you looking for precisely?
        Chair Klobuchar. Well, just examples about how they're kind
    of double-dealing on both sides, and how it uses its position
    in the markets to maximize profitability, increase market
    power.
        Ms. Srinivasan. Yes, I mean, I guess I would just make two
    comments. In the allegations in the State AG complaint led by
    the State of Texas there were a bunch of auction manipulations
    that are alleged with fund names like Project Bernanke, where
    Google was supposedly using information on one side to
    manipulate the auction mechanics in the middle.
        The other thing that I would say is that, you know, we
    actually see them extracting a higher fee in the middle, not
    taking less from one side and giving more to the other, or
    taking more from one side and giving less to the other. The
    actual intermediary fees are inflated.
        Chair Klobuchar. Mm-hmm. Okay, very good. All right. I
    think I'm going to turn it over to Senator Lee for some closing
    questions.
        Senator Lee. Ms. Srinivasan, so there's been a lot of talk
    about Google when it comes to digital advertising. Let's talk
    about some of the other Big Tech firms for a minute. Keeping in
    mind, like any market, this isn't static. You've got other
    companies moving, and it's always good to keep our eye on where
    things could be going next.
        Apple seems to have realized that the market for the iPhone
    is quite saturated. I mean, it's a good position for anyone
    making phones to be in, where pretty much everyone who wants an
    iPhone now has one, and so most sales are going to come from
    replacements. And so it's now using the vast network that it
    has and citing privacy concerns in order to gain exclusive
    control over our data, so it can monopolize ads that we see on
    our iOS devices.
        And correct me if I'm misstating any feature of this
    marketplace.
        You've got Amazon, that increasingly serves as kind of a
    clearinghouse for goods made in China, opting for higher
    margins from selling ads to Chinese manufacturers. And then
    you've got Facebook, which of course sits on a treasure trove
    of data.
        Now, Facebook has always been dependent on ads. It would
    likely have an even greater presence in the ad tech space in
    digital ads had it not reached its own agreement with Google
    preventing that. Should we be concerned about any of these
    other firms' activity in digital advertising at this point?
        Ms. Srinivasan. Well, I would say that this bill doesn't
    aim to fix, you know, all problems. But most of the companies
    that you mentioned do operate what would be termed and captured
    by the bill as exchanges that are bringing together third-party
    buyers and third-party sellers. And they would be subject to
    the same conflicts of interest rules and the same rules around
    having to sort of siphon off, and manage, and protect the data
    in different divisions.
        Senator Lee. Okay. So they're not in the same position as
    Google, but would be in the same position in the sense that
    they're covered entities?
        Ms. Srinivasan. They would be covered entities in some
    respect. So for example, Facebook does act as a broker under
    the bill on the buy side, and they do bring together buyers and
    sellers--buyers and third-party sellers in real-time auction
    markets. And Amazon also plays multiple roles in this respect,
    too. So Amazon is not just selling ads on Amazon.com, but it's
    also intermediating ads on behalf of third parties. And so it,
    too, would be captured under certain aspects of the bill.
        Senator Lee. Okay. Thank you. Mr. Kint, let's talk about a
    little bit more about data. You've written a fair amount on
    this, and you've written that collecting data in one context
    but then using it in another context--e.g., behavioral
    advertising--tends to violate consumer expectations. How would
    the AMERICA Act prevent a company like Google from collecting
    data in one context and then using it in another in the harmful
    ways that you described?
        Mr. Kint. Yes, I guess, two ways. The best-interest and
    execution obligations will require that they don't collect that
    data and use it for a different purpose.
        So the data's only going to be collected by Google, or
    Facebook, or whoever the company is that's in that tier for the
    purpose of the publisher and maximizing value for the
    publisher. So that data stays, almost has a ring fence if you
    will around it, so that it can't be taken and used for other
    value elsewhere. And so I think that's--that's one way.
        And then, you know, the restrictions on being on both sides
    of the market, too, will eliminate the example that I used in
    my opening remarks around ``tying,'' where, you know, one
    company can say, ``I control most of the demand in the ad
    marketplace, and so therefore you'd need to give me all this
    data as part of the conditions--as a precondition''----
        Senator Lee. Right.
        Mr. Kint [continuing]. ``Of the deal.'' Which is quite
    abusive and it's quite documented in all the AG----
        Senator Lee. Well, and you----
        Mr. Kint [continuing]. Lawsuits
        Senator Lee [continuing]. And you wouldn't get away with
    that.
        Mr. Kint. You wouldn't get away with it.
        Senator Lee. If there were a free market, nobody would get
    away with that because they'd tell you to ``pound sand.''
        Mr. Kint. If the consumer knew it was happening and the
    publisher actually had any sort of market power, yes.
        Senator Lee. Right.
        Mr. Kint [continuing]. And again, every single publisher,
    any size, can't stop that.
        Senator Lee. Right. And presumably, the customers of that
    entity would also insist upon it. But it's hard to tell someone
    to pound sand when----
        Mr. Kint. Yes. We've done the research on it, Senator. You
    know, we've asked, you know, ``When you're not using a Facebook
    product, would you expect your data to be collected and used
    for a different purpose? '' And the answer is ``no''--from like
    60 percent of the users.
        We asked the same question about Google.
        Users do not want to be tracked across the web. If they
    choose to use a product as part of real choice and real
    competition, and that data is used to deliver the service to
    them, that's great: ``That's fine, I'm a subscriber. You can
    use my data to authenticate my subscription. Wonderful. I'm a,
    you know, customer of this product. You can personalize it
    based on the data that I'm giving you to make the product
    better. If I don't like what you're doing, I'll go elsewhere.''
        They do not expect that data to be collected and used in a
    totally different purpose.
        Senator Lee. So that prevailing assumption, with regard to
    Facebook that you just described, is not accurate?
        Mr. Kint. Correct.
        Senator Lee. Right. Now, you've also said that, quote,
    ``The issue of tracking and data collection, and use by third
    parties is a really important issue, and that consumers should
    have a global privacy control'' and, you know, an ability to
    opt out. But you limited that to opting out of third-party data
    use. Is that right?
        Mr. Kint. I did.
        Senator Lee. Here it seems that the first-party data use is
    really the fundamental problem because companies like Google,
    or like Meta, can use all the data they collect on their
    properties to feed their advertising engines. So how could a
    law like the AMERICA Act address this problem?
        Mr. Kint. Again, I'll go back to the data point from the UK
    Competition Authority report that showed that Google and
    Facebook uniquely collect a majority of their data from third
    parties. They get a majority of the data they have for targeted
    advertising from third parties, according to that report. So
    it's collected in a third-party context when the customer is
    not choosing to use a Google or Facebook product.
        And so, one, it cuts that all out because the user can no
    longer be tracked from one context to the other. And then the
    first-party data is still an issue. I mean, if you're on Google
    Search, because 90 percent of the searches happen on Google,
    they're going to have a lot of first-party data on you. You
    still need to have choice in search, but that's a different
    issue than we're trying to address here.
        [Pause.]
        Senator Lee. Mr. Henderson, let's go back to you for a
    minute. This stock market example: Is that really fair? I mean,
    you've got 700 times--the scale is much larger, the market
    concentration, market power of any individual firm in that
    setting, it's a lot more distributed. Isn't it?
        Professor Henderson. So first of all, Senator, I didn't
    make up this analogy. I was res--my paper responds to the
    claims that the proper analogy here for the litigation.
        Senator Lee. No, I get it. Yes.
        Professor Henderson. Okay. So I was just responding to
    that, the--and the claims that they are not vertically
    integrated, etc.----
        Senator Lee. Uh-huh.
        Professor Henderson [continuing]. With respect to market
    concentration in the securities business, the publicly traded
    securities, so not on the dark pools, the top three companies,
    the New York Stock Exchange, NASDAQ, and the Cboe, have an
    overwhelming market share.
        So there is concentration. And the reason there's
    concentration--it's the same reason there's concentration in
    this market--is because there's economies of scale and network
    effects. And that, you know, that can explain why there are
    very few competitors. In the dark pool, the alternative trading
    systems under Reg NMS--again, the couple, two-three largest
    firms, Goldman, Bank of America, JP Morgan, have overwhelming
    market shares there as well for the same reasons, economies of
    scales and network effects.
        So I don't want to push the analogy to stock markets and
    say that's a basis. I was merely responding to the claim that
    this vertical integration across the whole ad stack is some
    kind of monster we don't see anywhere.
        And I'll just note one final comment, which is, the New
    York Stock Exchange, it is true that they do not own a broker
    dealer. But the New York Stock Exchange sells tools for both
    buyers and sellers of stock, in fact--which is what Google
    does. In fact, if you are a small-time trader and you do not
    have your own algorithmic trading department, like the big
    traders do, the New York Times--the New York Stock Exchange
    will sell you their version of that, which is, you're like a
    small advertiser exactly the same way that Google does.
        So this behavior that we see with these kinds of potential
    conflicts of interest exists everywhere. And I want to say, I'm
    sensitive to the concerns that you have about privacy,
    pornography, all the things that you said. I've got three kids
    myself. These issues that you're raising are serious concerns.
        And if Google or anybody else--I'm not here on behalf of
    Google. If Google or anybody else is being deceptive, and
    they're misleading people about how they're using their
    personal data, we've got laws against that. I'm here just to
    point out some of the costs of the AMERICA Act that I think
    aren't being considered.
        Senator Lee. No, I get that. But there are--there are some
    significant differences here. I mean, you--the stock example,
    you've got--it's a pretty diffused marketplace. It is highly
    regulated, and it's quite fragmented. And you don't have one
    firm dominating the lion's share of the activity, the buying
    and the selling. And this is just----
        Professor Henderson. It's true. And I just want to say--let
    me just say one thing about the highly regulated. I completely
    agree with you. As I lay out in my paper, the reason it's
    highly regulated has nothing to do with these conflicts of
    interest. Because when I go into CVS, there are also conflicts
    of interest with them selling branded products, and generic
    products, and using data, and using cameras to check my eye
    line, and where they place everything, and the data there.
        I happily turn over my cell phone number to them to get a
    2-percent discount, and they collect that data. They know
    exactly what I'm buying. They use that to target me. This is--
    this is ubiquitous in all markets. The point about regulation I
    want to emphasize is, the SEC has been trying for 20 years to
    implement a best-interest rule in the stock market. For 20
    years, they've been trying, and they've-- 43 percent of trades
    trade at the best-interest rule. And this isn't a market that
    is trivial compared to the complexity of the ad market.
        So if you sign on for a best-interest rule--and the only
    reason we have it in the stock market is because there's not
    physical separation. So you're using a kind of belt-and-
    suspenders approach here.
        But if you sign on to a best-interest rule, you're signing
    on to a massive regulatory apparatus that cannot be
    administered by State attorneys general, or the Department of
    Justice. It will require an administrative agency to oversee
    the vast amount of data because the SEC is that, with 4,500
    employees, and they are not successful at implementing a best-
    interest rule after 20 years.
        Senator Lee. Is this one reason why it's sometimes fair to
    insist on structural separation instead of a massive regulatory
    body?
        Professor Henderson. I think that's a mistake for reasons
    I've said otherwise. I'm merely pointing out that if you go
    with the best-interest rule you are signing on, in my opinion
    and based on my experience in the stock exchange, which is much
    simpler, to a huge, massive regulatory apparatus to enforce a
    best-interest rule. I've given a----
        Senator Lee. It's not just--it's not the case with this
    bill. That's just not true. That's utterly at odds with what
    the bill says.
        Professor Henderson. I'm just taking the language of the
    bill as it is, which is enforcing a best-interest rule that
    would require an exchange to trade in the best interests of its
    clients. That's the rule that the stock exchange has. It's Rule
    611 and requires the same best execution rules for stock
    trades. It's the exact same. On that narrow point, it's the
    exact same.
        Senator Lee. Okay, Ms. Srinivasan, and Mr. Kint, and Mr.
    Lynn are all champing at the bit to answer this----
        [Laughter.]
        Senator Lee [continuing]. And I have to know what they're
    saying. This will be it--I promise, I promise.
        Chair Klobuchar. No, I want to see, too----
        Senator Lee. Okay.
        [Laughter.]
        Chair Klobuchar [continuing]. I've been--I was going to
    actually have them do it because they just seemed so eager----
        [Laughter.]
        Chair Klobuchar [continuing]. To defend you. Yes.
        Senator Lee. All right, Barry, let's start with you.
        Mr. Lynn. Thank you, Senator. Professor Henderson said
    that, you know, this kind of vertical integration across the ad
    stack is not some kind of a monster that we don't see
    elsewhere. He said it actually exists everywhere.
        Pre-1980, it existed nowhere. It was against the law. It
    was against the traditions of the United States going back to
    the beginning. And that's why what you just said, that's why we
    need to insist on structural separation, is absolutely correct.
    And I bless you for working on this--this bill.
        Senator Lee. Thank you. Ms. Srinivasan?
        Ms. Srinivasan. So the bill actually applies a best-
    interest rule not to exchanges but to the brokers. And to my
    knowledge today, I am not aware actually of any of the sort of
    entities that are helping buyers or sellers that proclaim to do
    anything but act in their customers' interests.
        And so in effect the only thing that this bill really does
    is shed sunlight onto what's actually going on, so that the
    customers can complain and hold their brokers to account when
    they're not actually doing what they're promising that they're
    doing.
        The other thing that might be helpful to just be clear
    about is that in financial markets there's really a two-tiered
    approach. So Goldman can't own the New York Stock Exchange
    because the New York Stock Exchange is big and important, and
    it has a lot of market share.
        And then the smaller guys can do both. They can be brokers
    and operate dark pools or ATSs. And those guys have to manage
    their conflicts of interest and disclose a lot of information,
    so that we can hold those conflicts of interest to account.
        The bill takes the exact same approach, really. It says
    that the very largest firms that own the very largest exchanges
    can't simultaneously be on all sides of the transaction at the
    same time.
        But smaller ones, like in financial markets, can both be a
    broker and an exchange. And in those situations, what we need
    to do is--that's not being done now--is we need to manage
    conflicts of interest, we need to make sure they are managing
    their conflicts of interest, and we need to make sure that
    there's enough transparency and disclosure so that customers
    themselves can audit and police the behavior of intermediaries.
        Senator Lee. Which they would have a greater ability to do
    under this bill.
        Ms. Srinivasan. That's correct.
        Senator Lee. Currently they don't have the ability to do
    that. Mr. Kint?
        Mr. Kint. Yes, and a last point, thank you, I'm not going
    to go deep on the stock piece again. But I still--the thing I
    understand enough is that if the dark pools--if these dark
    pools--that if there's some self-preferencing, or preferencing,
    or favoring, that would be illegal. And so we need something to
    actually make that same behavior illegal in the digital
    advertising world, which it's currently not.
        And yes, to Ms. Srinivasan's point, the SSPs, we call them,
    they're brokers on behalf of the publishers--they're supposed
    to act in their best interests. But in the case of at least
    Google and a few others, when the publisher says, ``Are you
    actually doing this? '' they have no recourse. There's no way
    to get the data to prove that that company is not taking the
    data and the value and using it elsewhere.
        And so time and time again we see that issue where they
    might not be acting in the best interest. And so that's the
    core underlying problem. And I think that's resolved by the
    legislation.
        Senator Lee. Thank you. It keeps occurring to me that I
    keep confusing the dark pool with dark web and Deadpool----
        [Laughter.]
        Senator Lee [continuing]. I'm going to try to keep those
    separate in my mind. Thank you.
        Chair Klobuchar. All right, on that note, thank you, all. I
    think it's been a very enlightening hearing. I think you know
    that these bills are more important than ever as we see the
    momentum off the end of last year, where we actually did get
    something done on merger fees in the Venue bill, and now we
    have several major pieces of legislation that we have interest
    in advancing.
        We have growing support, we have growing money spent
    against us, as I showed from that lovely advertisement that my
    guess is most people had not seen on the witness panel, but
    somehow a bunch of my colleagues did--an example of how
    targeting advertising works and what we are up against.
        But with the advent of AI, with the need to continue to
    support our Constitution and the First Amendment and the
    balance of powers in this country, with the need to take on
    monopoly power, I think that our momentum is growing stronger
    and stronger. People just are afraid to talk about it
    sometimes. But in the end there will be votes, and we must get
    a number of these bills passed.
        So it's been really, really great to have this civil
    discussion, despite some disagreements. I think you understand
    we had a number of Members here that couldn't all ask
    questions. I'm sure some of them will do--will, on the record,
    including, we were joined by Senator Hawley, and Senators
    Tillis, and Booker, and Blumenthal, and Hirono. And we thank
    them for being with us today.
        And I thank my colleague, as well, Senator Welch. I thank
    my colleague, Senator Lee, for his leadership and always being
    a good pal to hold discussions with. And when we do agree on
    things, we actually get a lot done. So watch out.
        With that I will hold the record of the hearing open till
    May 10th. Do you want to add anything, Mike?
        Senator Lee. No, just that this has been terrific, and I
    want to thank my staff, and Mark Meador, for helping to put
    this together. And to each of you, this has been an absolutely
    fascinating hearing. This is the most fun I've had in a long
    time doing something that doesn't involve ice cream----
        [Laughter.]
        Senator Lee [continuing]. So thank you, very much, for
    joining us.
        Chair Klobuchar. All right. And again, thank you to Keagan,
    and to Mark, and to Avery, on our staff, for all they do. I
    know they've worked with a number of people in this room--
    always open to new ideas, always open to criticisms. Right?
        [Laughter.]
        Chair Klobuchar. Because we get a lot of those. We get a
    lot of incoming. And we're excited, the progress we're making,
    the Members that we're educating about these important issues.
    And with that, the hearing is adjourned. Thanks.
        Senator Lee. Thank you.
        [Whereupon, at 4:30 p.m., the hearing was adjourned.]
        [Additional material submitted for the record follows.]

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