• Ashley N. Baker

Comments Filed with DOJ Antitrust Division Regarding Competition in Advertising

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Comments filed with the Department of Justice:

Re: Public Workshop on Competition in Television and Digital Advertising

Ashley Baker

Director of Public Policy

The Committee for Justice

We at the Committee for Justice (“CFJ”) write to the Department of Justice (“DOJ”) regarding the recent workshop on competition in television and digital advertising. Disruptive forms of technological change are upending traditional business models, and regulators are struggling to keep pace. As business models evolve in response to the convergence and expansion of various technologies, they can shift from one regulatory category to another. This is particularly true of the digital marketing industry, and we commend DOJ for this workshop and opportunity for public input.[1]

Founded in 2002, CFJ is a non-profit legal and policy organization that educates the public and policymakers about the rule of law and promotes constitutionally limited government. CFJ has a long history of leadership on Supreme Court and federal judicial nominations in the Senate and has recently focused on issues at the intersection of constitutional law and technology.[2] Consistent with that mission, our latest efforts have encompassed areas such as data privacy policy, administrative law, and antitrust law.[3]

Introduction & Executive Summary

“The video ecosystem has never been more complicated and exciting. We have seen an unprecedented number of content creation sources, distribution platforms, and consumption channels, and as a result, more video viewing time in total. While traditional TV still dominates ad revenue, digital video ― especially mobile video―is the fastest-growing video type by consumption. All of these developments and touch points have provided more opportunities for 21st century brands and marketers to directly connect and engage with consumers.”[4]

We’ve gone from the early days of newspaper and print ads, to the debut of radio commercials in the 1920s, to Kodak moments and Lucky Strike ads, to the Energizer bunny and Apple’s famous 1984 commercial. Then, in the last two decades, a plethora of ads were accommodated by the expanded capacity of digital cable systems.[5] Today’s entertainment—and the advertisements that come with it—is frequently distributed via online platforms.

As Robert Bork said:

The chief function of advertising and promotion, of course, is the provision of information. Even the least informative advertising tells consumers of the existence of particular products, what functions they perform, what kinds of outlets sell them, and (usually) the general range of prices. Many forms of advertising provide much more detail. Often advertising is rather general, its object being to get consumers interested.[6]

The same holds true for digital advertising, which yields a significant impact on consumers and the U.S. economy. According to a 2019 study, digital advertising will outperform other forms of advertising this year, exceeding over $100 billion in value.[7]

In his opening remarks, Assistant Attorney General (“AAG”) Makan Delrahim pointed out the need to define or distinguish digital advertising and television advertising:

Digital advertising offers an opportunity to target customers in a way that was unimaginable in traditional media advertising. Understanding the extent to which that distinction is significant from an advertisers’ perspective is important to our analysis of these markets. Although they may have embraced digital advertising we must understand if advertisers view advertising on digital media as a substitute to television or as a useful complement.[4]

However, with the decline and augmentation of broadcast television and the rise of online platforms, digital ads have become asynchronous, presenting new regulatory challenges. Specifically, despite the evolving business model, the tools for antitrust analysis and determining the relevant market remain the same.

We argue that digital advertising is both a substitute for and a complement to television advertising. In other words, the rampant ascent of digital marketing was made possible by TV advertising and its ability to influence consumer behavior. In that way it is a useful complement. The convergence of the two forms of advertising allowed marketers to measure efficacy and observe trends, which diverted attention to digital ads. Television and online ads no longer exist in separate silos; the two are inexplicably intertwined and functional distinctions have collapsed.

In sum, digital advertising is not a traditional, linear market. It is a two-sided market in which advertisers try to influence the online behavior of consumers through an intermediary.

The False Dichotomy of Television & Online Ads

“The combination of sight, sound, and motion that underlies video storytelling has unique advantages in creating enduring two-way relationships with consumers that 21st century brands desire to reach and engage. Convergence of traditional TV and digital video consumption is growing rapidly, impacting advertising planning, selling, and buying. This confluence of consumer behavior and technology will continue to propel the industry to adopt a more holistic understanding of the consumer that recognizes the differences by consumption, platform, content type, and audience segment.”[8]

Television and Digital Advertising Markets Have Converged

Traditionally, market definition is framed around a static product with a distinct type of customer. With advances in technology, this build-and-freeze model breaks down as advertising platforms evolve. The once-distinct markets for television and digital advertising have become fluid.

However, as Ronald Coase pointed out:

[I]f an economist finds something - a business practice of one sort or other - that he does not understand, he looks for a monopoly explanation. And as in this field we are rather ignorant, the number of ununderstandable practices tends to be rather large, and the reliance on monopoly explanations frequent.[9]

Indeed, when it comes to the innovative business model that has engulfed digital and television advertising, regulators are struggling to apply the correct regulatory framework.

During the workshop, Christina Beaumier[10] relayed that her experience with TV platforms makes clear that televisions and digital advertising markets have converged: “There’s no doubt that national traditional TV is converging with digital video. And this starts with the consumer and how she is consuming content across all different devices.”

Beaumier noted that this is at least in part due to how we use devices: “So, what used to be traditional TV being consumed on one device in the household, now it’s being consumed on a number of devices—a connected TV, the set-top box, the mobile device, etc.”[11]

Dave Lougee[12] pointed out how he has adapted to the migration of ads between platforms: “[W]e’ve created a company called ‘Premion’ that provides local advertisers the ability to place [the] same video ad inside high quality long-form video programming…on their own digital platforms, as well as their distribution on a number of popular OTT services, such as Sling or the Sony PlayStation.”[13] “It is one highly interchangeable video market now,” he said. “So, in other words, if broadcasters raise their prices, advertisers can, will, and do take their dollars elsewhere.”[14]