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New legislation aimed at online advertising exchanges will hit most of big tech - including Apple

U.S. Capitol Building. Credit: Alejandro Barba/Unsplash

US senators are proposing legislation that would break up the advertising side of big tech firms such as Google, and will also affect Apple's growing ad business.

Senator Mike Lee, who previously sat on a Big Tech judiciary committee, has introduced a bill that would prevent firms from operating as both buyer and seller of advertising. Together with Senators Amy Klobuchar, Ted Cruz and Richard Blumenthal, Lee's bill targets Google, but wants to "avoid replacing one abusive monopolist with another."

What the legislation is trying to curb are technologies at the core of online advertising. Every time a user hits a website, some ad blocks will have a real-time "auction" process, where ads loosely tailored to the user's preferences, as far as Google knows, fight against each other in milliseconds for placement based on a number of factors. Google, for instance, runs not just the auction process, but also holds the advertisements.

"Monopoly rents are being imposed upon every website that is ad-supported and every company — small, medium, or large — that relies on internet advertising to grow its business," said Lee in a statement. "It is essentially a tax on thousands of American businesses, and thus a tax on millions of American consumers."

Overall, the Competition and Transparency in Digital Advertising Act (CTDA) legislation concentrates on companies processing more than $20 billion per year in digital ad revenue. Such firms would no longer be allowed to own "more than one part of the digital ad ecosystem."

There is an exception. One of the examples in Senator Lee's explanatory document states that generally a company that buys and sells digital advertising cannot own the platforms that either sell or supply advertising. However, this would not apply to firms with a platform selling "their own advertising inventory."

CTDA also targets smaller digital advertising companies, ones that "process more than $5 billion in digital ad transactions." Such firms would be obliged to take steps to "act in the best interests of their customers," including erecting firewalls "to prevent abuse and conflicts of interest" between buying and selling ads.

"If enacted into law, this bill would most likely require Google and Facebook to divest significant portions of their advertising businesses," says Lee's bill. "Amazon may also have to make divestments, and the bill will impact Apple's accelerating entry into third-party ads."

The full bill does not specifically mention Apple, Google, or Facebook parent company Meta. None of these companies have yet responded publicly.