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MARK R. WARNER _— United States Senate 0 WASHINGTON, DC 20510-4606 Tew December 5, 2018 The Honorable Joseph J. Simons Chairman Federal Trade Commission 600 Pennsylvania Avenue, NW Washington, D.C. 20530 Dear Chairman Simons, ‘On October 25", I wrote to you to express grave concerns with the growing phenomenon of digital ad fraud, and in particular my frustration with the ways that large intermediaries have turned a blind cye to, and in certain cases helped enable, this fraud. This letter followed concerns Senator Schumer and I raised in a 2016 letter to your predecessor about the negative economic impact of ad fraud on end users, advertisers, and publishers. I was deeply disappointed by your November 19" response, which failed to substantively address any of the concems that I have been raising for two years now regarding the Federal ‘Trade Commission’s failures to crack down on digital advertising fraud. The digital advertising market has come to be largely dominated by one company, in part because of enforcement decisions by the FTC.’ The FTC’s failure to act has had the effect of allowing Google to structure its own market; through a series of transactions, the company has accomplished a level of vertical integration that allows it in effect to act as the equivalent of markel-maker, commodities broker, and commodities exchange for digital advertising ~ in the process creating a range of conflicts of interest. While the company controls each link in the supply chain and therefore maintains the power to monitor activity in the digital advertising market from start to finish, it has continued to be caught flat-footed in identifying and addressing digital ad fraud, As we've seen in other contexts — such as the rampant proliferation of online disinformation — major platforms including Google have often proved unwilling to address misuse of their platforms until brought to the wider public’s attention by Congress or media outlets. As long as Google stands to profit from the sale of additional advertisements, the financial incentive for it to voluntarily root out and address fraud remains minimal. It was thus enormously discouraging to read your own response to my letter, which did nothing to address the inaction of major industry stakeholders in curbing these abuses. Instead, your letter appeared to suggest that your authority to address deceptive and unfair practices does " Lauren Johnson, “U.S. Digital Advertising Will Make $83 Billion This Year, Says EMarketer,” AdWeek (March 14, 2017), available ar buips:/