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[MARK R. WARNER om va FINANCE BANKING, HOUSING, AND URBAN AFFAIRS Wnited States Senate svooet RULES AND ADMINISTRATION December 6, 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 tured a blind eye 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 concerns 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 market-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 at hups:/www.adweek, com diuita t-sdigital-advetising-will-make-83-billon cemarketer! (Noting that “Google controls 40.7 percent ofthe U.S. digital ad market.” 2 Sara Fischer, “The Regulatory Mistakes that Let Facebook and Google Buy Ad Dominance,” Axios (lune 19, 2018), available a hups:/ivww-axios.convrevultorslte-facebook-google-dj-advertising-Sea(00|-ecn8-4/07- not apply to this conduct; rather, your letter portrays the FTC as successfully addressing online fraud through workshops and education campaigns. Neither suggestion inspires confidence in the FTC’s efforts as digital ad fraud has continued to proliferate. In recent congressional testimony, you urged Congress to provide the FTC with additional authority related to promoting competition and consumer protection in the digital age.’ Increasingly, I am not convinced the Commission is adequately utilizing the authority it already hhas to crack down on fraud and other misbehavior. The FTC is the agency explicitly empowered to address fraud and deceptive practices, and Section 5 of the Federal Trade Commission Act ‘was written in broad terms precisely for this purpose, Since 1938, Congress has given your agency broad enforcement authority to protect consumers and expects you to use it, T would like to sit down with you in the next month to discuss how the FTC can ensure it does the job Congress intended it to do. Sincerely, wh K Mme MARK R. WARNER United States Senator Ce: Commissioner Rohit Chopra Commissioner Rebecca Kelly Slaughter Commissioner Christine Wilson Commissioner Noah Phillips * Oversight ofthe Federal Trade Commission: Hearings before the Committee on Commerce, Science, and Transportation, Senate, 115th Cong. (2018) (Testimony of Joseph J. Simons, Chairman, Federal Trade Commission).