WASHINGTON – Today, U.S. Sen. Mark R. Warner (D-VA) sent another letter to Federal Trade Commission (FTC) Chairman Joseph J. Simons pressing the leader of the agency to use the authorities granted to it by Congress to protect American businesses and shoppers from digital advertising fraud, which reached $7.4 billion in 2016 – costs that are later passed on to consumers in the form of higher prices. Today’s letter follows an earlier Oct. 25 letter urging the FTC to do more to respond to the prevalence of digital ad fraud, in light of inaction by major industry players like Google to voluntarily curb the problem.

Sen. Warner noted that in large part because of enforcement decisions made by the FTC, Google has come to dominate the digital ad market, but has done little to crack down on fraud. Google was the only major social media company absent for a September hearing in the Senate Intelligence Committee, on which Sen. Warner serves as Vice Chairman.

Sen. Warner today criticized the FTC’s failure to take action, writing, “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 [Oct. 25] 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 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 have 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 has to crack down on fraud and other misbehavior,” Sen. Warner added. “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. I 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.” 

The full text of today’s letter is available here, and also appears below.

In October, Sen. Warner wrote a letter to the Federal Trade Commission (FTC) Chairman Joseph Simons expressing concern following a report published by Buzzfeed detailing continued prevalence of digital advertising fraud and inaction by Google to curb these efforts. AccordingBuzzfeed, this scheme has generated hundreds of millions of dollars in fraudulent advertising revenues, with operations spanning more than 125 Android apps and websites. The FTC’s November response can be found here. 

In July 2016, Sen. Warner and Sen. Chuck Schumer (D-NY) wrote to then-FTC Chairwoman Ramirez calling on the agency to protect consumers from the growing digital ad fraud phenomenon. Since then, reports have estimated that digital ad fraud has only grown to $7.4 billion in 2017 – and projected to rise to $10.9 billion by 2021.

The full text of today’s letter follows:

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 25th, 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 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 19th 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 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 has 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. I 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,

Mark R. Warner

United States Senator

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