Late last week, several news outlets reported that the Federal Trade Commission, as part of its review under the Hart-Scott-Rodino Act of a merger between Interpublic and Omnicom, two of the world’s largest advertising agencies, may introduce some unusual terms: “a proposed consent decree [that] would prevent the merged company from boycotting platforms because of their political content by refusing to place their clients’ advertisements on them.” If true, we maintain that these terms are rooted in an inaccurate premise and represent another ploy by the Trump administration to weaponize its regulatory authority in the interest of controlling our information environment and advancing its political goals. Furthermore, and more importantly, it would be unconstitutional.
What Do Ad Agencies Do, and What is the FTC Accusing Them Of?
Advertising agencies work closely with advertiser clients to create ads and buy media space to place them where the advertisers’ target audiences will see them. In the United States, about three quarters of all advertising or $300 billion is placed in digital channels, including social media platforms, search engines, and online publishers’ websites. Since many of those ads are placed through monopolized ad tech platforms and opaque automated auctions, advertisers’ brands can get placed adjacent to really hateful content, including foreign disinformation campaigns, harmful conspiracy theories, and toxic hate speech. It can make it look as though the advertiser is endorsing those ideas. As we wrote in another blog post:
“With billion-dollar budgets, prized brand reputations, and fickle consumer loyalty at stake, advertisers adopted strategies – first “inclusion lists” and “exclusion lists” of content; then increasingly sophisticated monitoring systems; and then coalitions in which advertisers could share and promote best practices – to protect their investments.”
In past letters to advertisers and agencies, allies of President Trump have falsely described these efforts as “colluding to demonetize conservative platforms and voices.” More recently, in a so-called “censorship forum,” FTC Chairman Andrew Ferguson accused advertisers of “getting in a room to agree amongst themselves not to place ads next to [these voices],” or “to agree that some third party [an advertiser coalition] is going to set the rules about when we advertise based on the content of speech.” This accusation fits in with a broader conservative playbook based on the false premise that social media and other digital channels – as well as academic researchers, civil society organizations, and others – “censor” conservative voices.
But advertising strategies designed to avoid placing brands next to toxic content is not an indication of pervasive ideological bias. With some exceptions, advertisers’ politics are driven by their stockholders’ interests: For example, it may in fact be fashionable to publicly associate brands with liberal causes to build brand value with young, diverse, affluent consumers. But those same advertisers’ positions in regard to trade, tax, and labor policies that impact their bottom line may align with conservative values.
Mergers between ad agencies in the interest of scaling ad buys and reducing costs are nothing new. In our recent history of contemporary media buying, we described how agency consolidation was the inevitable outcome of years of specialization and declining media fees. This particular merger between Omnicom and Interpublic (both of whose cobbled-together corporate names reveal their own history of growth through mergers) would create the world’s largest advertising agency with $25 billion in revenue. The United Kingdom’s Competition and Markets Authority, or CMA, has also been reviewing the deal.
But the resulting entity’s impact on competition, according to the news reports, is not what is giving the FTC pause. Instead, the FTC now appears to be demanding that these ad agencies – and by extension, their clients – support media channels that may spread disinformation, hate speech, and extreme content as a condition for a merger. Their notion of a “boycott,” in this context, is as manipulative as that of “censorship.” The term purposefully implies orchestrated and collusive agreements among advertisers to suppress conservative media. (The FTC itself made the connection when it asked, in its recent request for public comment on “technology platform censorship,” how activities such as “advertising boycotts” “facilitate collusion on censorship.”)
If the FTC proceeds on this path, it will be for some of the same motivations as lawsuits filed by Elon Musk against advertisers who have wound down their spending on the platform; threats to ad agencies that might do so; and the past letters from Rep. Jim Jordan (R-OH) that used the House Judiciary Committee’s Select Subcommittee on the Weaponization of the Federal Government to bring advertisers and agencies to heel. And it’s akin to the Federal Communications Commission withholding approval of the Paramount merger with Skydance until a complaint about CBS’s news coverage is resolved. They’re all in service of controlling the flow of information about the administration and its policies.
What Happens Next?
Based on its actions so far, the FTC is likely to pursue this conditional consent order for this transaction. FTC regulations then require a 30-day public comment period for the agency’s order. However, unlike consent orders issued by the Department of Justice under the Tunney Act, FTC consent orders are not subject to judicial review in federal court. These are purely administrative actions, and any challenge must come from the companies themselves in federal court. If the FTC proceeds with the consent order and opens a comment period here, it is likely that the agency will be looking for further public support of its claims that the online advertising ecosystem has systematically censored conservative viewpoints. The FTC already pushed for this commentary in its recent request for public comment on technology platform censorship. You can read Public Knowledge’s filing in that docket for more information.
The FTC’s motivation in its review of this merger extends beyond Omnicon and Interpublic. It aims to shape market behavior through example. This move by the FTC would conflate traditional antitrust principles (in this case, antitrust boycotts) with perfectly legal, independent refusals to deal by private companies. Although consent orders are technically voluntary, companies who want to avoid agency scrutiny or similar conditions in future transactions will be pressured to toss aside best practices and put their brands at risk to do business with hateful, inflammatory actors. Such conditions would set a dangerous precedent for the advertising community and our shared information ecosystem.
Advertisers’ First Amendment protections in regard to speech and association make a consent order of this kind likely unconstitutional. But challenging an order of this type means that the companies must be willing to litigate. Moreover, given that consent orders are deemed voluntary, third parties who may wish to sue likely don’t have standing to do so. Still, there are potential opportunities for legal challenge. First, if the FTC proceeds with the merger condition, the companies could argue that it violates the First Amendment and challenge it. Second, given the Supreme Court’s decision in SEC v. Jarkesy (giving the right to a jury trial), the parties may be able to challenge the order on the basis that the FTC cannot impose these conditions without judicial review from a federal judge in court. Both of these opportunities are not without risk – the “voluntary” status of the consent orders may undermine standing or be treated as a voluntary waiver of constitutional objection. And again, each approach is contingent upon the companies being willing to take this to court.
Ultimately, federal agencies must not act as de facto regulators of free speech. Rather than imposing politically motivated, speech-chilling conditions through administrative proceedings that lack mandated judicial review, we hope that the FTC will one day return to raising legitimate antitrust concerns that center consumer needs.