Last week, Public Knowledge published a blog post recapping news reports that the Federal Trade Commission, as part of its review of a merger between the third and fourth largest U.S. advertising agencies, was about to introduce a consent order that would prevent the merged company from “boycotting” digital platforms because of their political content by “refusing” to place their clients’ advertisements on them. This week, the FTC’s decision and consent order were issued, subject to a 30-day public comment period, and the CEO of the acquiring agency, Omnicom, appears to have agreed to the order. In conjunction with the preparation of our public comments (which will have more legal analysis), we have assessed the consent order in this post. In our view, the order makes political points while completely missing the point of the merger’s potential impact on competition.
The FTC’s Consent Order Reflects – Perhaps Intentionally – A Misunderstanding of How Media Buying Works
In his statement about the consent order, FTC Chair Andrew Ferguson noted that advertisers hire advertising agencies to “make decisions on where [advertisers’] advertisements should be placed.” This is simply not true. Advertisers – the agencies’ clients – make those decisions themselves based on recommendations from ad agencies in the form of media plans. As evidence, the gold standard template for media buying services contracts between advertisers and agencies from the U.S. advertising industry’s main trade association makes it clear that, contractually, advertisers control the parameters for brand safety and standards. Advertisers determine, in writing, the contexts that are “safe and protective” of their brands. Here’s why it matters: Although it’s expedient for the FTC to focus on two massive ad agencies hoping to push through a merger, media placement decisions are actually made by tens of thousands of advertisers across industry sectors, product categories, and consumer groups, all with their own criteria for brand standards.
Interestingly, despite Chair Ferguson’s headline-grabbing statement, the FTC’s actual consent order reflects and preserves this status quo: As the press release accompanying it notes, the consent order “preserv[es] individual advertisers’ ability to choose where their ads are placed.” Chair Ferguson points to this loophole to assert the constitutionality of the order but it also undermines its impact. And at least one constitutional challenge remains: The order prohibits Omnicom from maintaining any policy that “declines to deal with Advertisers based on political or ideological viewpoints.” This impacts the agency’s rights of association and perfectly legal, independent refusals to deal by private companies.
Advertisers May Be the Biggest Losers From the Consent Order
In our view, the primary purpose of the FTC’s consent order is to cause a chilling effect on Omnicom and other ad agencies. But the real losers may be advertisers themselves.
The consent order contains very specific language defining how advertisers and their agencies can engage on advertising placements. Omnicom may not “direct Advertisers’ advertising spend based on the Media Publisher’s political or ideological viewpoints” – unless there is agreement or discussion between Omnicom and an advertiser about how to direct their advertising spend. And Omnicom may not “rely on ‘exclusion lists’ to differentiate media publishers on the basis of political or ideological viewpoints” – unless the exclusion list is developed at the direction of a client. The net result of all these constraints and exceptions is that advertisers will have to take on more of the responsibility for the research and preparation of inclusion and exclusion lists to guide media placements. As noted in an ad industry trade journal article titled “FTC Hobbles Brand Safety” (paywalled), “If you don’t want your stuff to be shown against Nazis, you’re going to have to figure out how, and instruct Omnicom accordingly.”
The reporting requirements in the consent order have additional implications for advertisers. For the next four years, Omnicom must send the FTC a list “setting forth the number of times a publisher appears on ‘exclusion lists’ developed or applied by Omnicom at the express direction of a particular client based on political ideology.” This is based on a false premise – “political ideology” is not the basis of exclusion lists – but to comply, Omnicom may make its own clients subject to political attacks. This may be what the FTC has in mind, as the FTC otherwise prohibits Omnicom from sharing these lists across its clients (something, by the confidentiality clauses in their contracts, Omnicom would never do anyway). In other words, the FTC is creating the very visibility it prohibits Omnicom from creating.
As for political ideology, legitimate conservative online platforms and publishers have nothing to fear if they ensure their product is a good fit for advertisers’ brand strategies – including brand safety – and intended consumer target. Platforms and publishers, too, have the opportunity and obligation to compete, in this case for the ad dollars that fuel their business models.
The FTC’s Consent Order Ignores Far More Likely Impacts of an Ad Agency Merger on Competition
Like any merger between industry behemoths, this one raises serious competitive concerns for advertisers and their customers. As the FTC’s own complaint noted, “Coordinated interaction harms consumers because it enables competitors collectively to compete less aggressively, reduce product quality, [and] slow the rate of innovation.” Yet the agency’s actual theory of harm focuses narrowly on the idea that Omnicom and the company it is acquiring, Interpublic, could coordinate to “boycott” politically controversial publishers. There is little concrete evidence that such coordination exists or poses a real threat to competition. The cited bases for these claims derive from reports led by Rep. Jim Jordan (R-Ohio) and legal complaints from Elon Musk, neither of which provide robust economic analysis to substantively support the allegations of collusion across ad agencies. This is not the kind of evidentiary record that would typically anchor a merger enforcement action.
The reliance on partisan political actors and social media discourse to justify the order rather than well-founded economic studies or enforcement precedent raises concerns about the underlying motivation and evidentiary rigor of the FTC’s consent order.
Meanwhile, in an advisory report to advertisers about the likely impact of the merger, Ebiquity, a leading consulting firm specializing in media investment analysis, warned that the merger could “limit contestability or stifle innovation in the market.” The FTC’s own press release on the consent order also refers to the role of advertising agencies in activities like “pricing, ad placement, and sponsorships.” But the consent order refers to none of these. Nor does it refer to negotiation of commission rates, service fees, media discounts, real-time bidding approaches, value pot allocations, rebates or incentives, data consolidation, service level agreements, or the labor dislocation associated with the promise of $750 million in cost savings… all of which are potential impacts of the merger on competition in ad buying services.
The specific scope of the consent order seems to indicate that it does not reflect focus on the true impacts of diminished ad buying competition on advertisers, consumers, or labor, but instead the political impact of decreased revenue flows to publishers hosting content favorable to the Trump administration.
The consent order also still allows the 1500 agencies under the Omnicom umbrella (plus the ones they’ll acquire from Interpublic) to confer and coordinate. Omnicom is only prohibited from coordinating with third parties. Despite the clear knowledge of actual competitive risks in the market, the FTC has prioritized elevating speculative and politically loaded theory.
Given its narrow scope, it’s perhaps not surprising that the CEO of Omnicom appears to have agreed to the order to get this merger and its benefits to shareholders completed. That’s disappointing, because as we pointed out in our previous blog post on this subject, all legal avenues to counter this order depended upon the merging companies being willing to take it to court.
As we also noted in our previous post, the consent order is part of a recent pattern of the FTC using the technical concepts of antitrust and consumer protection to further its goals related to information control on behalf of the Trump administration. As the FTC shows no inclination to do so, we hope the remedies in the Google search and ad tech antitrust case address some of the true monopolistic practices in the online advertising sector, which caused the opacity and complexity that made these advertiser approaches to brand safety necessary in the first place.