Legal Director Sandeep Vaheesan writes about how the FTC can prohibit the harmful surveillance advertising business model used by Facebook, Google, and other platforms as an unfair method of competition, and force the corporations to develop benign methods of making money.

It’s official: Facebook and Google have taken over digital advertising. Not only that, they’re now the leading players in all advertising, accounting for nearly half of total ad spending in the United States. By capturing billions of ad dollars from traditional media, this duopoly has wreaked havoc on journalism. Newspapers saw ad revenues—once the lifeblood of their business—decline more than 60 percent between 2008 and 2018. Since 2004, U.S. newspapers have laid off half their staff, and more than 2,000 newspapers have shut down. The flagship newspapers in both New Orleans and Pittsburgh stopped publishing print editions seven days a week.

The decline of journalism, here and abroad, means many important stories are no longer covered thanks to “news deserts” and are sometimes replaced with disinformation spread through social media including Facebook, translating to a less informed citizenry and a further diminishment of healthy electoral democracy.

While some may hail the rise of Facebook and Google and the demise of journalism as “the market” at work, the two Internet giants won the contest in advertising, in large part, through broad and deep surveillance. Facebook and Google operate dragnets that track what we do, think, and feel and with whom we socialize and do business, both online and offline. This personal information is raw material for their core business: targeted advertising that aims to reach users they already believe will be interested in the marketed product or service. Rival publishers that host ads, whether newspapers, television stations, or billboard owners, cannot track and monitor users the way Facebook and Google do and build comparably detailed personal profiles—nor should we want them to. Surveillance advertising entails the systemic violation of laws protecting our privacy and prohibiting discrimination on the bases of race, color, gender, and other personal traits, supercharges corporate marketing’s psychological manipulation, and wastes human labor and resources.

Is there anything that can be done about this? In fact, yes: Federal law should prohibit this business model and prevent corporations, large and small, from tracking our online and offline activities in an effort to “target” advertising based on our non-public activities, speech, and thoughts. But even without new legislation in Congress, the Federal Trade Commission (FTC) can prohibit surveillance advertising as an unfair method of competition and force Facebook, Google, and other surveillance-driven businesses to develop new and benign methods of making money.

To understand how we got here, we need to go back to the early to mid-2000s, when Facebook and Google started remaking advertising by surveilling users online and subsequently offline through mobile phones, wearable devices, and “smart” home appliances. With their expansive and intrusive tracking, the two firms provided advertisers the seeming power to more precisely home in on receptive audiences. On Facebook and YouTube, a retailer of tailor-made suits in lower Manhattan can target 30-something professional men who live within a two-mile radius of its store, make more than $300,000 a year, and purchased Italian leather shoes in the past month. Former Google employee Tim Hwang described this system as “the bundling of a multitude of tiny moments of attention into discrete, liquid assets that can then be bought and sold frictionlessly in a global marketplace.”

In addition to their new method of targeting advertising, the two also grew by each acquiring hundreds of firms—consolidation sprees that the Department of Justice and FTC did nothing to halt. Among other acquisitions, Google bought YouTube, Android, and digital advertising platforms DoubleClick and AdMob, while Facebook purchased WhatsApp and Instagram in the 2010s. They also employed unfair practices such as the bundling of separate products and exclusionary contracts to shut out and impede the growth of would-be rivals, as recent federal and state antitrust suits allege.

As a result of their acquisitions and exclusionary practices, Facebook has more than 2.5 billion individuals on its original platform, 2 billion active users on WhatsApp, and more than a billion each on Instagram and Messenger, while Google has nine services with at least 1 billion users. In an interview with The Atlantic in 2010 (when Google was not nearly as big as it is today), former Google CEO Eric Schmidt captured the company’s scope of surveillance in concise and creepy terms:

We don’t need you to type at all. We know where you are. We know where you’ve been. We can more or less know what you’re thinking about.

Other online publishers and service providers, such as Bing, ESPN, and The New York Times, track users as well, but they cannot offer the breadth and depth of monitoring and precision that Facebook and Google present to marketers. No one comes close to matching their massive online footprints.

Diagnosing the problems with surveillance advertising requires understanding the public creation and maintenance of markets that enable economic activity in general. Despite common rhetoric around “free markets,” all markets, including advertising markets, are constructed and governed by rules. The government defines what things, whether land, goods, or intangibles, are entitled to property protection and upholds these rights through police and judicial action. The courts enforce contracts and decide what remedies to award in the event of a party’s breach of its obligations. State action establishes and structures market life.

In the competition realm, the law determines which business methods and tactics are permissible. Competition is not a free for all in which corporations can win by hook or crook. For example, a manufacturer cannot gain a competitive edge by making false claims about its own products or baselessly disparaging a competitor’s goods. Antitrust rules also set norms of fair competition. They restrict firms from dominating markets through below-cost pricing, exclusive contracts with distributors, and bundling of separate products or services. In short, the law shapes and restricts business rivalry in accordance with generally accepted notions of morality.

But these existing strictures have not proven to be of much use in the cyber age. In fact, the basic business model of Facebook and Google runs afoul of least four bodies of law or social values in the United States and many other nations.

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