ICLE Issue Brief Examines Competition in Advertising Markets

PORTLAND, Ore. (June 2, 2022)—Claims that the digital-advertising market is monopolized by one or two large players have been at the core both of legislation recently introduced in the U.S. Senate and an antitrust lawsuit filed by Texas and 17 other states. A new issue brief from the International Center for Law & Economics (ICLE), however, argues that critics take an exceedingly narrow view of the relevant market and fail to consider how advertisers and publishers can choose among competing forms of advertising, either online or offline.

Written by ICLE President Geoffrey Manne and Senior Scholars Eric Fruits and Lazar Radic, the brief notes that advertising technology, or “adtech,” bears none of the markers of a sector subject to monopoly, such as decreasing output and rising costs. Indeed, U.S. digital advertising grew by an average annual increase of 19% last decade, from $26 billion in 2010 to $152 billion in 2020, even as the Producer Price Index for Internet advertising sales declined by an annual average of 5% over the same period.

But digital advertising is just one kind of advertising, and advertising more generally is just one piece of a much larger group of marketing activities, the ICLE scholars note. They argue that the weight of evidence suggests that offline and online advertising represent a far more unified and integrated economically relevant market than is commonly assumed.

“What publishers sell to advertisers is access to consumers’ attention,” the ICLE scholars write. “While there is no dearth of advertising space, consumer attention is a finite and limited resource. If the same or similar consumers are variously to be found in each channel, all else being equal, there is every reason to expect advertisers to substitute between them, as well.”

The problem, the scholars note, is that the use of erroneously narrow market definitions to bring antitrust litigation, or as the basis of legislation that would impose new rules on market participants, is likely to raise the cost of business for advertisers, publishers, and intermediaries alike.

The full issue brief is here. Journalists interested in interviewing ICLE scholars about the law & economics of digital advertising should contact ICLE Editor-in-Chief R.J. Lehmann at [email protected] or 908-265-5272.