[House Hearing, 115 Congress]
[From the U.S. Government Publishing Office]
UNDERSTANDING THE DIGITAL ADVERTISING ECOSYSTEM
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON DIGITAL COMMERCE AND CONSUMER PROTECTION
OF THE
COMMITTEE ON ENERGY AND COMMERCE
HOUSE OF REPRESENTATIVES
ONE HUNDRED FIFTEENTH CONGRESS
SECOND SESSION
__________
JUNE 14, 2018
__________
Serial No. 115-139
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Printed for the use of the Committee on Energy and Commerce
energycommerce.house.gov
__________
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34-638 PDF WASHINGTON : 2019
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COMMITTEE ON ENERGY AND COMMERCE
GREG WALDEN, Oregon
Chairman
JOE BARTON, Texas FRANK PALLONE, Jr., New Jersey
Vice Chairman Ranking Member
FRED UPTON, Michigan BOBBY L. RUSH, Illinois
JOHN SHIMKUS, Illinois ANNA G. ESHOO, California
MICHAEL C. BURGESS, Texas ELIOT L. ENGEL, New York
MARSHA BLACKBURN, Tennessee GENE GREEN, Texas
STEVE SCALISE, Louisiana DIANA DeGETTE, Colorado
ROBERT E. LATTA, Ohio MICHAEL F. DOYLE, Pennsylvania
CATHY McMORRIS RODGERS, Washington JANICE D. SCHAKOWSKY, Illinois
GREGG HARPER, Mississippi G.K. BUTTERFIELD, North Carolina
LEONARD LANCE, New Jersey DORIS O. MATSUI, California
BRETT GUTHRIE, Kentucky KATHY CASTOR, Florida
PETE OLSON, Texas JOHN P. SARBANES, Maryland
DAVID B. McKINLEY, West Virginia JERRY McNERNEY, California
ADAM KINZINGER, Illinois PETER WELCH, Vermont
H. MORGAN GRIFFITH, Virginia BEN RAY LUJAN, New Mexico
GUS M. BILIRAKIS, Florida PAUL TONKO, New York
BILL JOHNSON, Ohio YVETTE D. CLARKE, New York
BILLY LONG, Missouri DAVID LOEBSACK, Iowa
LARRY BUCSHON, Indiana KURT SCHRADER, Oregon
BILL FLORES, Texas JOSEPH P. KENNEDY, III,
SUSAN W. BROOKS, Indiana Massachusetts
MARKWAYNE MULLIN, Oklahoma TONY CARDENAS, California
RICHARD HUDSON, North Carolina RAUL RUIZ, California
CHRIS COLLINS, New York SCOTT H. PETERS, California
KEVIN CRAMER, North Dakota DEBBIE DINGELL, Michigan
TIM WALBERG, Michigan
MIMI WALTERS, California
RYAN A. COSTELLO, Pennsylvania
EARL L. ``BUDDY'' CARTER, Georgia
JEFF DUNCAN, South Carolina
______
Subcommittee on Digital Commerce and Consumer Protection
ROBERT E. LATTA, Ohio
Chairman
ADAM KINZINGER, Illinois JANICE D. SCHAKOWSKY, Illinois
Vice Chairman Ranking Member
FRED UPTON, Michigan BEN RAY LUJAN, New Mexico
MICHAEL C. BURGESS, Texas YVETTE D. CLARKE, New York
LEONARD LANCE, New Jersey TONY CARDENAS, California
BRETT GUTHRIE, Kentucky DEBBIE DINGELL, Michigan
DAVID B. McKINLEY, West Virgina DORIS O. MATSUI, California
ADAM KINZINGER, Illinois PETER WELCH, Vermont
GUS M. BILIRAKIS, Florida JOSEPH P. KENNEDY, III,
LARRY BUCSHON, Indiana Massachusetts
MARKWAYNE MULLIN, Oklahoma GENE GREEN, Texas
MIMI WALTERS, California FRANK PALLONE, Jr., New Jersey (ex
RYAN A. COSTELLO, Pennsylvania officio)
JEFF DUNCAN, South Carolina
GREG WALDEN, Oregon (ex officio)
(ii)
C O N T E N T S
----------
Page
Hon. Robert E. Latta, a Representative in Congress from the State
of Ohio, opening statement..................................... 1
Prepared statement........................................... 3
Hon. Janice D. Schakowsky, a Representative in Congress from the
State of Illinois, opening statement........................... 4
Hon. Frank Pallone, Jr., a Representative in Congress from the
State of New Jersey, opening statement......................... 5
Prepared statement........................................... 7
Witnesses
Rachel Glasser, Chief Privacy Officer, Wunderman................. 8
Prepared statement........................................... 11
Answers to submitted questions............................... 104
Mike Zaneis, President and Chief Executive Officer, Trustworthy
Accountability Group........................................... 20
Prepared statement........................................... 22
Answers to submitted questions \1\........................... 113
Justin Brookman, Director, Privacy and Technology Policy,
Consumers Union................................................ 34
Prepared statement........................................... 36
Answers to submitted questions............................... 116
J. Howard Beales III, Ph.D., Professor of Strategic Management
and Public Policy, George Washington School of Business........ 50
Prepared statement........................................... 52
Answers to submitted questions............................... 132
Submitted Material
Report of Oxford BioChronometrics, ``Quantifying Online
Advertising Fraud: Ad-Click Bots vs Humans,'' January 2015, by
Adrian Neal and Sander Kouwenhoven, submitted by Mr. Latta..... 87
Report of Oxford BioChronometrics, ``Ad Fraud Summary,'' June
2018, submitted by Mr. Latta................................... 95
Report of IAB, ``Economic Value of the Advertising-Supported
Internet Ecosystem,'' January 2017, by John Deighton, et al.,
\2\ submitted by Mr. Latta
Slide presentation, ``The Rise of the 21st Century Brand
Economy,'' IAB Annual Leadership Meeting, February 12, 2018,
\2\ submitted by Mr. Latta
Blog post of June 14, 2018, ``Voluntary Advertising Initiative
May Hold a Key to a Responsible Internet,'' by Neil Fried,
Motion Picture Association of America, submitted by Mr. Latta.. 101
----------
\1\ Mr. Zaneis did not answer submitted questions for the record
by the time of printing.
\2\ The information has been retained in committee files and also
is available at https://docs.house.gov/Committee/Calendar/
ByEvent.aspx?EventID=
108413.
UNDERSTANDING THE DIGITAL ADVERTISING ECOSYSTEM
----------
THURSDAY, JUNE 14, 2018
House of Representatives,
Subcommittee on Digital Commerce and Consumer
Protection,
Committee on Energy and Commerce,
Washington, DC.
The subcommittee met, pursuant to call, at 10:16 a.m., in
room 2322, Rayburn House Office Building, Hon. Robert Latta
(chairman of the subcommittee) presiding.
Members present: Representatives Latta, Kinzinger, Burgess,
Upton, Lance, Guthrie, Bilirakis, Bucshon, Walters, Costello,
Schakowsky, Cardenas, Dingell, Matsui, Welch, Kennedy, Green,
and Pallone (ex officio).
Staff present: Melissa Froelich, Chief Counsel, Digital
Commerce and Consumer Protection; Adam Fromm, Director of
Outreach and Coalitions; Ali Fulling, Legislative Clerk,
Oversight and Investigations, Digital Commerce and Consumer
Protection; Elena Hernandez, Press Secretary; Paul Jackson,
Professional Staff Member, Digital Commerce and Consumer
Protection; Bijan Koohmaraie, Counsel, Digital Commerce and
Consumer Protection; Mark Ratner, Policy Coordinator; Austin
Stonebraker, Press Assistant; Greg Zerzan, Counsel, Digital
Commerce and Consumer Protection; Michelle Ash, Minority Chief
Counsel, Digital Commerce and Consumer Protection; Jeff
Carroll, Minority Staff Director; Lisa Goldman, Minority
Counsel; Carolyn Hann, Minority FTC Detailee; Caroline Paris-
Behr, Minority Policy Analyst; and C.J. Young, Minority Press
Secretary.
Mr. Latta. Well, good morning, and welcome to the
Subcommittee on Digital Commerce and Consumer Protection. We
really appreciate you all being here, and we look forward today
to your testimony.
And at this time, I'll recognize myself for 5 minutes for
an opening statement. And again, good morning and I wanted to
again thank our witnesses for being with us today.
OPENING STATEMENT OF HON. ROBERT E. LATTA, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF OHIO
An advertisement used to mean a quarter-page section in
your local newspaper, a billboard along the highway, or as our
chairman of the full committee would know in his radio days, a
radio spot during the rush-hour commute.
While those types of advertisements still exist, targeted
digital advertising has begun to dominate the advertising and
marketing industry.
The digital advertising ecosystem is complex and often
misunderstood. Today, we hope to clear up some of this
confusion for consumers and discuss both the benefits and
emerging, often high-profile, challenges of online advertising.
Our expert panel of witnesses will explain how this
technology works and its place in our economy and our lives.
According to the Interactive Advertising Bureau, the ad-
supported internet ecosystem generated over $1 trillion for the
U.S. economy in 2016 and was responsible for 10.4 million jobs
with 44 percent of those jobs employed by small and medium
businesses.
The massive growth of online advertising's contribution to
GDP can be tied to improved data collection and subsequent ad
targeting. Digital ads are dependent on consumer-related
information and data, and many of the largest companies in the
world--Facebook, Google, and the like--are supported by revenue
generated from the collection of this data for the use of
targeted ads.
While these companies clearly have dominance in this space,
many of the benefits of this data collection trickle down to
small businesses and create a more tailored online experience
for consumers.
For example, a local greenhouse can use their limited time
and resources to advertise in the most effective way for less
cost by using targeted ads. Instead of publishing an imprecise
catch-all ad in the newspaper, they can purchase ad space on
websites dedicated to gardening or set up a geolocation range
for IP addresses in driving distance in their greenhouse.
This ensures that their ad is reaching their most likely
group of customers--avid gardeners who live within 10 miles of
the greenhouse. In the same transaction, the gardeners benefit
from knowing what promotions and deals are available in their
home area.
To some consumers, these practices can feel like an
invasion of privacy, or leave them wondering how much personal
information about them is being sold. As this subcommittee
continues to grapple with the many privacy issues and data
breaches of the past few years, we are no stranger to the risks
of collecting such detailed consumer profiles and amassing it
in centralized data repositories susceptible to bad actors.
This hearing is yet another opportunity to discuss these
risks and understand what those are in the private sector--and
what those are in the private sector are doing to address them.
Additionally, ads are only effective if they're reaching
actual people. Digital ad fraud and the scourge of traffic
bots, algorithms designed to look like actual humans,
complicate this system in new ways, and undermine the trust in
the current advertising model.
Businesses who think they are paying for ad space because
of high audience interest might not get the response they want
because of bots. One study found that 22 percent of desktop
video ads were viewed only by bots.
The online advertising ecosystem has many players that
contribute to its effectiveness. Understanding how each of
these players interact with each other and with consumers is an
important step in discussing larger issues like privacy and
data security.
As always, it is one of the primary goals of the Energy and
Commerce Committee to ensure that consumers are informed and
can make educated decisions about their online habits.
The advertising-based model supports the platforms that we
use to communicate, connect, shop, and work. Today, we hope to
hear of the many efforts undertaken by industry to innovate and
grow in this space, while at the same time responding to
consumer demands for privacy and security of their data.
[The prepared statement of Mr. Latta follows:]
Prepared statement of Hon. Robert E. Latta
Good morning and thank you to all our witnesses for joining
us today. An advertisement used to mean a quarter page section
in your local newspaper, a billboard along the highway, or as
our chairman of the full committee would know, a radio spot
during the rush-hour commute. While those types of
advertisements still exist, targeted digital advertising has
begun to dominate the advertising and marketing industry.
The digital advertising ecosystem is complex and often
misunderstood. Today, we hope to clear up some of that
confusion for consumers and discuss both the benefits and
emerging, often high profile, challenges of online advertising.
Our expert panel of witnesses will explain how this technology
works, and its place in our economy and our lives.
According to the Interactive Advertising Bureau, the ad-
supported internet ecosystem generated over $1 trillion for the
U.S. economy in 2016 and was responsible for 10.4 million jobs
with 44 percent of those jobs employed by small and medium
businesses. The massive growth of online advertising's
contribution to GDP can be tied to improved data collection and
subsequent ad targeting.
Digital ads are dependent on consumer-related information
and data, and many of the largest companies in the world,
Facebook, Google, and the like, are supported by revenue
generated from the collection of this data for the use of
targeted ads. While these companies clearly have dominance in
this space, many of the benefits of this data collection
trickle down to small businesses and create a more tailored
online experience for consumers.
For example, a local greenhouse can use their limited time
and resources to advertise in the most effective way for less
cost by using targeted ads. Instead of publishing an imprecise,
catch-all ad in the newspaper, they can purchase ad space on
websites dedicated to gardening or set up a geolocation range
for IP addresses in driving distance to their greenhouse. This
ensures that their ad is reaching their most-likely group of
customers: avid gardeners who live within 10 miles of the
greenhouse. In the same transaction, the gardeners benefit from
knowing what promotions and deals are available in their area.
To some consumers, these practices can feel like an
invasion of privacy, or leave them wondering how much personal
information about them is being sold. As this subcommittee
continues to grapple with the many privacy issues and data
breaches of the past few years, we are no stranger to the risks
of collecting such detailed consumer profiles and amassing it
in centralized data repositories susceptible to bad actors.
This hearing is yet another opportunity to discuss these risks
and understand what those in the private sector are doing to
address them.
Additionally, ads are only effective if they're reaching
actual people. Digital ad fraud and the scourge of traffic
bots, algorithms designed to look like actual human views,
complicate this system in new ways, and undermine the trust in
the current advertising model. Businesses who think they are
paying more for ad space because of high audience interest,
might not get the response they want because of bots. One study
found that 22 percent of desktop video ads were viewed only by
bots.
The online advertising ecosystem has many players that
contribute to its effectiveness. Understanding how each of
these players interact with each other and with consumers is an
important step in discussing larger issues like privacy and
data security. As always, it is one of the primary goals of the
Energy and Commerce Committee to ensure that consumers are
informed and can make educated decisions about their online
habits.
The advertising-based model supports the platforms that we
use to communicate, connect, shop, and work. Today, we hope to
hear of the many efforts undertaken by industry to innovate and
grow in this space, while at the same time responding to
consumer demands for privacy and security of their data.
Thank you to all of our witnesses for being here today. I
yield to the gentle lady from Illinois, the ranking member of
the subcommittee, for a 5-minute opening statement.
Mr. Latta. Again, I want to thank our witnesses for being
with us today, and at this time I will yield back my time and
recognize the gentlelady from Illinois, the ranking member of
the subcommittee, for 5 minutes.
OPENING STATEMENT OF HON. JANICE D. SCHAKOWSKY, A
REPRESENTATIVE IN CONGRESS FROM THE STATE OF ILLINOIS
Ms. Schakowsky. Thank you, Mr. Chairman.
Ads are ubiquitous, often irritating, as you browse the
internet. Most of the time, we give little thought to why those
ads are there.
But, as we touched on during the Facebook hearing earlier
this year, the ads that consumers see are often highly
targeted.
I've certainly noticed them in my own experience that I am
being tracked online. I start to shop on a website and then
next thing you know an ad for the very same product I was
looking for turns up on a completely different website.
Companies may claim that consumers like targeted ads, and
some may. But consumers tell a different story often when they
are polled. In fact, most Americans report taking at least some
steps to block tracking.
Americans are realizing how little control they have over
their own information. You may not even be on Facebook, but
Facebook collects information about you.
You can block cookies but you are still tracked. You are
tracked regardless of whether you're on a computer, smartphone,
or tablet, and the internet of things expands which devices can
collect your data even further.
The use of targeted digital ads can have serious
consequences. It's not just online shopping. We have learned
more and more in the past year about how Russia used targeted
ads to spread disinformation and meddle in our elections.
The grand jury in Special Counsel Robert Mueller's
investigation has indicted 13 Russian nationals and three
companies for waging information warfare on the United States.
Targeted ads can also be tools for discrimination. A
ProPublica investigation last year found that Amazon, Verizon,
UPS, and Facebook all posted jobs--job ads that were targeted
specifically to specific age groups, excluding older Americans.
We have also seen ads for junk financial products that are
directed to communities of color. Facebook has now removed the
option to exclude certain ethnic groups for advertising. But
the potential for discrimination remains in the online ad
market.
Congress has been woefully slow in responding to the risks
that online advertising practices pose to privacy, fairness,
and our very democracy.
The Federal Trade Commission does not have the resources it
needs to be an effective consumer watch dog. It does not have
close to enough staff to monitor anti-consumer practices online
and it has weak enforcement tools.
The FTC has limited rulemaking authority. It cannot impose
civil penalties right away. When a company fails to protect
consumer privacy, instead it has to negotiate a consent order
and only if it later finds a violation of that consent order
does a company actually pay for misusing consumer data.
Perversely, the Republican majority tried the last Congress
to further restrict the FTC's authority. Fortunately, that
legislation was not passed.
Consumers deserve a real protection. We need rules of the
road for what information can be collected and stored on--and
stored about consumers.
Consumers need real options when it comes to how their
information is used. The Facebook scandal and the many data
breaches in recent years have made consumers increasingly aware
of how much data is sitting out there--how much of their own
data.
After the Equifax data breach, we had a witness describe
the steps a consumer could take to protect the information, and
she basically made protecting your privacy sound like a full
time job.
It shouldn't be that way. I am glad that we are having
this--we are continuing to discuss the field of digital ads. My
question is what comes next.
Is the subcommittee finally going to take up legislation to
strengthen consumer privacy protection? This is a complicated
issue.
But I believe that we are up to the challenge. Let's bring
our ideas to the table and hash out the solutions that are--
that our constituents deserve.
People are fed up with big corporations tracking their
every move online and controlling what they see. They are
demanding action and it is time for Congress, for this
committee, to deliver.
I yield back.
Mr. Latta. Thank you very much. The gentlelady yields back,
and I believe the chairman of the full committee has not
arrived yet. Is there anyone on the Republican side wishing to
claim the chairman's time?
If not, at this time I will recognize the gentleman from
New Jersey, the ranking member of the full committee, for 5
minutes.
OPENING STATEMENT OF HON. FRANK PALLONE, JR., A REPRESENTATIVE
IN CONGRESS FROM THE STATE OF NEW JERSEY
Mr. Pallone. Thank you, Mr. Chairman.
Today's hearing will explore online advertising and its
role in society. In the early days of the internet, online
advertising was like other forms of advertising.
Advertisers would place ads aimed at broad audiences. But
that has all changed. Advertising is now directed to smaller
targeted categories of audiences, those most likely to purchase
their products and services.
Targeted advertising can provide more relevant advertising
to consumers. It also provides revenue to advertisers.
For example it allows a small business selling boutique
men's razors to reach men, say, in their 40s and 50s who may be
able to afford a specialty product.
However, it also allows a scammer to reach women over a 65
in a particular zip code who have been duped in the past to
give their money to fake veterans charities.
Moreover, contrary to industry claims, it's not always
anonymous. Right now, anyone willing to pay can target
advertising to a list of 20 names and send a specialized adjust
to them.
Without explaining or justifying the list, an advertiser
could send an advertisement to 20 specific people who have a
mental health condition or are taking a particular medication.
And target advertising is possible because of the vast
amounts of information collected about individual consumers by
companies across the advertising ecosystem.
Beyond the websites, you go to the advertisers today to see
there are numerous middlemen, ad networks, ad agencies, data
brokers, and the like.
These companies lurk in the background, often unknown to
consumers, and not just collecting and storing data that would
choose to share. They track what websites we visit, what
purchases we make, and even the movement of your mouse on the
computer screen.
And information collected about our online activity is
increasingly being merged with our offline identity to create
extremely detailed profiled.
Moreover, they can go beyond facts to include inferences
about our interests and demographic information. Targeted
advertising by its very nature separates people into categories
and shapes our choices.
We have shown limited options that are chosen for us by
automated processes based on our profiles. So what I see on the
internet may end up being very different from what you see, and
neither of us getting all the information that may help us make
our purchasing decisions.
Even if we seek out additional information we may get
created content, further limiting our choices.
In addition to the risks of scams, targeted ads can result
in blatant discrimination. It's been well documented than
targeted advertising systems have allowed housing ads to
exclude people of color and job ads to exclude older workers.
At this committee's hearing last year on the effect of
algorithms on consumers we discussed how bias can be built into
algorithms, resulting in bias results, and that problem does
not just apply to content and search results. It applies to
advertisement as well.
It is good that Google and Bing have now blocked ads for
predatory payday loans, but that's not enough. The American
people rightfully feel like they've lost control.
One survey showed that 84 percent of people want more
control over what companies can learn about them online, yet 65
percent of people are resigned to the fact that they have
little control.
So we hear a lot about self-regulatory transparency,
notice, and choice but we all receive many updated privacy
policies spurred by the EU's new data privacy regulations. None
of us have time to read all of them, let alone actually
understand and remember what each company is doing with our
data.
And what about the companies collecting our data that we
don't even know exist?
The Equifax breach brought that issue up front and center,
and people weren't just upset that their data was stolen. They
were upset that a company that may have never--they've never
interacted with had all that data.
So I think we can do better and I think we must do better,
Mr. Chairman. It's time we all admit that the current system
just isn't working for consumers, and Congress needs to do a
better job and pass comprehensive privacy legislation so people
can take back control that they've lost.
And I yield back.
[The prepared statement of Mr. Pallone follows:]
Prepared statement of Hon. Frank Pallone, Jr.
Today's hearing will explore online advertising and its
role in society.
In the early days of the internet, online advertising was
like other forms of advertising-advertisers would place ads
aimed at broad audiences. But that has all changed. Advertising
is now directed to smaller, targeted categories of audiences-
those most likely to purchase their products and services.
Targeted advertising can provide more relevant advertising
to consumers. It also provides revenue to advertisers. For
example, it allows a small business selling boutique men's
razors to reach men, say in their 40s and 50s, who may be able
to afford its specialty product. However, it also allows a
scammer to reach women over 85, in a particular zip code, who
have been duped in the past to give their money to fake
veterans' charities.
Moreover, contrary to industry claims, it is not always
anonymous. Right now, anyone willing to pay, can target
advertising to a list of 20 names and send a specialized ad
just to them. Without explaining or justifying the list, an
advertiser could send an advertisement to 20 specific people
who have a mental health condition or are taking a particular
medicine.
Targeted advertising is possible because of the vast
amounts of information collected about individual consumers by
companies across the advertising ecosystem. Beyond the websites
you go to and the advertisers whose ads you see, there are
numerous middlemen-ad networks, ad agencies, data brokers, and
others.
These companies lurk in the background, often unknown to
consumers. They are not just collecting and storing data that
we choose to share. They track what websites we visit, what
purchases we make, and even the movement of your mouse on the
computer screen. And information collected about our online
activity is increasingly being merged with our offline identity
to create extremely detailed profiles. Also, they can go beyond
facts to include inferences about our interests and demographic
information.
Targeted advertising, by its very nature, separates people
into categories and shapes our choices. We are shown limited
options that are chosen for us by automated processes based on
our profiles.
So, what I see on the internet may end up being very
different from what you see. And neither of us is getting all
the information that may help us make our purchasing decisions.
Even if we seek out additional information, we get curated
content further limiting our choices.
In addition to the risk of scams, targeted ads can result
in blatant discrimination. It's been well-documented that
targeted advertising systems have allowed housing ads to
exclude people of color and job ads to exclude older workers.
At this committee's hearing last year on the effect of
algorithms on consumers, we discussed how bias can be built
into algorithms resulting in biased results. That problem does
not just apply to content and search results, it applies to
advertisements as well. It is good that Google and Bing have
now blocked ads for predatory payday loans, but it is not
enough.
The American people rightfully feel like they've lost
control. One survey showed that 84 percent of people want more
control over what companies can learn about them online yet 65
percent of people are resigned to the fact they have little
control.
We hear a lot about self-regulatory transparency, notice,
and choice, but we all received many updated privacy policies
spurred by the EU's new data privacy regulations. None of us
have time to read all of them, let alone actually understand
and remember what each company is doing with our data.
And what about the companies collecting our data that we
don't even know exist. The Equifax breach brought that issue
front and center. People weren't just upset that their data was
stolen. They were upset that a company that they may have never
interacted with had all that data.
We can do better, and we must do better. It's time we all
admit that the current system just isn't working for consumers.
Congress needs to do its job and pass comprehensive privacy
legislation so people can take back control.
Thank you, I yield back.
Mr. Latta. Thank you very much. The gentleman yields back
the balance of his time.
And that now concludes Member opening statements. The Chair
reminds Members that, pursuant to committee rules, all Members'
opening statements will be made part of the record.
Again, I want to thank our witnesses for being with us
today and taking time to testify.
Today's witnesses will have the opportunity to give a 5-
minute opening statement followed by a round of questions from
the Members.
Our witness panel for today's hearing will include Ms.
Rachel Glasser, who is the global chief privacy officer at
Wunderman; Mr. Mike Zaneis, president and CEO of Trustworthy
Accountability Group; Mr. Justin Brookman, the director of
privacy and technology policy at Consumers Union; and Dr.
Howard Beales, professor of strategic management and public
policy at George Washington University.
Again, we want to thank you all for being with us and
taking the time to testify and, again, Ms. Glasser, you're
recognized for 5 minutes for your opening statement. So just
pull that mic up close and press the button to get her on, and
we appreciate hearing your testimony today.
Thanks very much.
STATEMENTS OF RACHEL GLASSER, CHIEF PRIVACY OFFICER, WUNDERMAN;
MIKE ZANEIS, PRESIDENT AND CHIEF EXECUTIVE OFFICER, TRUSTWORTHY
ACCOUNTABILITY GROUP; JUSTIN BROOKMAN, DIRECTOR, PRIVACY AND
TECHNOLOGY POLICY, CONSUMERS UNION; J. HOWARD BEALES III,
PH.D., PROFESSOR OF STRATEGIC MANAGEMENT AND PUBLIC POLICY,
GEORGE WASHINGTON SCHOOL OF BUSINESS
STATEMENT OF RACHEL GLASSER
Ms. Glasser. Thank you very much, Chairman Latta, Ranking
Member Schakowsky, and members of the subcommittee.
Good morning, and thank you for the opportunity to speak at
this important hearing. I am honored to have traveled from New
York to appear before you to today to discuss how responsible
digital advertising supports innovative, diverse, and free
services that are the foundation of our online economy.
My name is Rachel Glasser. I am the global chief privacy
officer for Wunderman, who's the parent company of KBMG.
I am responsible for data privacy strategy and
implementation and ongoing process improvements for all of
Wunderman including KBMG.
KBMG is headquartered in Louisville, Colorado, with offices
in New York, Texas, and Brazil. We help brands, companies, and
nonprofit, large and small, use data as a strategic asset and
provide data-driven marketing engagement for improved marketing
performance and a resident customer experience.
The internet has drastically improved the way people work,
consume content, learn, travel, access health care, spend
leisure time, and communicate with one another.
Many of these life changing benefits are available to
consumers for free because it's supported by digital
advertising. In short, digital advertising is the lifeblood of
the internet economy and connects business with consumers who
are most likely to value their products and services.
Data is at the center of this American success story and is
core to the marketing services that KBMG provides the clients.
Accordingly, the foundation of our business model is trust.
We work every day to earn and maintain the trust of both
consumers and companies with whom we work.
My job is to help ensure that privacy and respect for the
consumer are integrated into every initiative.
This message comes from the top. Respect consumer privacy,
be transparent about our data collection and use practices,
offer consumer choice, and honor those choices.
This trust allows us to innovate faster, provide more value
to clients, and create better experiences for consumers.
Digital advertising is a broad term used to describe the
paid advertising that publishers put on their websites or apps.
It enables these publishers to provide consumers with content
and services for free.
Today, I am focusing on digital advertising tailored to
consumers' likely interests. This is generally known as
interest-based advertising, or IBA.
IBA is why consumers see ads that are relevant to their
interests. With this type of advertising, companies and
advertisers collect information across some of the sites and
apps that they visit.
This information is then used to predict what ads might be
the most interesting to consumers. IBA doesn't depend on
information that may be personally identifiable such as a
consumer's name or a phone number or postal address.
In fact, most ad tech companies do not want to know the
identity of a consumer for the purposes of IBA. They only want
to link an interest category to demographic data with the
consumer's browser so that they can serve up relevant ads.
Of course, different companies may use different methods of
IBA. To kind of level set, it's important to go over the fact
that there are several different players in the advertising
ecosystem.
We have the consumer, the publisher, the advertiser, and
the third party advertising company, and that's where my
company sits.
We are third party advertising company. As I mentioned,
KBMG, as a digital marketing company, places a high priority on
consumer privacy and reasonable use of data.
We expect that participants in the online economy will
honor high standards regarding the collection and use of online
data.
This supplies the publishers, platforms, social media, data
management companies, ad tech providers, commerce sites, and
more.
At a minimum, when data is collected and used to support
various activities such as online advertising or to create
personalized experiences, each player in the data life cycle
has a responsibility to be transparent, offer consumers
appropriate choices, and honor those choices with respect to
data collection and use.
We also expect every company to take reasonable measures to
secure that data prevent--to secure that data and prevent
potential misuse.
This leads me to my final point this morning. Businesses
have a vested interest in acting responsibly and building user
trust on line. Recognizing the value of user trust and the
potential applications of data online, the digital ecosystem
has taken initiative and thorough measures to put in place a
set of codes and principles to reinforce these practices.
The NAI and the DAA are two self-regulatory groups
committed to maintaining and enforcing responsible privacy
practices and high standards for data collection.
These standards include providing consumers with enhanced
transparency and control and companies like mine voluntarily
commit themselves to these organizations.
These companies demonstrate their desire to be good actors
and they are obliged to abide by the respective codes and
principles. This is a clear indication of the intent of
companies to act responsibly, build user trust, and help drive
innovation and grow the internet economy.
There is no question that data privacy is on everyone's
minds these days. But for our industry it's been on our mind
for nearly two decades.
While not to be downplayed by any means, we do not want the
recent events of recent to overshadow the extraordinary
benefits of the online advertising ecosystem and we are very
pleased that the Energy and Commerce Committee is taking the
time to learn more about this vibrant and exciting sector.
Thank you.
[The prepared statement of Ms. Glasser follows:]
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Mr. Latta. Well, thank you for your testimony this morning,
and Mr. Zaneis, you are recognized for 5 minutes.
STATEMENT OF MIKE ZANEIS
Mr. Zaneis. Thank you, Chairman Latta, Ranking Member
Schakowsky, distinguished members of the subcommittee, it's
wonderful to be before you again today.
May name is Mike Zaneis. I am the president and CEO of the
Trustworthy Accountability Group, or TAG, as it's known in the
industry.
TAG is a industry not-for-profit organization whose mission
is to fight criminal activity throughout the digital
advertising supply chain.
It may come as a surprise to all of you that that's a
necessary mission. But let me assure you it is. Our industry is
fighting the same criminal networks that operate globally often
to commit human trafficking, drug trafficking, and widespread
digital identity theft.
Why is that? It's because digital advertising is the engine
that drives America Mr. Justin BrookmanDirector, Privacy and
Technology Policy, Consumers Union's digital data-driven
economy.
This is an industry that contributed $1.12 trillion to the
domestic economy in 2016 and in so doing created 10.4 million
jobs, and these are incredibly high quality jobs that pay very
well, spread across the country in literally every
congressional district.
With that prosperity, though, comes added attention, as I
mentioned. The complexity then Ms. Glasser talked about with
the digital supply chain--the fact that you may have dozens of
companies touching an ad from the marketer, the agency, the
tech firms, all the way down to the publisher before it ever
appears, hopefully, in front of a real consumer, creates
sometimes an opaque supply chain and that allows criminals to
hide in the dark murky corners and to infiltrate it.
It's estimated then that this criminal activity, as I
mentioned, causes more than $8.2 billion in harm. But that's
just domestically, and the impact is greater globally.
The industry found a common chain of criminal activity a
few years ago. The first link in this chain is the theft of
digital content. Criminals don't take the time or the effort to
create content like our own homegrown creative community does.
Instead, they steal it. Maybe it's a blog posting, a local
news article, all the way up to the latest music and movies,
and they put this content on websites that they own, and that's
because domains are inexpensive and easily accessible.
Once they have a website with quality content on it, they
have to generate an audience to visit that website. That's very
difficult to do.
Here, again, criminals, of course, cheat, as they always
do. They prefer to distribute malware onto consumers' computers
and devices.
Once infected, that device can actually open up individual
browsers or even behind-the-scenes mobile apps, unbeknownst to
the consumer, and it visits Web sites.
We call this fraudulent nonhuman traffic. That's because
there's not a person on the other end of that screen. It's
estimated then to digital app at a cost to the industry $4
billion a year here in the U.S.
Finally, now that a criminal network has a website with
great content, they have what appears to be large engaged
audience. They're a perfect candidate to attract digital
advertising revenue.
Like any legitimate business, they can embed ads into that
site and begin to receive revenue into a matter of weeks a
great democratization tool for small businesses in this
country.
TAG was created by the industry to solve these challenges.
And so we are often referred to as sort of the good
housekeeping seal of approval.
To date, the industry has rallied behind these efforts,
although we are only 3 years old. More than 680 companies have
applied to join TAG.
That's spread across 27 countries and six continents. Most
importantly, more than 100 companies have already achieved a
TAG certification.
What that means is that these companies are living up to
the highest standards using the best technology to fight fraud,
to fight ad-supported piracy, to fight malware, and also we
have an overarching goal of increasing transparency throughout
the supply chain.
We've been very gratified to learn over the past year that
these programs are working. Two pieces of independent research
showed that in our anti-fraud program that if marketers worked
with TAG-certified entities through what we call a TAG-
certified channel, they could remove at least 83 percent of
those fraudulent non-human impressions that they receive. It
can save them billions of dollars a year.
With our anti-piracy efforts, a study by EY--Ernst and
Young--found that industry efforts to keep ads off of sites and
steal content and have illicit material on them had kept more
than half of that revenue from flowing to these pirate sites.
I think most encouraging about that research is that the
little revenue that does flow to pirate sites comes from
nonpremium marketers, meaning the smaller, less reputable
folks.
So I appreciate the opportunity to speak to you today and I
look forward to answering your questions.
[The prepared statement of Mr. Zaneis follows:]
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Mr. Latta. Well, thank you very much for your testimony.
Mr. Brookman, you are recognized for 5 minutes. Thank you.
STATEMENT OF JUSTIN BROOKMAN
Mr. Brookman. Chairman Latta, Ranking Member Schakowsky,
members of the committee, thank you very much for holding this
hearing into the digital ad ecosystem and for the opportunity
to testify here today.
I am here today on behalf of Consumers Union. We are the
advocacy division of Consumer Reports. We are the world's
largest independent testing organization, rating thousands of
products and services for consumers every year.
I've been working on ad tech for a number of years now,
dating back to suing adware companies in the 2000s for
deceptive install practices.
I recognize the value of ad targeting. I also recognize
that a lot of consumers really don't like it and they don't
feel they've agreed to be tracked everywhere they go with
everything they do in exchange for free content.
It used to be that online ad tracking was fairly
straightforward. A lot of people didn't like it but it was
simpler to understand. Advertising companies would put
anonymous cookies in your browser and they serve you ads based
on the sites you visited in your browser but not based on who
you are, and you can control it by deleting or blocking
cookies.
Today, however, the techniques companies use are a lot more
sophisticated. Companies like Google and Facebook track you by
real name, not just on their own services but on the majority
of other sites and apps that are out there across all of your
different devices.
Deleting cookies or using private browsing mode may not do
much good anymore if companies are using other technologies
like digital fingerprinting to monitor you instead.
And we are not just tracked on our computers anymore. It's
other devices as well. Consumer Reports looked at a bunch of
smart TVs earlier this year and all of them tried to use
automated content recognition to take snapshots of what was on
our screens to try to figure out what shows we are watching.
Ad companies also want to tie what we do online to the
physical world. So a couple days ago I was in New York City. I
bought a cup of coffee at a place I would never been before.
A day or so later, I got an email from them welcoming me to
their rewards program. I had never given them my email address.
Now, I can see why companies might want to do some of these
things but I also see why consumers might want to make it stop.
Privacy is, at some level, a right to seclusion--a right to be
left alone--a right to autonomy over our own devices and what
they share about us, and it's getting harder and harder to
manage that personal information.
Now, in response to this constant creeping encroachment
into our personal spaces, there are some companies who are
pushing back. Apple, for example, has done a lot to limit
tracking and apps on iPhones. Just this week, they announced
further changes to give users more control over cross-site
tracking.
Mozilla, maker of the Firefox browser, has also taken a lot
of positive steps to limit tracking in their browsers, and
we've also seen a tremendous rise in the use of ad blockers
like Disconnect and Privacy Badger and uBlock and Brave by
consumers who are frustrated by aggressive ads or the
underlying tracking.
Ad blocker penetration is expected to rise to 30 percent of
the market this year, showing that users really are not
satisfied with online ads' ecosystem.
In my organization, Consumer Reports--long-time testing
lab--we are starting to test products based on privacy and
security in response to consumer demand.
So I mentioned how we analyse privacy and security issues
with TVs earlier. We are looking to build those sorts of
evaluations into our everyday product testing.
And so far, though, all this pressure hasn't really been
enough to get industry to reform itself. There are self-
regulatory programs but they've always suffered from the same
problems--they're too weak, they don't apply to all the
companies in the space, they don't really address the data
collection issue, the interfaces can be complicated and
confusing, and a lot of times the tools are just broken.
Now, the online ad industry had agreed to address these
failings back in 2012 when they promised to honor do not track
instructions in browsers. These are the easy-to-use settings in
your web browser. You can signal to the world that you don't
want to be targeted and tracked.
Well, then a couple of years later the industry backtracked
on that promise. Now it's been over 7 years since consumers
have been activating do-not-track in their browsers. The ad
industry still by and large just ignores those signals.
And so while we at Consumer Reports are working to improve
the market for privacy and security, ultimately, I do think we
probably need some basic legislative protections.
So we should have a discussion about what would work and
what wouldn't, because privacy laws are already happening
around the world.
Europe recently expanded their legal protections with the
GDPR that just went into effect and a lot of other nations
around the world are copying European models and those laws do
affect U.S. companies.
States continue to pass privacy and security laws. States
led the way on data breach notification laws and credit freeze
laws and a lot of other basic consumer rights. We are starting
to see them advance more comprehensive privacy and security
legislation as well.
So I would urge this committee not to leave the policy
decisions entirely to Europe or to the States but to really dig
in and think about what sort of practical protections can
empower consumers to make their own decisions about their
personal information.
Thank you, again, for inviting me here today and I look
forward to your questions.
[The prepared statement of Mr. Brookman follows:]
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Mr. Latta. Well, thank you again for your testimony.
And Dr. Beales, you are recognized for 5 minutes. Thank
you.
STATEMENT OF J. HOWARD BEALES III
Dr. Beales. Thank you, Chairman Latta, Ranking Member
Schakowsky, and members of the subcommittee. I thank you for
the opportunity to testify today.
I am Howard Beales. I am a professor of strategic
management and public policy at the George Washington School of
Business. I've written academic articles about privacy and from
2001 to 2004 I was the director of the Bureau of Consumer
Protection at the FTC at the time when the commission
promulgated the National Do Not Call Registry.
I want to make three essential points this morning. First,
internet content is a public good. Private market provisions of
such public goods has historically depended on revenue from
advertising, as does internet content today.
Second, the value of advertising depends critically on the
availability of information about the likely viewer. When
information is available, advertising prices are, roughly,
three times higher than when there's no information about the
viewer.
Impairing the flow of information would significantly
reduce the revenues available to support internet content, an
impact that would be particularly problematic for smaller
publishers.
Third, advertising actually benefits consumers, leading to
more competitive markets, lower prices, product improvements,
and smaller differences between demographic groups.
To return to my first point, from an economic perspective,
internet content is a public good. Unlike private goods, public
goods are not used up in consumption.
Like free broadcast radio or television, any number of
consumers can enjoy the content without any additional cost of
providing it. The primary market mechanism for providing such
goods is advertising, which converts the public good of media
content into a private good of exposures to advertising.
Throughout history, advertising support has been a vital
revenue source for media companies. Although purer subscription
models exist, like satellite radio or premium cable TV, market
behavior makes clear that most consumers most of the time are
not willing to pay a premium price to avoid advertising.
Online content is not fundamentally different. Publishers
must cover their costs and advertising is critical to achieve
that objective. Given the long histories of advertiser-
supported media markets, that fact should not be surprising and
it's not likely to change.
Second, the value of advertising depends on information.
What advertisers are willing to pay for an advertising slot
depends critically on what they know about the viewer. However
attractive to an individual viewer, anonymity reduces the price
of the advertisement and therefore reduces the revenue
available to support the content the viewer is enjoying.
In short, anonymity is a subtle form of free riding on the
contributions of others. In two separate studies I've examined
the impact of better information on the price of digital
advertising.
In a 2010 study, I surveyed advertising networks to
determine the impact of behavioral targeting which uses
browsing behavior data to categorize likely consumer interest
in a particular advertisement.
The price for behaviorally targeted advertising was,
roughly, three times higher than the price of run of network
advertising sold without regard to audience characteristics,
and that's a substantial prices premium.
My 2013 study analysed data from automated advertising
exchanges. If there was a cookie available, the price of the
advertisement was, roughly, three times higher than if there
was no cookie. The longer the cookie had been in place, the
more it was worth. With a 90-day-old cookie, the price was
between 3.7 and 7.1 times higher than the price with no cookie.
We also found that even the largest publishers sold about
half of their ad slots through third-party technologies like ad
exchanges while smaller long-tail publishers relied on these
approaches for up to two-thirds of their advertising sales.
Thus, regulatory requirements that impair the flow of
information will significantly reduce the revenue available to
online content producers, leading to a less vibrant internet.
The impact will be greatest on the smallest publishers.
Many important participants in the online marketplace are
not consumer facing at all because they work with publishers or
advertisers to observe behavior across independent websites.
Consumers have never heard of most of them: for example,
33Across, Accuen, Acuity, and Adara, which happen to be the
first four names on the list of members of the Network
Advertising Initiative.
More elaborate consent requirements could seriously
disadvantage these companies with the primary effect of
protecting the market shares of the current leaders in the
online advertising market.
As in any other market, regulatory barriers that protect
market leaders from competition are bad for consumers.
Finally, advertising is not evil. It provides important
benefits for consumers. Numerous economic studies have shown
that restrictions on advertising increase prices for consumers.
Advertising also facilitates innovation and narrows the
differences between demographic groups. Advertising the
relationship between fiber consumption and cancer, for example,
resulted in the greatest increases in fiber consumption in
racial minority and single parent households.
When eyeglass advertising was restricted, the least
educated paid the highest prices.
To summarize, the provision of internet content depends on
advertising revenue. That revenue, in turn, depends on the
availability of information about the viewer, and online
advertising, like other advertising, benefits consumers.
Thank you again for the opportunity to testify today and I
look forward to your questions.
[The prepared statement of Dr. Beales follows:]
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Mr. Latta. Well, Dr. Beales, thank you very much for your
testimony today and, again, I want to thank all of our
witnesses for being here and we'll move into the question and
answer portion of our hearing.
I will begin the questioning and recognize myself for 5
minutes.
Ms. Glasser, would you describe some of the tools that are
used to track consumers online and would you also tell what
kinds of information digital ad businesses have about consumers
and what they use it for?
Put that mic on, please. Thank you.
Ms. Glasser. Thank you. Thank you, Congressman, for your
question.
Sure, there are many different tools that you can use to
track users online. I think it really could depend on the
platform that you're using.
Persistent identifiers tend to be of the most common and
those would include things like cookies or advertising IDs.
They don't identify an individual personally so they're not
personally identifiable. Instead, it allows to--it allows the
advertiser to make associations and inferences on the types of
behavior and the types of things that a consumer enjoys.
And can you repeat the second part of your question?
Mr. Latta. Yes, and would you tell us also what kind of
information the digital ad businesses have about consumers and
how it's being used?
Ms. Glasser. Sure. Again, I think that also depends on who
you're speaking to in the supply chain. But, generally, for a
company like mine, the type of information that we usually hold
on the consumers would be things related to a cookie.
So that could include an IP address, cookie ID, browser
information. For example, if you're using a certain version of
Google Chrome or Internet Explorer, it might include a time
stamp and a date for verification purposes. It could really
vary, depending on how you set the cookie to collect
information.
Mr. Latta. Thank you.
Mr. Zaneis, how significant of a problem are bots and fake
accounts in the digital ad ecosystem?
Mr. Zaneis. There's no question that it's a massive
challenge and a problem for the entire ecosystem. I think then
there's a recognition that no industry can be based off of this
high level of fraud.
The number that you quoted of 22 percent fraud in certain
display units--you know, we used to have a discussion around is
fraud 20 percent of all inventory or 30 or 40 percent.
Over the last 2 years, we've sort of turned the corner on
that. We have not solved it. But now what we see, again,
working with reputable partners it's relatively easy to get
your fraud rate down well into, as I mentioned, less than 1.5
percent.
I sometimes look at other industries like, you know,
produce shippers and manufacturers that have spoilage and
breakage rates around 15 to 20 percent and I look at where we
are getting the industry and think we are doing a good job.
Mr. Latta. Let me follow up on that. Is there a conflict of
interest in the industry if fake accounts are driving traffic
numbers higher?
Mr. Zaneis. No. I think that that's a common myth that has
been put out there by some advertising naysayer--that because
there can be more revenue generated by more traffic, even
fraudulent traffic.
There's no question that some companies--legitimate
companies--could make more money from that. We always say in
the industry that there are crimes of omission and there are
crimes of commission, and sort of sitting back and maybe
getting a little extra revenue from a few fake hits on your
website used to happen all the time.
Nobody in our industry is committing commission crimes of
actually committing fraud, but I am happy to say that now the
respectable companies--as I mentioned, 680 companies have
sought to join TAG--now we've turned the corner on the crimes
of omission.
Mr. Latta. OK. Thank you.
Ms. Glasser, in about my last minute that I have, if I
wanted to create a website today and sell advertising space,
for example, a banner ad, and some ads along the side, how
difficult would that be and how much would it cost me to get
started, especially if I was a small business?
Ms. Glasser. I would not be able to comment on what it
could cost or even a range, because that could really depend on
the size of the audience you're trying to market to or that
you're trying to attract to your website.
It could also depend on the type of the audience, right?
Mr. Latta. How about the difficulty, though? How difficult
would it be for somebody to go out there to do that--to get a
banner?
Ms. Glasser. It's not very difficult. You would most likely
have to engage with either--I think the easiest thing to do
would be engage with an ad agency because they could basically
do everything turnkey for you, or you could probably approach
some ad networks on your own.
I've really only worked with ad networks from an agency
perspective so I wouldn't know how it is personally to go and
do it. But I think some of the bigger companies and some of the
companies who have been around a lot longer probably, you know,
have certain teams to handle the smaller businesses.
Mr. Latta. OK. Well, thank you. My time has expired and I
will recognize the gentlelady from Illinois, the ranking member
of the subcommittee, for 5 minutes.
Ms. Schakowsky. Thank you.
Mr. Brookman, in your written testimony you say just last
week, Vice published a story purporting to prove that Facebook
listens to ambient conversation for the--for ad targeting
purposes.
You acknowledge that privacy researchers cast doubt on the
story but the fact that leading authorities cannot even agree
on whether Facebook is mining personal audio conversations is
emblematic of the generalized confusion about privacy.
We do know, for example, that Samsung's smart TVs do record
everything. They have some sound--some voice-responsive
feature. And I don't know what disclosure means, if it's in,
you know, some sort of tiny print thing that you can find when
you unbox the TV.
We also know that Vizio, also a TV, tracks second by second
viewing information. There is right now an FTC enforcement
action, or there was, against them because they did not
disclose that.
So, you know, what do consumers know and what don't they
know and how should they know, and should this be done even if
they are informed?
Mr. Brookman. Yes. No, I think that's a good question.
You know, I think there's just a lot of understandable
uncertainty because there's so many sensors, right, all around
our house.
We have Echos. We have--we have a microphone right now. I
mean, according to that Vice article, you know, any company
could be listening to it.
I do think that, you know, there are actually--some
companies are kind of scared to go there. I know that Samsung
in their privacy policy reserved the right to listen to
everything you do. But they did, I think, fortunately, clarify
that no, we will only actually listen when the button is
pressed down, and I think that's the right choice.
Facebook has also tried to clarify, you know, we will only,
you know, listen, you know, if you--we don't listen to what's
going on ambiently.
But I think that's the question. I mean, according to Dr.
Beales' testimony, it would actually probably be good if
Facebook were listening to every single thing that I say and
not just Facebook but also Google or Samsung or any of the 650
companies that Mr. Zaneis mentioned because it could give us,
you know, more targeted ads.
I think consumers reject that and I do think it's actually
unfair to kind of try to put that burden on consumers to try to
figure out, you know, what every single company is doing, which
is why I definitely support what you're saying--that there
should be some basic rules of the road to empower consumers to
kind of take some control over all these devices.
Ms. Schakowsky. Thank you.
What do you mean by rules of the road? Should we be passing
legislation?
Mr. Brookman. Yes. So there's a few things that could be
done, like just better transparency for first, right? I mean,
right now privacy policies--if you--if you look at them--you
know, I review privacy policies as part of my job. I can't make
heads or tails of them, and that's my job, right? They don't
actually say what companies are doing. They reserve really
broad rights to do stuff.
Actually requiring disclosure kind of like SEC filings
would, I think, will probably have some degree of
accountability for consumers who should not be affected, read
those but for regulators and for folks like me who, like, try
to rate products based on these sorts of things, there should
be easier kind of global choices. I talked about do not track,
which is a thing that I worked on for a long time. You should
be able to, you know, opt out of everything at once. I mean,
maybe it should be opt in for some things, right, or maybe some
things that just shouldn't be happening.
You know, principles like data minimization--don't just
collect every single thing, like, through the microphone just
because it might be interesting one day. You know, security--
well, we don't have baseline security legislation in this
country.
The FTC has done a pretty good job of trying to interpret
the statutes to require it. But they've run into some
roadblocks. You know, access to your information--if the
company has the information about you they should tell you
about it.
And so, I mean, there's been proposals floating around I
think there are some good elements to, there's some bad element
too, but, certainly, where we are right now where there's very
little law, right, the basic privacy law is Section 5 of the
FTC Act, which just says don't lie. And don't lie is a good
principle but it's not enough, right? I mean, don't lie -- if
it's why I have these privacy policies I can't figure out what
they're saying.
Ms. Schakowsky. In the few seconds I have, how common is it
that there's discrimination in terms of--and maybe that's a
loaded word--but in terms of hiring ads that do, particularly,
age discrimination?
Mr. Brookman. Yes. So I am familiar with the ProPublica
work that was pointed out--you know, targeted ads for age but
also, you know, you are allowed to target ads based on racist
terms, right?
And part of the problem is, you know, Facebook is, like, a
$500 billion company, or whatever--they make a lot of money--
but they don't have a lot of staff, right?
They don't review all these things. It's all automated.
It's all programmatic, which is efficient in some ways, but
it's harder to snake out the fraud and the discrimination.
And I have a lot of respect for the work that Mr. Zaneis
does to try to tackle that. But by and large, I mean, you look
at the sort of ads that you see online. A lot of times they're
a bad experience for consumers.
Ms. Schakowsky. Thank you. I yield back.
Mr. Latta. Thank you. The gentlelady yields back.
The Chair now recognizes the gentleman from Illinois, the
vice chair of the subcommittee, for 5 minutes.
Mr. Kinzinger. Well, thank you, Mr. Chairman. I thank you
all for being here today.
Professor Beales, we want the internet to continue to
thrive but we also don't want consumers to lose faith in the
internet because their information is being used in an
unanticipated or even a harmful way.
Aren't there some baseline protections that would balance
both innovation and consumers' trust in the privacy of their
sensitive online information?
Dr. Beales. Well, I think the approach you're trying to get
consumers to understand the gory details of how this works and
make choices on a provider by provider basis is just hopeless.
It's like trying to understand--trying to ask consumers to
understand all of the code that's on your computer and how it
works and what it does. It's not going to happen.
It shouldn't be used--the information, however it's
collected and by whoever it's collected, should not be used in
ways that are harmful to consumers.
But you need to figure out what harm you're worried about
and figure out what's the best way to stop that harm
specifically. It's not an information problem. It's what people
are doing with the information and if there's specific things
that they're doing that are bad that's what you ought to
address.
But targeted advertising isn't one of those.
Mr. Kinzinger. Yes, and so that you basically answered my
second question, which is shouldn't the privacy protections be
based on the potential for consumer harm and I think ----
Dr. Beales. Absolutely. Absolutely.
I mean, I think it's always been telling to me that in
Europe it's about data protection and in the U.S. we do privacy
through a consumer protection agency.
Mr. Kinzinger. More people now access the internet from a
device--phone, tablet, or IOT product--than from desktops or
laptops. Knowing the geolocation of a consumer is increasingly
important to these companies. Not only can companies target ads
based on location but companies like Google and Facebook can
assemble profiles and patterns of life about consumers.
I would like to hear your opinions about as to whether
precise geolocating information should be considered sensitive
information, meaning consumers should have to affirmatively opt
in for tracking and collection of their location.
So Mr. Zaneis, can you explain to me how consumers are
tracked between devices and how is it that ads on one device
might be seen on another?
Mr. Zaneis. Sure. Thank you for the question.
Just to be clear, TAG does not work on consumer privacy
issues. But I certainly have a lot of experience here and have
testified in front of the subcommittee in the past on privacy
issues and data issues. So I am happy to elaborate a little
bit.
Certainly, there are technologies--desktop and mobile
browsing is technologically different than mobile apps, and
cookies don't generally exist in the mobile app space. So you
have different types of identifiers such as device identifiers
for a mobile phone or a tablet that can be used.
But the concept is the same, which is advertising requires
an identifier. Whatever it is is less important. The technology
that empowers it is less important than what it is, and we've
proven, as an industry--Ms. Glasser mentioned the Digital
Advertising Alliance and the Network Advertising Initiative to
wonderful self-regulatory programs not dissimilar from TAG that
have been able to put in place consumer protections even in the
mobile space.
Really, the key is to be technology agnostic but to set
policy and self-regulatory principles based on principles and
standards that everybody must meet. I think that's the
effective method.
Mr. Kinzinger. Thank you.
Back to you, Professor. There's been a lot of debate about
the concept of selling data, which culminated with the Facebook
hearings recently.
These large online businesses often assert that they don't
sell their consumers' private--personal information to anyone.
Yet, five data companies--Google, Facebook, Apple, Microsoft,
and Amazon--represent a combined market share of nearly $4
trillion.
So regardless of ownership of the data, they're well
compensated for their commodities through the transactions that
they conduct. What do you think of their claim that they don't
sell consumer data and is it really as nuanced as they--as they
say?
Dr. Beales. Well, the way I've seen it in the context of ad
exchanges for--you know, for the purchase and sale of the
advertising is there's not data that's bought and sold but
there are cooperators in that process who are sharing data.
For example, an ad comes up that General Motors might be
interested in. The publisher sends some information about what
it knows about me based on the cookies that are on my machine
to the ad exchange.
Somebody who's a potential bidder, like General Motors, who
knows something else about me matches that information and now
they know more than either party knew in the first place and
they use that information in deciding on whether to bid on the
ad.
But people think--companies in this space tend to think
their data is their lifeblood and they're not going to give it
to somebody else. I mean, they hold on to it as closely as they
can is the experience I've seen.
Mr. Kinzinger. And just--with 10 seconds, because I am
going to just get yes or no--consumer privacy laws and policy
makers have regularly complained about the length and
complexity of consumers facing privacy policies.
Do any of you believe consumers have a clear understanding
of what's contained in a privacy policy? And so a quick yes or
no from each of you would be great.
Ms. Glasser. No.
Dr. Beales. No.
Mr. Brookman. No.
Mr. Zaneis. No.
Mr. Kinzinger. Thanks. I yield back.
Mr. Latta. The gentleman yields back and the Chair now
recognizes the gentlelady from California for 5 minutes.
Ms. Matsui. Thank you, Mr. Chairman, and thank you very
much for our witnesses here today.
As we discuss here today and in previous hearings a
fundamental tenet of digital advertising is explaining to
consumers what data is being collected and for what purpose--in
other words, providing meaningful and robust transparency.
But that, of course, is more complex than a list of the
information on the types of data collected and whether that
data is sold.
Specifically, companies are able to take user data and sell
ads based on the data users provide to those platforms without
having to ever sell that data to a third party, and the more
data that platforms have access to and, importantly, the more
they can use that data to create inferences to target these
users, the better these platforms can target advertisements.
Entire panel--so even if data isn't so-called sold, how do
we work towards meaningful transparency with both more clarity
and nuance about data usage that don't make distinctions
without differences?
Anyone want to start?
Ms. Glasser. Sure. I think, plain and simple, we just need
to be better at describing what we do. It is a complicated
space. It does get very technical and I think the easiest way
to explain what we do is to provide an example. Explain to the
user what happens when they go to Facebook or why they're
seeing a certain ad.
I think in addition to that, the self-regulatory groups
have made a tremendous effort toward that end by creating an
icon that's supposed to indicate when certain types of
advertising is happening or a certain type of data collection
is happening for interest-based advertising which I talked
about earlier.
Ms. Matsui. Right.
Ms. Glasser. I think we just need to be more clear and we
need to write these policies much better.
Ms. Matsui. Do you agree?
Mr. Zaneis. I do. I mean, we all just agreed that privacy
policies are not understandable by consumers just because you
have to tell the truth but that's all you have to say and you
have to disclose everything. It's not a--it's not an effective
mechanism for disclosure, which is why programs such as
industry self-regulatory ones--the DAA and NAI--are so
important.
A lot of these third-party entities don't have a consumer
touch point. So having a very simple policy disclosure outside
of a privacy policy is key, and I will just add I think then
the platforms that do have a consumer touch point have done a
fantastic job of developing things like privacy centers and
communicating with their users clearly.
Ms. Matsui. OK. OK.
Mr. Brookman. Yes. I mean, I think you're right that
companies like Facebook or AT&T they make a big deal of the
fact that they don't sell the data, right, but then it goes
down to the question of excess data collection.
You know, I give Facebook a lot of information about me on
plenty of stuff--pictures of my kids, things I like, my
religious and political affiliation.
But that's not good enough, right? I mean, they actually--
and this was I thought a fascinating part of the Cambridge
Analytica hearings--a lot of the questions were not about
Cambridge but how Facebook watches what I do in all my other
apps and websites, and that's the thing I think a lot of folks
object to.
So, really, you know, AT&T is like a service provider for
me. They never used to listen to my phone calls to try to
target ads to me. Do they have a--should they be able to watch
everything I do online where I have no control because they're
my pipe in order to target ads.
I think that's the sort of out of context data collection
and use that I think consumers object to. I think they're
surprised by that. I think that there should be maybe more
prohibitions but very much at least some sort of rights.
Ms. Matsui. Do you think the public is more aware of this
today based upon what's happening--the coverage?
Mr. Brookman. I think--I think there's a generalized
awareness that our privacy is under siege. This kind of goes to
the questions from Ranking Member Schakowsky. I think people
feel like, I am being listened to all the time by everyone--
what do I do about it--what's happening now. And I think
there's just a lot of paralysis and a lot of confusion and a
lot of, like, upset, right? I mean, we talked about the poll
numbers. People don't like it but they don't know how to----
Ms. Matsui. They don't know what to do.
Mr. Brookman. They don't know what to do. That's exactly
right.
Ms. Matsui. OK. How about you?
Dr. Beales. Well, as I said, I think--I think the key is to
think about what it is that we are worried about would happen
as a result of this information and then think about ways we
can keep that from happening.
The information is out there. It can be observed in a lot
of different ways using a lot of different technologies, and
new ones will be invented if not every day every year.
Ms. Matsui. Right. The horse has left the barn, to a
degree, so we have to figure out what we could do about it and
try to explain it to everybody so people understand it, and
then it's more of sense of how we deal with our own data and
understanding as we click on things what could happen, right?
Yes. OK. Well, I am running out of time so I yield back.
Thanks.
Mr. Latta. Thank you. The gentlelady yields back the
balance of her time.
The Chair now recognizes the gentleman from Michigan, the
chairman of the Subcommittee on Energy and the former chair of
the full committee, for 5 minutes.
Mr. Upton. Well, thank you, Mr. Chairman.
Ms. Glasser, I want to follow up a little bit on what Ms.
Matsui said. In your testimony, you stated, quote, ``Using and
sharing a consumer's name or similarly identifiable information
is not necessary in many cases to provide rich, personalized,
and relevant advertising.''
So what's your thoughts as to why Facebook does in fact
collect so much information along those lines like phone
numbers and location and calling histories? What information--
what are they doing with that if they don't really need it and
to tee up that interest-based ad?
Ms. Glasser. Thank you for your question.
Mr. Upton. If you want to comment. I don't----
Ms. Glasser. Yes. I can't speak specifically to the motives
behind Facebook for doing it. Just simply, I don't have that
insight.
However, my perception of the reason why they collect it is
when you sign up for their platform, you have to provide this
information so you can create your actual profile page.
Now, as I understand it, I don't think you actually have to
give your phone number but in that case if you decide to it's a
way that they can--they use it for a means to text you certain
sort of updates or they can use your phone number to identify
that particular device and be able to provide you continuity of
services. Maybe you get a new phone but, you know, the phone
number is the same. The device is different. It's a way for
them to keep linking it.
Facebook is sort of a unique case in the broader ecosystem
because they are a subscription-based platform. When you go to
Facebook you provide your email, your name, and all of that
information as a condition of signing up.
I think when you are looking on a website just like New
York Times, for example, or the Washington Post, unless you
have a subscription--let's assume you don't--you're not
providing any of that information.
You're not giving your name, your phone number, your email
address, and you don't need to in order to get advertising
placed on that site that's relevant to your interests or things
that you might have looked at before.
Mr. Upton. So you mentioned a little bit earlier about the
icons and I know that the Digital Advertising Alliance launched
last month an industrywide initiative including a political ad
icon for consumers.
Are you aware of any political ads currently branded with
that new icon?
Ms. Glasser. I don't, but I just haven't seen them myself.
I am sure I will start seeing them after this conversation
because it always comes up after you talk about it. But I have
not myself seen them yet.
Mr. Upton. Great.
Mr. Zaneis, can you explain how the third-party validation
processes exist and how they work?
Mr. Zaneis. Third-party validation as far as our
certifications are concerned? Thanks for asking the question.
You know, any certification program is only as strong as
the validation process behind it. So we work with a number of
independent audit firms and the majority of our members
actually go through a third-party audit, which is very
significant and they literally are on the site, kicking the
tires, looking under the hood to make sure that the companies
are complying with our standards, and I will take it one step
further, because if you go up the supply chain a little bit a
lot of our efforts to fight criminal activity are supported by
really niche technically sophisticated companies--what we call
vendor companies--an anti-fraud vendor, for example--which they
also go through an independent accreditation from the Media
Ratings Council. So they may go with EY or somebody like that
and go through a very extensive certification process.
It's really key to raise the bar.
Mr. Upton. Well, I just want to say as a native Michigander
I really appreciate your testimony. Thank you.
Mr. Zaneis. I appreciate it. Thank you.
Mr. Latta. The gentleman yields back and the Chair now
recognizes the gentlelady--oh, I am sorry, I think Mr. Green
just walked in.
Mr. Green is recognized for 5 minutes.
Mr. Green. I want to thank the chairman and the ranking
member for holding this hearing. The two biggest online privacy
scandals in the past year has come through this subcommittee--
the Equifax breach and the Facebook Cambridge Analytica issue--
and I hope we can soon see some legislation on the books to
protect Americans online.
Mr. Brookman, we know that small businesses as well as
larger corporations sometimes benefit from consumer data since
it allows them to show their ads to customers who are mostly
likely to want their product.
Do you know--do we know how common it is for small to
medium-sized businesses to use tracking technology as compared
to larger businesses?
Mr. Brookman. I don't have that information. But I will
grant the point--that it's small businesses, large businesses.
Lots of companies rely--use behavioral targeting ad tracking to
reach their customers.
I will also concede Dr. Beales' point that in some cases
those ads may be more valuable. I do think the vast majority of
ads are not in fact behavioral and I do know that leading
publisher trade associations like Digital Content Next--they
used to be the Online Publishers Alliance--have been one of the
more aggressive forces calling for actually privacy protection.
Even though--and we are a member too, right?--I mean, even
though those companies use targeting, they think it would be
better for the ad ecosystem if there were some more protections
in place.
It would be partly just for confidence in the ecosystem,
partly because a lot of the excess consumer surplus is just
flowing to companies, to Facebook, and to Google and also
because, I mean, they're seeing companies or users deploy ad
blockers because the self-regulatory efforts that have happened
so far haven't been sufficient to address a lot of these
concerns.
Mr. Green. OK. Any--do you have any thoughts on whether
there are any way for any potential online privacy law at the
Federal level to balance potential benefits to businesses along
with better consumer privacy?
Mr. Brookman. Yes, absolutely.
I mean, it's a thing that I've worked on for a number of
years. The United States is kind of an outlier around the world
and most countries have some sort of basic privacy laws on the
books to give folks control.
United States is one of the rare exceptions so they don't.
The default law is just don't lie to folks, which has not been
sufficient to really safeguard privacy.
So yes, having something on the books that provides better
information--again, I don't want all the onus to be on
consumers to try to figure out, you know, every single thing so
I think, you know, a lot of this out of context data
collection, data usage, may be, you know, should be prohibited
in some cases, right?
At the very least, though, there should be some more--at
least a stronger ability to say no, right? A lot of folks
just--you know, they feel like they want control. They feel
like they're being monitored. They wish they could do more.
They don't have the information or ability to do so today.
Mr. Green. Well, and after our hearing with Facebook, we
realized that, you know, somewhere along the way you can't
accumulate this data without marketing it and that's the
reason.
But like you said--and I hear, you know, the balance of the
consumer privacy--I really want to get permission for it. I
don't want them taking it from me without knowing.
Can you discuss ways to balance the consumer privacy, which
polling shows is extremely the high priority for Americans,
with any benefit that may sometime come from these ads?
Mr. Brookman. Yes. I mean, Facebook has a lot of
information about me. They have--like, they know where I live.
They can serve me plenty of targeted ads.
What I object to is them watching every place I go online,
you know, in order to monitor me in ways I don't expect.
They started doing that back in 2011 or so when they
started rolling out like buttons and people would see a like
button--``Oh, I can press this, I can click `like.'''
What it didn't realize is that meant Facebook was watching
them whether they clicked the button or not, right? And so
that's the sort of thing I think folks object to. That's the
sort of thing I think--I saw a lot of Members of Congress were
objecting to during the Cambridge Analytica hearings--that's
the sort of thing I think consumers, like, don't expect and
that there should be stronger rules in place for, whereas today
there really aren't.
Mr. Green. Well, I even have a staff member who said he was
planning to get married so he was looking for wedding rings,
and all of a sudden he saw these adds all pop up on his
handheld.
So, I mean, it's a problem but how do we deal with it?
While you were at the FTC you worked on a commissions cross-
device tracking report. Can you tell us some of your concerns
about companies following people across these multiple
platforms?
Mr. Brookman. Yes, absolutely. So I think it's just
unexpected in ways that folks, you know, don't necessarily
think that just because I am on my phone I will suddenly--if I
am searching for ``wedding ring'' on my phone, suddenly on my
desktop computer--which, by the way, I share with my live-in
girlfriend--suddenly she starts seeing pop-up ads over there
for the wedding rings I was looking at.
I think a lot of folks don't necessarily expect that, and I
think they----
Ms. Schakowsky. You better get married.
[Laughter.]
Mr. Brookman. Exactly. It's a lot of pressure.
But I think, I mean, the information is used in ways that
are surprising. So online tracking used to be fairly anonymous,
but now if you go a publisher you type in--if you log in on,
you know, Justin at Gmail, you know, that website might then
spew out to a bunch of ad networks, hey, that's Justin, right?
And so they are now tracking by real name in ways that they
hadn't done before.
And so I think these are the sorts of things that are
unexpected, and I think when people know about them, they're up
in arms. They're controversial, and they wish there were more
limitations or at least controls around.
Mr. Green. Mr. Chairman, just briefly, I heard that if I
have a smart TV and I have my handheld, my iPhone, they can
actually know what they're doing and together. Is there any
solution there? Should we just turn it off?
Mr. Brookman. Yes, it's tricky.
Mr. Green. I really don't like the appliances talking about
me.
[Laughter.]
Mr. Brookman. It's a big conspiracy, and I wish they would
knock it off.
You know, things like--most of these companies do offer,
like, opt out. So there are controls, but they're kind of hard
to find.
And so, I mean, one thing we try to do in Consumer Reports
is, like, say, ``Hey, if you want to knock this off, here's how
to do it.''
It's just, like, a lot of labor, right? I mean, we all have
a lot going on. We don't want to have to spend, like, half an
hour configuring our smart TV to, like, not talk to the
toaster, right?
I mean, there should be some things that by default just
don't happen.
Mr. Green. Thank you, Mr. Chairman.
Mr. Latta. The gentleman's time has expired and yields
back, and the Chair now recognizes the gentleman from New
Jersey for 5 minutes.
Mr. Lance. Thank you, Mr. Chairman.
I want the panel to know I've been happily married for a
generation, and none of these matters pop up on my computer.
This subcommittee had Mr. Zuckerberg testify before us two
months ago. As others on the panel have indicated, reports last
week revealed that Facebook has data assuring partnerships with
many device makers, including Chinese firms that U.S.
intelligence agencies have labeled national security threats.
Following these reports, I sent Mr. Zuckerberg a letter
indicating my continued frustration with Facebook's handling of
users' data.
I reiterated a statement I made at our April hearing that I
believe Facebook may have violated its 2011 consent agreement
with the Federal Trade Commission.
I believe Facebook's issues are interrelated with the
subject of this hearing, digital advertising, as the company
makes the vast majority of its profits from advertising,
reporting $40 billion in revenue from advertising alone in
2017.
Another issue I am concerned about is the increase in fake
news advertisements and foreign interference in our electoral
process.
I am one of the co-sponsors of the bipartisan Honest Ads
Act, which enhances disclosure requirements and transparency
for online political advertisements.
I was pleased that Facebook pledged its support to the
bill, and I thank the panel for being with us this morning.
To the panel in general: From your expertise, how do
companies balance the need to protect privacy while also
offering the most effective advertising platforms to their
clients?
Ms. Glasser.
Ms. Glasser. Thank you. There are a lot of things that we
do before we engage with a company for advertising or analytic
services.
To us, it's of paramount importance to make sure that we
are working with companies who behave appropriately and who do
the right thing. It's our reputation on the line, and if we get
caught up in things like misuse of data or data collecting--
being collected improperly, you know, that's a clear black mark
on us.
At the same time, we can't obviously control other
companies. However, we have some expensive due diligence that
we put in place, whether it starts with reading a company's
privacy policy, ensuring they offer opt-out, ensuring they're
actually describing how their services work, if they just
describe data collection on their own website that doesn't
necessarily get us where we need to be because consumers are
using their services and their platforms and not necessarily
their website.
So we go through some extensive efforts to make sure that
the companies we are working with are at least taking an effort
to do the right thing, whether it's members of industry
associations such as TAG or the NAI and DAA, it provides a
level of comfort to know that they too recognize a lot of the
issues and that they too are obliged to put certain protections
in place.
Mr. Lance. Thank you. Others on the panel?
Mr. Zaneis. Yes. I think Ms. Glasser nailed it as far as
every company really has to take privacy very seriously because
it impacts their reputation in his market and it's a very fluid
market. It's a very diverse market, and consumers can go to any
of your competitors with one click.
In my experience, it's been companies--early adopters in
self-regulatory programs--it's a good signal that they care
about it and in working it helps establish both the Digital
Advertising Alliance almost a decade ago and now TAG 3 years
ago. Facebook has always been an early adopter and a good
participant.
Mr. Lance. Mr. Brookman.
Mr. Brookman. Yes. I mean, I will ultimately grant that,
you know, I have friends that--who work at privacy companies
and they do a lot.
I just think that the balance is off--that there's always
this wide-eyed enthusiasm that big data will save everything
while folks tend to be very dismissive that things might go
wrong.
And I think, you know, the consequences if they go wrong,
there really isn't enough risk. There's not any--Ranking Member
Schakowsky talked about how the Federal Trade Commission--you
know, even if a company does violate the fairly week laws that
we have can't get penalties in most of the cases. They have a
limited staff to police--like, again, all these things that,
again, leading academic experts can't even figure out.
When I was at the FTC, you know, I worked in their
division, their office of technology, research, and
investigations designed to try to help bring more tech
expertise to the FTC. But we were understaffed. And so I think,
you know, there's just not enough reason to try to safeguard
privacy in the existing legal framework.
Mr. Lance. Thank you. My time has expired but I look
forward to working with all of the distinguished panel members.
Thank you very much, Mr. Chairman.
Mr. Latta. Thank you. The gentleman's time has expired, and
the Chair now recognizes the gentlelady from Michigan for 5
minutes.
Mrs. Dingell. Thank you, Mr. Chairman.
I am not calm like anybody here. I listened to all of you
this morning. I've listened to my colleague, Ms. Schakowsky. I
don't have an Alexa in my house. I don't want anybody
listening.
We've seen examples of people knowing that we are being
listened to and, you know, in the past we've been told to just
trust companies that hold our personal information, and that
our information was used in a transparent process.
We, obviously, now know that that's not the case and I
think, quite frankly, the trust is wearing thing. You say,
well, consumers are kind of worried about it but what can you
do about it.
Consumers don't understand how much that data is being used
and how it can be used.
Dr. Beales, I didn't sleep last night. I was up all night
for two reasons. One, I pulled out my paper from my graduate
school on public good, and I think that what we are talking
about today in the internet is not a public good and I am going
to write a paper.
I was up until 3:00 a.m., and you're going to be the first
copy to get a--first person to get a copy of it.
And two, Michael Chertoff has a new book out on privacy and
was talking about how the Chinese are using all of this data to
actually--we think it's innocent.
The Chinese are looking at who does these searches and
compiling them and grading them, and how people get jobs, et
cetera, and that's what's happening here.
How do we know that this data, viewed alone, thousands of
data points collected on each of us, don't paint a picture
other than our, you know, our interests, curiosities, or
preferences?
But when they're combined together, they create a vivid
mosaic of both our online and offline who we are, and we don't
know who that's being shared with, and trust me, I don't trust
you to say it's not being shared with lots of people.
It should raise concerns for consumers. We've got laws that
protect people at work, on the streets, and in their homes, and
with the lines continually blurring between online and offline.
I think we have to address these issues and we need to be
doing a lot more to protect consumers and educate them. They
think there's nothing they can do and what does it matter--it
could matter a lot.
So, Dr. Beales and Ms. Glasser, what are the market
incentives for companies to not collect as much information as
possible? There are none, I would like to say that.
Dr. Beales. I think--I mean, collecting information has
some cost. It's usually not very big, and so the incentive
tends to be to collect more of it, and we'll see whether it is
good for something.
There's an incentive not to collect, I think, information--
that people are going to be reluctant to give you. I mean, if
you do survey research you always ask questions about income at
the end because a lot of people will stop answering question
when you ask that question and you don't want to lose the data.
There's not a lot of incentive.
Ms. Glasser.
Ms. Glasser. Sure. I think that there is definitely a lot
of--a lot of reasons why companies would want to limit the data
that they're collecting, first of all, for legal reasons,
right? I mean it depends on which sector you're in and, as we
all know, there are different sectoral logs here in the U.S.
that protect different types of information, particularly CAPA.
Now, I don't want to collect personally identifiable
information by children, which includes cookies and personal
identifiers.
Same thing goes for health care or finance. I, as a
company, have a vested interest to limit the data on collecting
for several reasons.
I don't want to risk a lawsuit. I don't want to risk
enforcement by the FTC, not even from a legal perspective--of
course, that's terrible, but--I mean, depending on whose side
you are, but also because I don't want the press and I don't
want people to know that I got caught doing something I
shouldn't have been doing.
I think the other reason is, if I am collecting all of this
data that I don't necessarily need, I run the risk of
collecting bad data, and when I am collecting bad data and it
comes to be found out that it's bad data, then I have to go and
purge all of my data that might be connected to that bad data
and that comes at a tremendous cost to my company, literally,
in money what it costs to have engineers and people go through
the systems and do that. It also comes at a reputational cost
as well and it could slow down business because we have to now
remove this entire data set.
So for me and for our company, there's, clearly, a vested
interest to collect only what's needed.
Mrs. Dingell. So I am almost out of time. So I am going to
do more questions for the record. But I will give you all
another example.
I was prepping for a committee hearing. I stay up nights.
They call me Dr. Google. But was doing opioid research and by
the next morning was getting drug rehabilitation centers to
check myself into, and I didn't want anybody to think that I
was a drug user.
But that's the kind of data that's being collected and then
a potential employer can buy that from somebody. People don't
think about it. I hope we can get them to.
Thank you.
Mr. Latta. The gentlelady's time has expired and the Chair
now recognizes the gentleman from Kentucky for 5 minutes.
Mr. Guthrie. Thanks a lot, and thanks for being here. And
this is serious and really trying to figure out where we draw
the line in public policy in this.
I've said before that, you know, I am from Kentucky. I love
college basketball. The most frustrating thing is every 4
minutes you get a TV timeout.
But I get to watch it for free because I got to watch the
ad. And we are talking about free content. I think Mr. Brookman
said people don't want to trade free content for the violation
of privacy.
And what will be interesting in some of these apps would
have a subscription so you can subscribe and you get no ads
whatsoever and see what people choose. That would be
interesting to see where people move forward with that.
But and I was in Ms. Schakowsky's district trying to figure
out how to get around Monday--trying to get around traffic to
get from Sheridan Road to Lake Shore Drive.
And the app I was using popped up an ad right when in
needed to make a critical turn. So that was--so there's a
difference in frustrating--but I was in your wonderful
district. Might ever trying to get me lost so I would stay in
Chicago.
Great city, by the way. And so we are trying to figure out
what's, like, just nuisance and stuff you have to fool with and
pop-ups and then really what gets into what some of the things
that Mr. Brookman has talked about and where we need to draw a
line.
So just kind of the process of this. So, Ms. Glasser,
first, so how do the--these target audiences are created by
additional ad companies.
I mean, just kind of how is that--I think we've kind of
gotten into it. They look at all the different ways that you
move forward. Can you kind of describe how a target audience
from a digital ad company is created for--generically for
somebody who's wanting to create an audience?
Ms. Glasser. Sure, I would be happy to.
So, basically, what happens is we talk about intra space
advertising. Typically, we'll used intra space advertising to
build these profiles and target audiences and what we do then
is we actually will see what websites you have gone to over the
course of time.
So maybe one day you're visiting MapQuest to get
directions. Another day you're on a gardening website. Then
you're on the New York Times and then you're looking to buy dog
food, and algorithmically and using modelling and science they
are able to sort of piece these things together and, you know,
put you in a certain age range--say, you're male, you live in
Kentucky and you have an interest in gardening and dogs. Simple
enough, right?
That's basically an interest category. We then provide that
data to other partners for them to target the specific
audiences but we'll use the data collected over different
websites over time to build up these profiles and to get a
sense of the different interests so that we can build these----
Mr. Guthrie. And then you build up ads that I want to see.
That's the kind of the things instead of generic, like, when I
do the basketball whatever comes on I got to watch but ads I
want to see.
So I don't have an issue with that but just trying to
figure out where we draw the line.
So, Professor Beales, you talk about or it's been suggested
that online advertising market can operate like an financial
exchange where people bid on the ads and people--I heard you
talk about that earlier today.
How does that work? I mean, how does that kind of--I didn't
realize that happened.
Dr. Beales. Yes, there's an----
Mr. Guthrie. Usually, like here's a group of dog lovers
from Kentucky so here's an ad that--and so somebody will bid on
to get the ad----
Dr. Beales. Well, you go to a website and the website will
say here's an ad--here's the limited information that website
has, other than you're on that website. That may be all it
knows but it may be part of the network that knows something
more.
It passes that information to the ad exchange, which passes
it on to potential bidders, which are typically advertisers or
advertising agencies who have other information about you.
Mr. Guthrie. Well, I will go to the--going to a website and
boom, all this starts taking place instantaneously?
Dr. Beales. Yes. Absolutely. Absolutely.
There's a fascinating video that I think is 70 milliseconds
or something like that, which is about how long it takes to
actually serve the ad.
Different advertisers bid. You know, I've got this great
dog food that I know you're really going to like so I will bid
a lot for your exposure. I win the auction, and the you get the
dog food ad.
But there may be dozens and dozens of advertisers that bid
for that particular availability, each of who has a little bit
information about what--about you, about what you might be
interested in, and the one who thinks you're most valuable is
the one----
Mr. Guthrie. And, obviously, the more information I have
the more valuable I become to that--whoever's bidding,
obviously. The more they know my likes, the more they're going
to bid on what I--and so therefore, to get me on somebody's
website they're going to provide better content.
So I will use their--so they kind of--it works that way,
but it just gets into the--but they have to have so much
information on you so that--are there things that you think
need to be protected in that or people just need to know, going
in, and that it's an open process?
Dr. Beales. Well, I think it's a more going in--a known
going in and I think it's more think about----
Mr. Guthrie. The thing is if everybody's a good actor we
are--I mean, the problem is the bad actor. If everybody's a
good actor, then it makes me more valuable to that advertising.
It makes somebody want me on their website. They're going
to provide better content that I will then enjoy using. That's
why I go there. And so it all works. But how do you protect
against the bad actors in that?
Dr. Beales. I think you got to think about what I means to
be a bad actor and then try to restrict that particular
conduct. It's not that--it's not that a lot of people know
something about you from your various online behavior.
It's what bad do we think might happen. I mean,
Congresswoman Dingell's example of what China's doing--I mean,
the problem there is the Government has got that data, and to
the extent that that's a problem, that's a problem we can
address directly by making it harder for the Government to get
that data.
But it's what are--and I think we need to ask what are the
bad actors doing with that information that could be harmful,
because we need to try to address the bad things that could
happen to consumers.
But it's not the information collection that itself is the
bad thing. The bad thing is what somebody does with that.
Mr. Guthrie. OK. Thanks. I am out of time. I yield back.
Mr. Latta. The gentleman's time has expired and the Chair
now recognizes the gentleman from California for 5 minutes.
Mr. Cardenas. Thank you, Mr. Chairman, also Ranking Member
Schakowsky for having this hearing, and I would like to thank
the panellists for answering our questions and helping us make
sense of all of this, and there's a lot of all of this involved
here. It's very, very new to the human psyche and the human
element.
You know, this is on the heels of the Facebook scandal and
the hearings that we've had here. But at the same time, I think
that it's important to note that that's just the tip of the
iceberg.
There's a lot going on out there and a lot that we don't
hear about, and I think that Mrs. Dingell brought up some good
points about just getting online and all of a sudden the next
day, you know, you get certain pop-ups and like she said, who
knows in the future if people are going to use that against
someone saying, hey, are you really an opioid addict because we
got some information on you and you spent a heck of a lot of
time looking at this stuff.
But then again, she's just doing research, but at the same
time, people are going to use that data as they wish, and what
is unfortunate is that we have a lot of small businesses out
there who are benefiting from this, who are able to compete now
in an environment like never before with larger businesses,
that are creating jobs.
In my district alone, for example, it's come to my
attention that thousands of jobs have been created just in my
district alone because of this new technology and these new
efforts.
And when it comes to the economic boon as well, there is
economic pluses. When you talk about thousands of jobs, you're
talking about hundreds of millions of dollars of money that's
coming into my community.
So there is positive to all this as well. But where is the
balance? And in that comes my first question is what data is
collected from consumers and also what kind of data do
companies pay for the most and what information about consumers
is most valuable to them.
If anybody can give me some perspective on that.
Ms. Glasser. I would be happy to try.
Mr. Cardenas. Sure. Thank you.
Ms. Glasser. I think the answer is really it depends. I
think it depends on what your end goal is as far as what data
will be most valuable.
I think it also depends on who you're trying to reach and
what type of company you are. Again, I think all of us at least
up here--I can't speak for everyone else--are true believers in
data minimization, transparency, and principles along those
lines.
So as far as data minimization you only collect what you
need and that would not typically fall into the area of
egregious practices.
Mr. Cardenas. Anybody else?
Mr. Zaneis. Yes, I would be happy to answer that, and it
relates very well to Congressman Guthrie's question just a
second ago.
Obviously, some of your web browsing behavior is going to
be collected and so if you go to another website and we are
talking about the real-time bidding, somebody then thinks since
you want to buy dog food may think that you're worth, you know,
20 cents for that impression--somebody then knows that you just
went to a--to autodealer.com or something like that--may think
you're worth $20. And so that kind of information is very
valuable.
But I also want to make sure we don't lose focus and get
too myopic just on advertising because this kind of information
is collected for all sorts of purposes.
At TAG, we collect from our member companies' IP addresses
and we use them to fight fraud. We have something called a data
center IP list and it has 40 million IP addressed that generate
fraudulent nonhuman traffic.
This is incredibly valuable tool to fight criminal activity
globally and it only comes from companies. So if companies are
restricted from collecting that kind of information, perhaps
under GDR-like restrictions or the California privacy
initiative, that's going to harm law enforcement and industry's
efforts to fight crime.
Mr. Cardenas. Yes, go ahead.
Mr. Brookman. Yes. So the question of, you know, what
information is collected, I mean, I think my main thing would
be that more and more information is collected from more and
more devices in confusing and often in transparent ways.
So if I am with Congressman Guthrie watching a basketball
game I think I am likely to expect some ads targeted to the
content to what I am watching, right? I am going to see ads for
trucks and for beer, and that's contextual and that's fine. I
think people appreciate that.
What I might not expect is then for my ISP to then tie what
I do on a connected computer, right, and maybe I am looking for
wedding rings and suddenly I am watching the game and a big ad
for wedding rings comes up based on what I did on a different
device and watching the game with my girlfriend.
This is the thing I think people are confused by and it's
increasingly capable, rights. I mean, TV ads used to be not
targeted to individuals. Increasingly, they can do that, right,
and tie it to your behavior online or they can tie it to the
email address that you give them, and that's the sort of thing
that I think people--we are all kind of grappling with.
You know, how do you put in place, you know, because it is
valuable, right? I mean, yes, I suddenly need to spend a lot of
money on the diamond ring right now.
But I think people still wish they had autonomy and control
over the things they own.
Mr. Cardenas. Thank you. My time has expired.
I yield back. Thank you, Mr. Chairman.
Mr. Latta. I thank you very much. The gentleman's time has
expired.
The Chair now recognizes the gentleman from Indiana for 5
minutes.
Mr. Loebsack. Thank you, Mr. Chairman.
I guess this could be one of those things, be careful what
you wish for.
I remember 25, 30 years ago, you know, people thought this
would be great. And it is. It really is. It's transformational
to our world, but also there some downsides. It's a serious
issue.
And Mr. Zaneis, you point out it's not only about ads, it's
about national security. It's about all kinds of law
enforcement. And so that's why we have to really strike a very
good balance here about what we do regulatory-wise or
legislatively as it relates to this issue.
I also think do you--does any--do we think that there's a
generational difference in concern over this? Because I have
some sons who are in their 20s and my son has an Alexa.
You know, I went to this apartment and he had it. I am,
like, don't you--they just don't seem to be concerned about it.
Do you think that's a problem? Do we need to--do we need more
education maybe of people who are now--have never grown up with
the internet?
I mean, anyone--Mr. Zaneis--about why this is actually a
legitimate serious question that it's just not about--just not
about turning on some jazz music, which he did, which was
really cool.
You see what I am saying?
Mr. Zaneis. Absolutely, and I will say that there are--of
course, there are generational differences. Without a doubt,
folks that are, you know, digital natives and folks are not.
I will say this. Everybody cares about privacy, and
sometimes you hear folks say, oh, young people don't care about
privacy.
It's not that they don't care about privacy. It's that they
understand the trade-off a little bit better in order to get
services and they are more willing to trade off certain privacy
and data in order to receive the services that they are sort of
entrenched in.
So there are studies. I will just say that I am sure Mr.
Brookman has some great numbers. Anybody can show you a study
that says either 90 plus percent of people are really concerned
about privacy or, you know, 90 percent of people love the
digital services they get and are willing to trade off.
Mr. Loebsack. Sure. I understand.
Briefly, Mr. Brookman, because I've got several questions.
Mr. Brookman. I think--I think young people actually do
probably care about privacy just as much. They tend to be a
little more tech savvy so they----
Mr. Loebsack. Do you think they're just resigned to the
fact that it's not going to happen?
Mr. Brookman. I actually don't because, like, for example,
you think about who uses ad blockers, right? It tends to be
millennials and younger people.
Mr. Loebsack. OK.
Mr. Brookman. They have the ability--they feel they have
more control to take back their privacy, I think.
Mr. Loebsack. This is a general question. You know, so I
don't generally quote from the media but there was media person
here in town that walked around town with a couple of
smartphones.
One phone had all the things that was, like, on airplane
mode, all the Wi-Fi and Bluetooth was off, and the other phone
was hard turned off. I mean, it wasn't just--you know, they had
it completely turned off.
Walked all around to different locations around DC--this is
actually very fascinating--then went back to studio and then
turned these phones back on, and had a tech person be able to
monitor what happened once they turned them back on.
And all this meta data from everywhere they had been on
both devices, by the way, even the one that was hard turned
off, was--showed up on the screen and was jettisoned out to the
world.
And so location--I think the location stuff is really
important, because they had stopped at a park bench by the
cathedral and went to a Starbuck's and all that, and all that
was known.
Do we know--Consumer Reports would maybe answer this--do we
know--was this a media--was this just the media that did it or
do we know that phones do this?
Because it becomes a hardware issue, right? It's not a--
this is a national security thing, because some of our--we
have, you know, hardware that's been imported from all around
the world that's in some of our devices, and our devices are
made in other parts of the world.
I mean, do we know that this can happen?
Mr. Brookman. So I've seen reports that Android phones,
when location services are turned on, do collected a lot of
information which I would personally find surprising--collect
barometric information, seem to know what floor you're on and
they guess whether you're on a train or on a bike or walking
around--in ways that I think that a lot of people would object
to.
I don't know that they do that when the phone is hard
turned off. I think that would be bad, if that were the case,
because it is an issue of security. Location information is
very sensitive.
I get Google uses location for, like, really useful things
like Maps, which I use all the time, right, and I believe they
probably have some protections on the back end to anonymize it.
But, I mean, as a user, like, how do you know, and it is
disturbing when you do find out the raw feed that does get
uploaded, I don't know if it is quite as extensive as what
you're talking about but it is extensive and surprising.
Mr. Loebsack. Yes. I mean, I just want to bring that point
up that, you know, we are talking about apps and websites and
everything. But for all the other reasons that Mr. Zaneis
talked about other than advertising, we have to be concerned, I
think, also about whether our hardware is that's in our devices
and computers.
You know, we can turn everything--they turned everything
off and it didn't matter. And whether that's true or not I
don't know because it was a media report, but it's concerning.
I yield back.
Mr. Latta. Thank you. The gentleman's time has expired and
yields back.
The Chair now recognizes the gentlelady from California for
5 minutes.
Mrs. Walters. Thank you, Mr. Chairman.
Mr. Beales, this first question--it's a three-part
question. It's actually for you.
What steps can be taken to enhance competition in the
market for online advertising and what are some of the
advantages and disadvantages of the way the market and the ad
tech works today?
And are reports that Google and Facebook control 90 percent
of the market true?
Dr. Beales. Let me start at the end. I don't really know
what the markets shares are, but I don't think 90 percent is
remotely right.
I would think it's more like 50 or 60 percent. But that's a
fairly well-establishable number that is not hard to find out.
And one of the interesting things about the online
ecosystem is we don't know what's the most efficient way to
organize this, and people are trying lots of different things
and it's changing on a very regular basis.
I mean, the whole idea of ad exchanges is probably not 10
years old yet as a way to distribute this content, and people
are finding out the pros and cons of different approaches and
then trying alternatives because it's a very innovative space
and that is the engine of competition.
What got Google and Facebook to where they are was better
mousetraps, if you will--different mousetraps in each case--and
the competitive pressure in this market is in part from the
third-party providers that don't have sign-in but do get some
of the same information in indirect ways, and it's really
important to preserve that competition.
Mrs. Walters. OK. Ms. Glasser, as someone who went to law
school and studied privacy, do you believe that there's an
adequate understanding or amount of training on data privacy by
entrepreneurs, engineers, coders, and et cetera who build these
products?
Ms. Glasser. I can really only speak from some of my
experience and what I've seen, and I don't think that there's
enough education.
I am very fortunate where I kind of fell into privacy by
accident where I was a law student at night working full time
so I had to take what was available to me, and that was
typically the privacy stuff because I guess no one else was
interested in it.
But it turned out to be quite fruitful for me so I am
grateful. I've always said that I am a firm believer in
education and even if it's education about privacy or how to
code or how computers work, I think education on how the
internet literacy period is also extremely important, whether
it comes to children, advertising, you know, how to help
elderly people recognize scams or fraud.
Absolutely, I don't think--I don't think that we could do
ourselves wrong if we encourage more education in this field.
Mrs. Walters. OK. Thank you, and I yield back the balance
of my time.
Mr. Latta. Thank you. The gentlelady yields back.
The Chair now recognizes the gentleman from Florida for 5
minutes.
Mr. Bilirakis. Thank you, Mr. Chairman. I appreciate it.
Professor Beales, you mentioned in your testimony that
advertising is particularly important to less advantaged
groups, particularly minorities and single parent households.
I am also curious as to your perspective on the senior
population. How would regulation in the advertising space
affect these particular groups?
Dr. Beales. Well, the--what the academic research shows
about the impact of advertising is there are some people who
are better at either using information or have more time to use
information, and that's where those people who are good at
information and have the time use information that's available
from other sources and they're less dependent on advertising.
The people who don't have those advantages need the
information in an easily digestible form and that's what
advertising does is it boils it down to a very simple
proposition of buy my serial, and I don't know where the
elderly would fit on that.
On the one hand, they got a lot of market experience and
that would tend to mean they're not going to be all that
dependent, and on the other hand, they also have a lot of time
in many cases and can use other information sources in ways
where they're less dependent on advertising.
I don't know of anybody that's looked at that question
specifically.
Mr. Bilirakis. OK. Fair enough.
You talk about the importance of transparency in digital
advertising. This question is for Ms. Glasser. You talk about
the importance of digital--importance of transparency in
digital advertising but suggest that a choice mechanism I snot
always required.
Yet, one of the reasons we were holding this hearing is due
to our constituents' concerns and the need to raise awareness
about privacy.
Do you believe that the FTC has the tools it needs to
effectively protect privacy and do you have suggestions for my
constituents to prevent websites from collecting information
about them?
Again, personal information--how do we protect personal
information? And then, Mr. Guthrie mentioned that particular
example but also Mrs. Dingell mentioned the example of the
opioids.
Give me another example of a bad thing that can happen. I
think our constituents need to know. So this question is for
Ms. Glasser, please.
Ms. Glasser. I think--that's correct. Not every instance
requires and opt out. So what I meant by that, for example, if
I own a website and I want to know how the behavior of users is
on my website specifically, I want to know what features of my
website users like to interact with.
I like to know what content they like to interact with, and
this helps me build a better website. This helps me build a
better platform for users to come to.
And I am not necessarily using this data for advertising or
marketing purposes. It's really to help me understand the
behavior of my business, essentially, and in those instances an
opt-out is not always required.
However, I do think that transparency is absolutely key to
all of this, whether you--whether you're using tracking pixels
for analytics or you're using it for more engaged advertising
and more engaged data collection.
I think it's absolutely critical that these things are
explained to the end user and the consumer so that they do
understand, OK, I see a tracking pixel on this website, but
they're not using it for advertising--it's being used for
analytics--I don't have to worry. Or if it's being used for
advertising, I can expect to see the red shoes I am looking for
show up on the next website I go to.
Only through our transparency can we even begin to expect
consumers to understand what's happening.
Mr. Bilirakis. Again, link this back, for example, Mrs.
Dingell's situation with the opioids, doing her research--and I
commend her for it, doing the research late at night because I
do it, too--and then maybe years down the road they might link
her personal information to possibly being a drug addict or
what you.
Is that the case? Can that happen?
Ms. Glasser. I mean, anything is really possible, right?
Mr. Bilirakis. Yes.
Ms. Glasser. It absolutely can happen. But I think it's
also important to point out that within the industry--and we've
talked a lot about responsible actors, legitimate companies,
the self-regulatory groups--there are restrictions on using
that type of information for targeting and behavioral
advertising.
The NAI, for example, has very specific provisions on
whether you can use health-related data--sensitive health-
related data about sensitive categories--thing like drug abuse,
drug addiction, mental health issues, cancer, sexually
transmitted diseases, reproductive issues, all of those things
are really off limits unless you have opt-in consent, which I
don't know anybody who even actively goes after those types of
segments just because of the sensitivity of it.
And I think when we put ourselves in our consumer shoes,
none of us want to be targeted with those types of ads either.
So, again, I think it comes back to some of the points that
Dr. Beales made and Mr. Brookman made about making sure that,
you know, we hold the bad actors accountable and we continue to
push these standards forward and we continue to try to enforce
these standards so that we are using the right type of data to
target the right type of advertising--the right type of people.
Mr. Bucshon. All right. Very good.
Thank you, Mr. Chairman. Thanks for holding the hearing as
well.
Mr. Latta. Well, thank you very much. The gentleman's time
has expired.
And seeing that there are no other Members here wishing to
ask questions, I again want to thank our panel for being here
today and presenting before us. Very, very informative.
But before we do conclude, I would like to include the
following documents submitted for the record by unanimous
consent: two documents from Oxford BioChronometrics, two
documents from Interactive Advertising Bureau, a blog post from
MPAA.\1\
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\1\ The Interactive Advertising Bureau documents have been retained
in committee files and also are available at https://docs.house.gov/
Committee/Calendar/ByEvent.aspx?EventID=
108413.
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And pursuant to committee rules, I remind Members that they
have 10 business days to submit additional questions for the
record. I ask that the witnesses submit their responses within
10 business days upon receipt of the questions.
And without objection, the subcommittee will stand
adjourned.
Thank you very much.
[Whereupon, at 12:02 p.m., the committee was adjourned.]
[Material submitted for inclusion in the record follows:]
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