Originally Published in the Wall Street Journal
If Calvin Coolidge’s observation that “advertising is the life of trade” remains true, the new bans by Google and Facebook on cryptocurrency ads threaten the fledgling industry’s existence. Coolidge in a 1926 address hailed advertising for spurring competition, but today these two companies control a large chunk of the digital-advertising market. A company or industry that has been shut out by Google and Facebook will find it nearly impossible to reach an internet audience.
Courts and regulators have limited the scope of rules involving “refusal to deal” arrangements, whereby a dominant company denies competitors access to essential products and services. But the anticrypto move by Google and Facebook still raises antitrust concerns. Google Pay and Facebook Messenger include peer-to-peer payment services, which compete against multibillion-dollar cryptoexchanges such as Coinbase and Binance. Both Google and Facebook may soon enter the cryptocurrency market directly. Last month, Ethereum founder Vitalik Buterin revealed that Google had approached him about helping to develop a cryptocurrency project. Facebook has also announced it will launch a group to explore blockchain technology.
The digital duopoly’s closest competitors in the online-ad market, Amazon and Microsoft , also have online payment systems and ban cryptocurrency promotions. In effect, four of the eight largest companies in the world control an online-advertising oligopoly and are denying competitors access to these services.
In Lorain Journal v. U.S. (1951), the U.S. Supreme Court held that while a business may usually “refuse to accept advertisements from whomever it pleases,” it may not refuse ads to harm its competitors. The case involved a Wisconsin newspaper that refused to sell ad space to anyone who also advertised over a local radio station. In 2016 the Federal Trade Commission filed a complaint against 1-800 Contacts for pressuring its competitors to withdraw advertising from certain online searches. The agency is still pursuing the enforcement, and an administrative law judge initially found in its favor.
These cases aren’t perfectly analogous to the cryptocurrency ad ban, but they point to key questions. If an advertiser can’t restrict its competitors from advertising on Google, how can Google itself do so? If a small-town newspaper can’t refuse ads to harm its competitors, why are the largest communications platforms in the world allowed to do the same?
Facebook and Google would likely respond that their motive isn’t to limit competition. Facebook claimed the policy was developed because cryptocurrencies are “frequently associated with misleading or deceptive promotional practices.”
As a new industry enjoying massive growth, cryptocurrencies are undoubtedly attractive to those pushing fraudulent get-rich-quick schemes. Yet many cryptocurrency companies have been audited and approved by financial regulators. Facebook notes that its policy “is intentionally broad” but insists that the high levels of abuse in the crypto industry require such an approach.
But as the Supreme Court held in FTC v. Superior Court Trial Lawyers Association (1990), “social justifications for the restraint of trade don’t make the restraint any less unlawful.” This principle has been applied to invalidate overbroad advertising bans. In 1980 a federal appeals court upheld the FTC’s finding that the American Medical Association’s “ethical limitations on advertising” resulted in “severely inhibiting competition.” The commission concluded that only rules against false and deceptive ads were permissible, and it has since blocked dozens of similar ad restrictions on these grounds.
The tech titans’ ban on cryptocurrency ads may well be motivated by a genuine desire to protect consumers from fraud. But when a few companies can prevent competing industries from advertising online, their justifications deserve extra scrutiny. At the very least, they should make an effort to separate the baby from the bathwater by narrowly tailoring their restrictions to allow lawful and truthful ads.