Political advertising conveys political messages to voters through a variety of media, from print to television to social media. It is used in political campaigns and more generally to shape public opinion and to contribute to debates on topics of societal importance. It is specifically regulated to ensure free and fair elections. An important element of existing rules is that they seek to ensure political advertising is used transparently, so that citizens can recognise advertisements and those who place them can be held to account. There is a legitimate public interest in protecting this, such as fairness, equal opportunities and transparency in the electoral process and the fundamental right to be informed in an objective, transparent and pluralistic way. National rules thus place obligations on political actors and on the companies providing political advertising services. These rules traditionally focused on ‘offline’ media (newspapers, broadcasters, etc.), but online advertising has become increasingly common as it can be disseminated with more flexibility and be targeted to very specific audiences. Online advertising has brought new challenges, in particular related to issues of transparency, accountability and manipulative targeting. All Member States have legislation relevant to political advertising, resulting in a fragmented patchwork of national rules in terms of substance, scope, implementation and enforcement, which create obligations for service providers, and which apply differently between Member States and depending on the medium through which the advertising is disseminated. This particularly concerns relevant definitions and transparency requirements, which affect the content of advertisements. As some Member States intend to introduce new legislation to cover the new online media, this fragmentation is expected to increase. This complex legal context generates costs and challenges, which also create barriers to political advertising as a cross-border service in the internal market, with a direct impact on the functioning of the internal market. Personal data is used to target political messages to citizens by directing advertisements to groups and tailoring the content. The processing of personal data for such purposes, particularly data considered sensitive under the GDPR, and targeting to groups small enough to enable the non-transparent provision of tailored political messages, have specific and pronounced negative effects on citizens’ protected rights. Some Member States have also attempted or are considering intervention with respect to targeting, but such measures have proved problematic. These issues also affect democratic processes and campaigning at EU level, including by European political parties (EUPPs). The EU legal framework for EUPPs does not regulate the use of political advertising, and fragmentation and uncertainty can hinder EUPPs’ ability to conduct EU-wide campaigns. This impact assessment analyses core problems with political ads and their causes, from 3 perspectives: 1.Economic actors who wish to run multi-medium and/or multi-Member State campaigns face significant obstacles and additional costs, due to the differences in transparency regulation between Member States and between online and offline contexts. Some political and economic actors exploit this situation to circumvent rules. This situation also drives a large share of political ads online. 2.This situation erodes the ability of national rules on political ads to protect democratic processes and fundamental rights. The targeting of online political ads, and other manipulative techniques, creates additional problems. 3.There is insufficient transparency around political ads sponsored by EUPPs which are campaigning across the EU on EU issues.