The CMA is considering potential measures to open up the search market, measures to address the conflicts of interests and lack of transparency in digital advertising and requiring platforms to allow people to turn off personalised advertising. There are strong arguments for a new regulatory regime.
The Competition and Markets Authority has published an interim report about its work examining online platforms and digital advertising and is now consulting on it before issuing a final report next year. The consultation ends on 12 February 2020.
In July 2019, the CMA launched a market study to discover more about how major online platforms like Google and Facebook operate. Although these services appear to be free, consumers pay for them indirectly through providing their attention and personal data, which platforms use to sell digital advertising. The digital advertising sector has grown significantly and is now worth around £13 billion – much larger than any other form of advertising.
The CMA’s interim report has found that:
The CMA says that ‘big’ is not necessarily ‘bad’ and these platforms have brought innovative and valuable products and services to the market. However, the CMA is concerned that their position may have become entrenched with negative consequences for the people and businesses who use these services every day.
A lack of real competition to Google and Facebook could mean people are already missing out on the next great new idea from a potential rival. It could also result in a lack of proper choice for consumers and higher prices for advertisers that can mean cost rises for goods and services such as flights, electronics and insurance bought online. The market position of Google and Facebook may potentially be undermining the ability of newspapers and other publishers to produce valuable content as their share of revenues is squeezed by large platforms.
Through its market study, the CMA has used its statutory information gathering powers to build a better understanding of this complex market, the drivers behind the positions of Google and Facebook and the competition issues this might present. It has also been able to build a better picture of how these large platforms collect and use personal data to assess whether people have the right amount of control over their own information. All of this will help the CMA identify steps that could open up competition and contribute to the discussion about whether and how best to regulate this sector.
Each year, about 15% of queries on Google have never been searched for before. Other search engines like Bing will not have the same access to these queries, putting Google in a powerful position of being able to better train its algorithms and provide more accurate search results than its rivals.
The CMA has also found that the default settings people are faced with online have a profound effect on choice and the shape of competition. Last year in the UK, Google was willing to pay around £1 billion – 16% of all its search revenues – where it was the default search engine on mobile devices such as Apple phones.
Personal data collection also plays an important role in driving Google and Facebook’s powerful market position by allowing them to target their advertisements more effectively than others. The CMA points out that for privacy and competition reasons, people must feel in control of their data. Currently, the CMA is concerned that this is not always the case.
For example, social media platforms such as Facebook do not allow consumers to opt out of personalised advertising. People are presented with a take-it-or-leave it offer, forcing them to share considerable amounts of personal data as a condition for using the service. And it is difficult to access privacy settings on these platforms, which are often only visible after navigating through multiple menus.
While there are examples of better practice, with search engines such as Google giving consumers better control, overall, the CMA has found that consumer engagement with privacy settings and controls is low and, that, as a result, most consumers follow the default settings set by platforms – which may result in them giving up more data than they would like.
The CMA is also concerned about a lack of transparency in the way that business on these platforms works. Publishers have expressed concerns about unexplained dramatic changes in the number people visiting their websites due to changes in Google’s search and Facebook’s news algorithms. Different sorts of transparency concerns are particularly acute in the market for display advertisements, where advertisers and publishers participate in a ‘black box’ process of real-time bidding but have limited ability to verify the effectiveness of their advertisements.
The CMA says that there is a strong argument for the development of a new regulatory regime. This could include rules governing the behaviour of online platforms and giving people greater control over their own data. The most likely outcome at the end of the study will be recommendations to the new UK government as it decides whether and how to regulate the digital sector. On the other hand, the CMA may act directly through any or all of its own powers if, ultimately, these issues are not addressed in other ways.
The CMA is also setting out proposals that it thinks are worth considering to address the issues it has identified. These reflect the ideas market participants have put to the CMA and include potential measures to open up the search market, such as access to click and query data and limiting Google’s ability to be the default search engine on devices and browsers; requiring Facebook to connect more seamlessly with rival social networking sites; measures to address the conflicts of interests and lack of transparency in digital advertising and requiring platforms to allow people to turn off personalised advertising.
The consultation on the interim report ends 12 February 2020. The CMA will publish its final report by 2 July 2020.