UK moves to fight Google and Facebook advertising monopolies

Between them, Google and Facebook control 80% of the UK digital advertising market and that’s not healthy for competition or the consumer.

The Competition and Markets Authority (CMA) has been taking a close look at the UK’s digital advertising for a while now, and published its final report on the matter yesterday. “The CMA is calling on the government to introduce a new pro-competition regulatory regime to tackle Google and Facebook’s market power,” opened the accompanying press release.

Around £14 billion was spent on digital advertising in the UK last year and four fifths of it went to either Google or Facebook. Most of that spend can be split into display advertising, which Facebook has the majority of, and search advertising, which Google has an amazing 90% share of. That’s a clear monopoly and therefore something that needs addressing.

People are often confused about the role of regulators when it comes to monopolies. As these two US tech giants have shown, it’s perfectly possible for a company to achieve a monopoly through legitimate means. In fact, once a company acquires a significant chunk of market share, it becomes easier for it to squash competition and bribe commercial partners to stay loyal. We have seen this many times in the past with other US tech companies such as Microsoft and Intel.

Regulation is an integral part of a properly functioning free market, as monopolies are actively hostile to free trade, so it is right and proper, given the above market shares, that these two companies be subject to special regulation. It also needs to be specific to the needs of the digital advertising market, as opposed to PCs, processors, etc.

“Through our examination of this market, we have discovered how major online platforms like Google and Facebook operate and how they use digital advertising to fuel their business models,” said CMA Chief Executive Andrea Coscelli. “What we have found is concerning – if the market power of these firms goes unchecked, people and businesses will lose out. People will carry on handing over more of their personal data than necessary, a lack of competition could mean higher prices for goods and services bought online and we could all miss out on the benefits of the next innovative digital platform.”

It should be noted that, on this matter, the CMA is lagging behind the European Commission, which has been fining Google for anticompetitive activity for a while. Perhaps the fact that we’re in the process of leaving the EU has caused it to step-up its own efforts. It’s one thing to identify a monopoly, however, but quite another to do something about it.

“Our clear recommendation to government is that a new pro-competitive regulatory regime be established to address the concerns we have identified and regulate a sector which is central to all our lives,” said Coscelli. The CMA has proposed that within the new regime there should be a new ‘Digital Markets Unit’, which should have the ability to:

• Enforce a code of conduct to ensure that platforms with a position of market power, like Google and Facebook, do not engage in exploitative or exclusionary practices, or practices likely to reduce trust and transparency, and to impose fines if necessary.
• Order Google to open up its click and query data to rival search engines to allow them to improve their algorithms so they can properly compete. This would be designed in a way that does not involve the transfer of personal data to avoid privacy concerns.
• Order Facebook to increase its interoperability with competing social media platforms. Platforms would need to secure consumer consent for the use of any of their data.
• Restrict Google’s ability to secure its place as the default search engine on mobile devices and browsers in order to introduce more choice for users.
• Order Facebook to give consumers a choice over whether to receive personalised advertising.
• Introduce a “fairness-by-design” duty on the platforms to ensure that they are making it as easy as possible for users to make meaningful choices.
• Order the separation of platforms where necessary to ensure healthy competition.

Most of those powers are reasonable but preventing legal business deals such as buying the ‘preferred browser’ position seems like over-reach. The ‘fairness’ thing is very vague and history shows that trying to force separation on tech monopolists is much easier said than done. Having said that, monopolies need regulating and armies of highly-paid corporate lawyers will already be looking forward to making that process as difficult as possible.