A new pro-competition regulatory regime to govern the behaviour of major platforms funded by digital advertising, like Google and Facebook, has been recommended by the UK's Competition & Markets Authority.

Following a year-long examination of the markets, the CMA has concluded in a report to the Government that the dynamic nature of digital advertising markets and the types of concerns it has identified are such that existing laws are not suitable for effective regulation of the online giants.

It reports that Google and Facebook between them claimed about 80% of the £14bn UK expenditure on digital advertising in 2019, equivalent to about £500 per household. While both originally grew by offering better services than the main platforms in the market at the time, the CMA is concerned that they have developed such unassailable market positions that rivals can no longer compete on equal terms.

The factors that now support their control reinforce the barriers to new competition and are extremely difficult to overcome. For consumers this leads to reduced innovation and choice, as well as to them giving up more data than they would like. Further, the cost of advertising will be felt in the prices for hotels, flights, electronics, books, insurance and other products that make heavy use of digital advertising. The CMA found that Google’s prices are around 30% to 40% higher than Bing when comparing like-for-like search terms on desktop and mobile.

Google and Facebook’s market positions also have a profound impact on newspapers and other publishers. 

 

The CMA proposes that within the new regime a "Digital Markets Unit" 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 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.

The recommendation is UK-focused, but the CMA recognises that many of the problems it has identified are international in nature. It said it would therefore continue to take a leading role globally in relation to these issues as part of its wider digital strategy.

Chief executive Andrea Coscelli commented: "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.

"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."

Click here to access the report.