The UK’s Competition & Markets Authority (CMA) has released an interim report into its study of Google and Facebook’s market power, which raises concerns about the companies’ practices – here are the possible interventions.
The CMA’s report, which is available here, is the first indication of the potential interventions it would put to the UK government to aid the digital advertising market’s health in the face of an extremely dominant Google and Facebook, popularly known as the duopoly.
“Most of us visit social media sites and search on the internet every day, but how these firms work can be a mystery,” said CMA Chief Executive Andrea Coscelli, explaining the scope of the research.
There are three key areas of concern:
- The open display advertising market and Google’s vertical integration within it, and the conflicts of interest.
- Google’s dominance over search market impeding the competition.
- Facebook’s market power in social media and display advertising.
At this stage, any recommendations are highly provisional, and neither of the companies in question will take any of them lying down; both have the resources and the will to come out swinging. But the direction of the interim report is similar to the broader international take on the need to regulate these companies and the maturing digital advertising market. The CMA is now consulting on suggestions and is open to contributions until the 12th February.
Separating Google from its ad server
One of the headline interventions would be the conscious uncoupling of Google from its ad server – “which plays a key role in the selection and pricing of adverts and in which Google has a very high market share” – or requiring the company to trade “on an arm’s length basis” with its analytics capability. The CMA is aware that a full divestiture might not be practical or possible given the need for the UK to act unilaterally in this area, which it is extremely unlikely to do.
However, the implication of this recommendation could have reverberations across the world. The US is currently gearing up to elections that could (and that is an extreme hypothetical) deliver a mandate for separations right to the White House. A global regulatory zeitgeist has the potential to accelerate these measures, but the probability is low.
Separating Google from its data and curbing its default deals
One is complex while the other is more straightforward. A requirement that “Google provide click and query data to rival search engines” would be designed to improve the quality of rivals’ search algorithms. For this to work, Google would need a reason to continue investing and innovating – a risk the CMA acknowledges – and enforcement is a major issue.
What is far more achievable, and has a precedent, is curbing Google’s ability to make default deals. These are highly valuable for the company, which spent around £1 billion – 16% of all its search revenues – where it was the default search engine on mobile devices such as Apple phones, according to the CMA.
But it can be done. Following a $5 billion antitrust fine from the EU in 2018, Google earlier this year began offering Android users a choice of default search engine when handset providers provide Google search as a default.
Making Facebook inter-operable
For the social network side of the duopoly, one possible intervention is the opening up of Facebook’s network to inter-operate with competitors. It suggests “the ability to post content across several platforms simultaneously; the ability to view posts from friends on other social platforms; and how the standards surrounding these features should be developed and monitored.”
Other elements of this measure could impose limits on Facebook’s ability to restrict competitors’ use of inter-operable features, including restoring past API access. However, this wouldn’t just apply to Facebook, but potentially to all social networks.
Changes to data gathering rules
Some of these would have implications far beyond just the duopoly. For instance, the CMA is considering a rule that “all platforms should be required to give consumers an option to use their services without requiring in return the use of consumers’ data for personalised advertising.”
“Both for privacy and competition reasons, it is essential that people feel in control of their data. At the moment, the CMA is concerned that this is not always the case.” Though both Google and Facebook offer controls, the CMA notes that “consumer engagement with privacy settings and controls is low” with the result that most people simply follow the defaults set by platforms – which may be less private than they would like.
The CMA is very aware that this is a radical step that could seriously damage a large number of online companies, though it also hopes such a move might encourage the use of more personal information management solutions to enable “consumer-led mobility”.
The final report is due next summer, but the preliminary findings indicate a growing intent to reign in these companies’ power. The CMA has received several requests to open a market investigation, and notes “reasonable grounds” for serious anti-competitivity.
Google accounted for over 90% of all search revenue in the UK and around 90% of the country’s search traffic with around £6 billion flowing to the company from this channel alone.
Facebook, meanwhile, took almost half of all display ad revenues in the UK: more than £2 billion. This was larger than the rest of the total open display ad market, and more than four times that of its nearest competitor. Ironically, that next competitor is YouTube, a Google-owned company.
The report follows overtures from regulators in other countries, most notably Australia and Germany as well as high profile fines for anti-competitive behaviour for Google from the European Union.
Sourced from the CMA; additional content by WARC staff