Author: Simon Stokes
Competition authorities around the world have been struggling with how to regulate online platforms. Concerns have been raised about firms’ use of people’s data, the market power or ‘gatekeeper’ status of certain platforms, the use of increasingly sophisticated technology to target advertising, and the risk of so-called ‘killer acquisitions’ – big companies buying smaller innovative ones with a view to extinguishing them as potential rivals. And all the time consumers’ reliance on these services is increasing.
CMA launches its Digital Markets Strategy
Today the CMA announced both the launch of its Digital Markets Strategy and a ground-breaking market study into online platforms that are funded by digital advertising. The CMA’s Digital Markets Strategy sets out the CMA’s approach to protecting consumers in the digital economy while ensuring robust competitive digital markets. The strategy brings together the CMA’s digital work in one place and sets out how the CMA plans to foster innovation while protecting consumers in the rapidly developing digital economy
The strategy includes detail on:
- consumer and antitrust enforcement and merger assessment,
- the work of the CMA’s Data, Technology, and Analytics Unit,
- how the CMA plans to adapt its mergers approach to digital markets,
- a market study on online platforms and digital advertising,
- considerations around a Digital Markets Unit and
- making best use of the CMA’s enforcement tools
Investigation of online platforms funded by digital advertising
Of particular interest is the market study into online platforms that are funded by digital advertising announced today as part of the CMA’s overall digital markets strategy. Obvious targets for investigation are Google and Facebook (and their respective subsidiaries, such as YouTube and Instagram) as they hold leading positions in the market for online advertising in the UK, with the majority of digital advertising revenue in the UK split between these two businesses. In turn, digital advertising comprises the substantial majority of the revenues of both of these companies. The CMA are particularly interested in search advertising where adverts appear beside search engine results (such as on Google or Bing), triggered by keywords in the search terms used and display advertising where marketing messages are displayed (as text, banners or video) on websites, social media pages or apps.
The background to the investigation is that despite the valuable services provided by the online platforms that are funded by digital advertising, the CMA has heard a number of concerns that the sector is not working well.
These concerns relate to the market power of the main platforms in consumer-facing markets, the lack of consumer control over the use of their data and the ways in which this is monetised by the platforms. So the CMA has decided to launch a market study to examine these concerns and to consider potential remedies should these concerns be substantiated. This will form part of the CMA’s broader Digital Markets Strategy, also published today, which sets out the CMA’s approach to protecting consumers in the digital economy while ensuring robust competitive digital markets.
In relation to digital advertising the CMA will be assessing three broad potential sources of harm to consumers in connection with the market for digital advertising:
- to what extent online platforms have market power in user-facing markets, and what impact this has on consumers
- whether consumers are able and willing to control how data about them is used and collected by online platforms
- whether competition in the digital advertising market may be distorted by any market power held by platforms
Consumer data issues
Perhaps surprisingly for a competition regulator one of the areas the CMA wishes to explore is giving consumers greater protection in respect of data: the CMA will consider whether there is a case for improving transparency over what data is being collected, and also the consent process, liaising with other authorities as appropriate. The CMA will consider the terms and conditions that platforms use and whether choice architecture could be improved and whether there is a potential role for a ‘fairness by design’ duty. The CMA will consider whether consents should be more granular, and whether there should be rules on what defaults are fair, including when it is acceptable to restrict users from accessing a service if they do not consent to the provider of the service accessing their data. This of course also overlaps with the General Data Protection Regulation which already addresses a number of these areas and the role of ICO as regulator.
ICO and digital advertising
Indeed only last month ICO published its Update report into adtech and real time bidding (RTB) – the buying and selling of online ads through auctions that occur in the time it takes a webpage to load. Cookies are used to facilitate this and targeted online advertising. ICO focussed just on RTB – whilst RTB is only part of the online advertising ecosystem, ICO decided they needed to investigate further due to its complexity and scale, the risks posed to the rights and freedoms of individuals and the concerns ICO had received. Indeed the report highlights a number of very significant concerns around transparency and consent and the data supply chain in relation to the use of consumer personal data in digital advertising. RTB in particular carries risks around:
- profiling of consumers and automated decision-making;
- large-scale processing of personal data (including of special categories of data);
- use of innovative technologies;
- combining and matching data from multiple sources;
- tracking of geolocation and/or behaviour; and
- invisible processing.
What next?
ICO has made clear its displeasure with a number of adtech practices and if the industry doesn’t get its house in order ICO will. The CMA’s investigation is broader and if the CMA were to decide to take action this could be far reaching – some have even advocated breaking up the tech giants in a manner echoing how in the USA in the early twentieth century the oil giant Standard Oil was broken up. The fact both the CMA and ICO are looking into how personal data is collected and used illustrates how the law here cannot be compartmentalised and increasingly regulators will need to work together here if competition is to be promoted and consumers rights protected.
