Stakeholders weigh in on the CMA’s Interim Report on online platforms and digital advertising
At the time of writing, 76 stakeholders have publicly responded to the UK Competition and Markets Authority’s interim report on its market study into online platforms and digital advertising (the Interim Report) which we covered in the Hausfeld Competition Bulletin in March 2020.
The Interim Report
The Interim Report indicated a range of competition concerns resulting from Google and Facebook’s market power in search and social media respectively, as well as consumer concerns arising out of a lack of choice for users as to the processing of their data. However, the CMA stopped short of making a market investigation reference into either company. The complex issues raised and next steps proposed by the CMA have naturally attracted a wide range of responses, the most prominent of which we briefly summarise in this blog.
The conclusion of the CMA not to launch a market investigation at this early stage has resulted in some criticism from stakeholders. In particular, British Institute Of International & Comparative Law's Competition Law Forum and the search engine DuckDuckGo expressed disappointment that despite the volume of evidence collected during the course of the market study and earlier reports which already suggests that serious competition concerns exist, and its available enforcement powers to tackle such issues, the CMA is choosing to wait for government intervention.
Google and Facebook’s responses
Responses from advertisers make it clear that there is a risk of effective regulation in this area being stifled by information asymmetry in favour of companies in the online advertising supply chain. Despite the detailed and highly technical nature of the Interim Report and, in particular, its appendices, Google’s public response has been that “[…] aspects of the sector and [Google’s] services are not yet properly understood.” At the same time, Google’s rationale for the opaque nature of the digital advertising ecosystem is that transparency must be weighed “against considerations such as user privacy and preventing ‘gaming’ of the [digital advertising] auction rules.”
Similarly, Google appears to justify competition concerns arising from issues such as the vertical integration of its advertising services, by the need to ensure the protection of its users’ data. However, as the Guardian Media Group points out, the CMA’s findings as to the vague and often vertically integrated nature of the two-sided market for digital advertising may be harmful to smaller competitors, advertisers, publishers and consumers. For instance, insufficient insight into the online advertising auction mechanisms may lead to advertisers unwittingly spending more, publishers earning less and consumers providing more personal data.
In its response to the CMA’s interim report, Facebook seeks to offset the competition concerns arising from its conduct by emphasising its positive impact on the UK economy. For example, it argues its advertising services propagate SMEs and provide clear benefits to consumers through personalised advertising, which Facebook is capable of tailoring to its users at a highly granular level due to the wealth of data collected.
Regarding the CMA’s finding of a lack of choice as to user privacy on both platforms, Facebook and Google have emphasised the features they offer to give their users control over privacy. However, responses from DuckDuckGo, Privacy International and Which? echo the CMA’s concerns that reliance on default behaviour or dark patterns, for instance when personalised advertising is either turned on by default or the process of turning it off is not an intuitive task, is harmful to consumer privacy. These respondents support the CMA in proposing remedies such as default opt-out personalised advertising settings. Privacy International urges the CMA not to commoditise consumer data and cautions against competition remedies that might involve insufficiently regulated data sharing between market players.
The final report in the CMA’s market study, which will include a more comprehensive assessment of the issues and confirm the CMA’s next steps, is due to be published by 2 July 2020, although we suspect the timing may be affected by the ongoing coronavirus pandemic. In March the CMA announced that its Digital Markets Taskforce (whose work will be running parallel to this market study) will not launch a formal consultation at this time due to the strain experienced by the Government and businesses alike.
In due course, when some semblance of normality returns, the CMA’s current reticence to take action on the competition and consumer issues revealed by the market study should be put into context. These issues are not too global for a single regulator, such as the CMA, to tackle; the UK digital advertising market is the largest in Europe and the third largest globally. Given its position, the CMA is very well placed to make its voice heard and take some bold, and much needed, steps in this area to protect all stakeholders in the UK digital advertising ecosystem.
With thanks to Intern Adel Msolly for his assistance with this blog.
 Online Platforms and Digital Advertising, Market study interim report, published 18 December 2019
 e.g. the Furman and Cairncross Reviews
 DuckDuckGo response to the Interim Report, page 1
 See e.g. the British Brand Group response to the Interim Report at para 14, as well as an anonymous advertiser’s response to the Interim Report at page 2.
 Google response to the Interim Report, para 16
 Ibid, para 32
 e.g. ibid, para 37
 Guardian Media Group response to the Interim Report, pages 3-4
 Facebook response to the Interim Report, paras 2.5-2.8
 e.g. ibid para 2.11
 e.g. ibid para 4.14, Google’s response to the Interim Report, paras 12-15
 DuckDuckGo response to the Interim Report, page 3
 Which? response to the Interim report, page 4
 Privacy International response to the Interim report, pages 4-6
 BIICL Competition Law Forum response to the Interim Report, para 2.6