Competition and Markets Authority publishes interim report in connection with its market study into online platforms and the digital advertising market in the UK

In July 2019, the CMA launched a market study into online platforms and digital advertising to understand how major online platforms like Google and Facebook operate. In particular, the study aims to examine how such online platforms are using people’s personal data, including whether making this data available to advertisers in return for payment is producing good outcomes for consumers.

The CMA has now published an interim report finding that the digital advertising sector has grown massively and is now worth around £13 billion, much larger than any other form of advertising. The report finds that:

  • last year, Google accounted for more than 90% of all revenues earned from search advertising in the UK, with revenues of around £6 billion; and
  • in the same year, Facebook accounted for almost half of all display advertising revenues in the UK, reaching more than £2 billion.

The CMA acknowledges that “‘Big is not necessarily ‘bad’” and that these platforms have brought very innovative and valuable products and services to the market. However, the CMA says that it is concerned that their position may have become entrenched, with negative consequences for the people and businesses that use these services every day.

The CMA says that a lack of real competition to Google and Facebook could mean people are already missing out on the next great new idea from a potential rival. It could also be resulting in a lack of proper choice for consumers and higher prices for advertisers that can mean cost rises for goods and services such as flights, electronics and insurance bought online. The market position of Google and Facebook may potentially be undermining the ability of newspapers and other publishers to produce valuable content as their share of revenues is squeezed by large platforms.

So far in the study, the CMA has used its legal powers to discover how major online platforms operate. Digital advertising fuels big businesses such as Google and Facebook and it has been building a picture of how this complex new market works. The CMA has looked especially at how these firms collect and use people’s data, how they monetise it, and what this means for rival companies who want to compete, as well as the people and businesses using these services every day.

The CMA is now inviting comments on its interim findings. At the end of the study, it says that it will present the findings to the Government as they decide whether and how to regulate the sector. At this stage, the CMA thinks that there is “a strong argument for the development of a new regulatory regime”. This could include rules governing the behaviour of online platforms and giving people greater control over their own data. The most likely outcome at the end of this study will be recommendations to the Government. However, the CMA also says that it “stands ready to act directly through any or all of its own powers if, ultimately, these issues are not addressed in other ways, whether domestically or internationally”.

The CMA has also set out proposals that it thinks are worth considering in order to address the issues identified, including:

  • potential measures to open up the search market, such as access to click and query data and limiting Google’s ability to be the default search engine on devices and browsers;
  • requiring Facebook to connect more seamlessly with rival social networking sites;
  • measures to address the conflicts of interests and lack of transparency in digital advertising and requiring platforms to allow people to turn off personalised advertising.

The deadline for responding to the interim report is 12 February 2020. To read the CMA’s press release in full and for links to the interim report and other information, click here.