The CMA is concerned about Google and Facebook’s dominance, and will make detailed policy recommendations to tackle it in its final report in 2020.
Background: The UK Competition and Markets Authority (CMA) set out its digital markets strategy in July 2019, to respond to the challenges facing competition authorities as a result of technological change and development of digital markets. As part of the strategy, the authority launched an investigation into how major online platforms such as Google and Facebook operate, with particular regard to digital advertising which is the key source of revenue for these firms. The CMA notes that this market is now worth around £13bn and much larger than any other form of advertising.
The interim report is out: The CMA has now published an interim report of its inquiry. It found that in 2018 Google accounted for more than 90% (around £6bn) of all search advertising revenues in the UK. In the same year, Facebook accounted for almost half of all display advertising revenues in the UK, reaching more than £2bn. The CMA is concerned that these companies’ dominance may now yield negative consequences for end users, since it makes it harder for potential rivals to compete in the same market, thereby harming innovation. It could also result in a lack of proper choice for consumers and higher prices for advertisers which in turn could mean cost rises for goods and services. Google and Facebook’s market position could also be undermining the ability of publishers to produce valuable content, as their share of revenues is squeezed by large platforms.
How to address the problem? At this stage, the CMA sees a strong argument for a new regulatory regime. This could include rules governing the behaviour of online platforms and giving people greater control over their own data. Other measures would look to address sources of market power and promote competition: for example, Google could be required to provide data to rival search engines (“click-and-query data”) and could be restricted from entering into arrangements to be the default search engine on devices and browsers. Its ad server business could also be separated. Similarly, Facebook could be required to ensure interoperability for some features of its network and made unable to impose restrictions on competitors’ use of these features.
Next steps: The CMA is now seeking input on its provisional findings until 12 February 2020. The authority will produce a final report with more detailed recommendations by 2 July 2020.
