While we’ve seen governments and antitrust authorities across the western world launch a number of investigations into the tech giants in recent years, many remain sceptical about whether the regulators will be able to rein them in. Both Google and Facebook have been hit with hefty fines in the past, but when set against their mind-boggling size and wealth, these fines are often seen as a slap on the wrist or as something that can be regarded as a perfectly affordable business expense.
However, the UK Competition and Markets Authority’s investigation into online platforms and digital advertising looks like it may result in more significant action. An interim report released last year proposed some very drastic measures, including a breakup of Google’s tech stack, and measures to give users more freedom over how Google and Facebook use their data.
Since the interim report was released, the CMA asked for industry feedback on its proposed measures. These responses provide some extremely interesting insights into how publishers, advertisers, ad tech companies, analysts and trade associations view their relationship with Google and Facebook. Their suggestions to the CMA also hint at what action we might eventually see the CMA taking.
The industry’s feedback to the CMA is sprawling, but some proposals feature more heavily than others and below we have compiled a summary of the most popular suggestions for regulating the dominant players:
The Break Up of Google
One of the most radical proposals made in the interim report was a break up of Google’s tech stack, though the CMA acknowledged this would be hard to achieve single-handedly.
The majority of respondents were very in favour of the move. A number of small advertisers called for a break up of Google, though without going into specifics. “The CMA must consider breaking Google up to combat its market dominance and allow for growth of competitors,” said one. “Anything less than this maintains the status quo with Google’s dominance continuing and harm to small businesses continuing.”
Many publishers also favoured a break up. DMG Media said that Google uses its market power in data and inventory to:
- preference its own DSP;
- limit the integration of its SSP with rival publisher ad servers;
- engage in self-preferencing between its SSP and its ad server;
- engage in self-preferencing between its DSP and SSP.
DMG Media said that separating Google’s publisher ad server from its ad intermediary activities is a “condicio sine qua non [essential action] for restoring competition in the ad tech ecosystem”. News UK similarly called for a separation of Google’s ad server from its ad exchange.
Interestingly, not all publishers were as enthusiastic about breaking up Google. The Guardian, who have been working closely with Google on their YouTube presence, chose not to comment, instead calling for a break up of Facebook. “A plurality of ownership of tech companies is, ultimately, preferable in order to ensure that one person’s business philosophy is not allowed to dominate the apps that occupy the attention of consumers,” said the publisher.
And Reach, a national UK publisher, argued against breaking up Google. Reach said that “such an intervention, whether begun by the government or some other party, would not ultimately be implemented as an effective remedy”. The company worried that efforts to break up Google would slow down other, quicker ways to regulate the tech giants.
Many ad tech companies honed in on Google’s ad tech stack. Demand-side platform Beeswax said “separation of [Google’s] ad server and SSP would be an effective remedy for helping competition on the sell-side of the business as independent publisher ad servers or exchanges would be able to effectively help publishers monetise traffic on an even basis.
Oracle agreed and went even further, arguing that the CMA should consider separating Google’s Chrome browser from the rest of its business too. Oracle urged the CMA to “focus on […] how Google uses its ownership over the main vehicle to browse the internet further to entrench its leading positions in online display advertising intermediation. In particular, Google has proposed changes to Chrome that have potential to directly prevent rival ad tech companies from implementing their own advertising solutions.”
But Beeswax also urged the CMA not to break up all ad tech businesses which own both buy-side and sell-side operations. Beeswax warned such a move could hurt smaller businesses not within the scope of the regulation, and proposed alternative solutions like requiring different cookies to be used by the DSP and SSP.
Verizon Media was more emotive when it came to rejecting the idea of separating buy and the sell-side technologies (both of which the company owns) for smaller players, saying that such a move would be a “punitive and draconian intervention”. The company said there is “no justification in competition law nor sufficient evidence in the interim report to support forcing this on a non-dominant firm.”
Opening Up YouTube Inventory to Third Party DSPs
Another Google-specific solution proposed in the interim report was forcing Google to open up YouTube’s inventory to third-party DSPs.
The Competition Law Forum said that blocking access to YouTube inventory is an attempt by Google to use its market power to stifle competitors. “Google is attempting to extend its market power in adjacent markets by forcing competitors (i.e. intermediaries) out of the market as ‘independent’ DSPs and SSPs do not have access to Google’s advertisement [sic] inventory,” said the CLF. “This is not an expression of competition on the merits, but an attempt to displace competitors by using anti-competitive tactics.”
Unsurprisingly, Google opposed the idea of opening up YouTube, saying that doing so would force it to share sensitive user data with third-parties. YouTube also says its unique ‘TrueView’ skippable ad format would be hard to sell via third-party DSPs.
But several respondents said Google is just making excuses. Beeswax was one of the most direct in its response. “Google claims the TrueView could only work with its own data, yet in the open exchange markets, so-called “skippable” ads are extremely common,” said the DSP. “Google makes the argument that there would be privacy issues if they shared predictions about which users skip ads, this seems highly unlikely.”
Beeswax ended by saying that if the CMA buys Google’s argument, the best response would be to block Google’s DSP from accessing YouTube inventory too, to level the playing field.
Oracle made a similar argument, saying that ”Google should not be allowed to hide behind alleged privacy concerns when it suits its interests”.
Others said that even if Google wasn’t able to sell TrueView inventory via third-party DSPs, non-TrueView inventory on YouTube could still be sold. An unnamed advertiser however said that if YouTube only sold some of its inventory through YouTube, there would need to be checks in place to ensure Google wasn’t giving its own DSP access to the best inventory.
And DMG Media agreed that there is a risk Google would give preference to its own DSP. The publisher said that “considering Google’s proven track record of favoring its own products / services over those of its competitors,” there would need to be checks in place to ensure Google treats all DSPs equally.
Increased Transparency for Fees and Measurement
Alongside the specific proposal to open up YouTube to third-party DSPs, the interim report also proposed requiring more transparency from Google and Facebook by opening up to third-party measurement and verification firms. Most respondents agreed that forcing both companies to open up to third-party measurement would improve conditions in the market.
An unnamed broadcaster said that “there is a clear and urgent need for platforms like Google and Facebook to be forced to enable industry standard, independent, third party measurement and verification of their advertising,” adding that “there have been a number of high profile cases in which the metrics used to demonstrate the effectiveness of ads on Google and Facebook have been shown to be overinflated or misleading.”
Arete Research said that while Google does work with third-party measurement providers, this shouldn’t be seen as true independent measurement. “Google anoints measurement partners but limits their role to working with data Google provides,” said Arete, “there is no independent verification of Google’s own ad inventory”.
News UK meanwhile complained “Google has taken multiple steps that make it more difficult for advertisers and publishers to run their own independent experiments (e.g. removing ability to export data out of Google Ads Data Hub on the advertiser side and removal of timestamp variables in data transfer files on the publisher side).”
Sticking with the theme of transparency, the CMA also proposed enforced fee transparency across the ad tech ecosystem generally.
This, unsurprisingly, resulted in mixed responses. Arete Research argued that “there is a compelling case for transparent reporting of fees along the entire ad tech chain, with advertisers given a clear view of what they bought (inventory, audience), what they paid (which ad-tech partner received which fees) and what was received by publishers whose inventory was sold”.
Reach agreed, saying that a lack of transparency “makes it difficult for us to know the actual value of our inventory and how to realise the greatest returns from that inventory”. Reach asked that fee transparency obligations should apply across the ad tech ecosystem, not just to Google and Facebook.
But others were more hesitant on transparency. Industry body IAB UK said that while it agrees with fee transparency in principle, in practice this can be difficult. Some ad tech companies tailor their prices to individual clients, and the cost of services may vary on an impression-by-impression basis in real-time bidding environments.
And Verizon Media said that fee transparency across the ad tech ecosystem could actually play into Google and Facebook’s hands. “We would urge caution in focusing purely on fee transparency (to the exclusion of other elements of ad tech services provided) as this approach is likely to benefit players with significant market status by shifting the focus to specific percentages of underlying fees rather than on net revenue and overall benefit to publishers,” said Verizon.
Access to Services without Personalised Advertising
Another of the headline suggestions put forward by the CMA in December was allowing large companies to let consumers use their platforms, even if they don’t opt in to personalised advertising.
This proposal was somewhat controversial amongst respondents – most were worried that these rules could end up impacting their own businesses.
The Guardian noted that if consumers had more freedom to opt-in to personalised advertising without being denied access to parts of the internet, this could level the playing field, with advertisers redistributing more of their spend to non-targeted ads.
News UK however argued that these rules shouldn’t apply to news publishers. “Consumers have a genuine choice whether to use any given publisher’s website, in contrast to the position facing the users of dominant platforms such as Google and Facebook,” said the publisher. “As such, competitive forces are far more likely to discipline individual publishers’ approach to privacy and, as such, regulatory intervention is not required.”
IAB UK shared this view, saying that “any requirement for media owners to provide their content without targeted advertising would have a significant impact on their funding models and ability to effectively monetise their content”.
And Twitter and Snapchat, unsurprisingly, both objected to the idea. Snap called it a “superficially attractive idea, but one that does not stand up to any real scrutiny”. Snap argued that data collection is necessary for functions beyond just advertising, and allowing users to completely opt out of data collection would break important functionality (for example, social platform’s ability to vet content based on users’ age). Snap also said that targeted advertising is crucial for some smaller businesses. “For smaller companies, operating on much tighter margins than the dominant platforms, this kind of value destruction would likely prove unsustainable.”
Twitter meanwhile argued that not all personalised advertising is equally intrusive. Twitter allows ad targeting based on who its users follow and what they tweet, and claims this is fundamentally different to targeting which uses off-platform data. “It would be a mistake to treat these practices in the same way and require all platforms to allow customers to opt out of advertising that is based upon a customer’s activity on the platform,” said Twitter. “Such a remedy is disproportionate and has the potential to make it more difficult for smaller firms to compete thereby further entrenching incumbents.”
A Code of Conduct for Dominant Players
One of the CMA’s proposals in its interim report was a code of conduct for online platforms with “strategic market status” (SMS). Strategic market status was defined as being where a platform:
- has enduring market power over a relevant market;
acts as an important gateway for businesses to access a significant portion of consumers;
and businesses depend on the platform to access users on the ‘other’ side of the market.
The CMA said these criteria are likely to apply to both Facebook and Google, though they could also apply to other platforms too.
Many of the respondents welcomed the idea of a code of conduct, with most agreeing that an independent regulator must be appointed and empowered to enforce the code of conduct. The Guardian for example said that “it is absolutely vital that this code of conduct is enforceable by a legally empowered independent regulator”.
But a number of respondents outline concerns that the code of conduct wouldn’t go far enough, or would end up unintentionally hitting the wrong targets.
The News Media Association, a publisher trade group, said it wants to see specific protections for publishers’ content included in the code. This would include compensation for use of publishers’ content, more clarity and transparency over how content is ranked within news feeds and news services, and more controls for publishers over how their content is used.
Several noted that penalties for not complying with the code of conduct would have to be designed so strategic market status (SMS) companies are incentivised to actually comply with the rules.
BT said that “although financial penalties are a useful tool, the CMA should consider how the regulator would best ensure that required changes in behaviour occur, given that financial penalties would need to be very large to deter entities with very high turnover”.
Others said that international coordination would be required to make the code of conduct effective. The Telegraph said “we have concerns that a UK-only based code of conduct, even if backed by robust enforcement measures, may not be adequate in itself to provide an effective remedy […] platforms operate across multiple countries and can take advantage of jurisdictional fragmentation”.
And the British Institute of International and Comparative Law’s Competition Law Forum (CLF) said that a code of conduct risks giving platforms too much control over how they interpret the rules. “Interoperability and data sharing will signify a major overhaul on how platforms operate,” said the CLF. “It is unlikely that the way platforms will need to be redesigned to interoperate will be successfully achieved by a decision coming from the platforms themselves”.
Calls for a Market Investigation
While most welcomed the idea of a code of conduct, many argued that the code should be informed by a market investigation, something which the CMA provisionally decided against in its interim report.
A market investigation can occur where the CMA suspects “a feature or combination of features of a market or markets in the UK prevents, restricts or distorts competition,” – i.e, in cases where a market is fundamentally broken.
An investigation would give the CMA wide powers to change the behaviour of firms, such as governing the way a product is sold in a particular market and the information that is available to customers buying that product, and the power to require companies to sell parts of their business, in order to improve competition.
A number of responses asked the CMA to reconsider its decision. Arete Research for example said it “wholeheartedly supports” a move to a market investigation. “We think there are substantial unanswered questions around the commercial and contractual terms behind the digital ads market that could be exposed in a more sustained investigation,” said Arete. “We also think this might help to inform ministers’ policy choices in a more unambiguous way, given the political clout of big tech platforms.”
Daily Mail and Metro owner DMG Media said that without a market investigation, progress in reining in the tech giants might be too slow. “If the recommendations made by the CMA need to be translated in a code of conduct to be developed in partnership with industry by a yet-to-be-created digital unit, they may be implemented too late for the publishers that heavily rely on digital advertising,” said the publisher.
News UK said that a market investigation would help foster international cooperation. “A market investigation would allow the CMA to engage further with its international counterparts over an extended period,” said News UK. “Moreover, the formal nature of the process would signal the CMA’s seriousness of intent, and in doing so could help drive more focused engagement on the issues.
And Verizon Media said that without a market investigation, regulation risks further entrenching the dominant players’ positions. Verizon said that “challenger firms share a concern that the current body of digital policy could potentially add to competitive pressures rather than serve as a programme of regulatory reform to enhance competition in digital markets”.
The CMA will publish their final report on 2nd July, 2020.