UK Govt Considering Tough Regulatory Framework to Control Digital Ad Dominance of Google, Facebook

The UK competition watchdog on Wednesday called on the government to introduce a new pro-competition regulatory regime to tackle Google and Facebook's market power.

The UK's Competition and Markets Authority (CMA) said that it proposed the creation of a "Digital Markets Unit" designed to rein in platforms with "a position of market power" when it comes to digital ads.

"Through our examination of this market, we have discovered how major online platforms like Google and Facebook operate and how they use digital advertising to fuel their business models," said CMA Chief Executive Andrea Coscelli.

What they found is concerning. If the market power of these firms goes unchecked, people and businesses will lose out.

"People will carry on handing over more of their personal data than necessary, a lack of competition could mean higher prices for goods and services bought online and we could all miss out on the benefits of the next innovative digital platform," explained Coscelli.

The watchdog recommended a new pro-competition regulatory regime to govern the behaviour of major platforms funded by digital advertising, like Google and Facebook.

UK expenditure on digital advertising was around 14 billion pound in 2019, equivalent to about 500 pounds per household.

About 80 per cent of this is earned by just two companies: Google and Facebook.

Google enjoys a more than 90 per cent share of the 7.3 billion pound search advertising market in the UK, while Facebook has a share of over 50 per cent of the 5.5 billion pound display advertising market.

Google's revenue per search has more than doubled since 2011, while Facebook's average revenue per user has increased from less than 5 pounds in 2011 to over 50 pounds in 2019.

"While both originally grew by offering better services than the main platforms in the market at the time, the CMA is concerned that they have developed such unassailable market positions that rivals can no longer compete on equal terms," said the agency.

The CMA found that Google's prices are around 30 per cent to 40 per cent higher than Microsoft Bing when comparing like-for-like search terms on desktop and mobile.

Google and Facebook's market positions also have a profound impact on newspapers and other publishers.

The CMA has found that newspapers are reliant on Google and Facebook for almost 40 per cent of all visits to their sites. This dependency potentially squeezes their share of digital advertising revenues, undermining their ability to produce valuable content.

The CMA has proposed that within the new regime a 'Digital Markets Unit' should have the ability to enforce a code of conduct to ensure that platforms with a position of market power, "like Google and Facebook, do not engage in exploitative or exclusionary practices, or practices likely to reduce trust and transparency, and to impose fines if necessary".

The unit would order Google to open up its click and query data to rival search engines to allow them to improve their algorithms so they can properly compete.

This would be designed in a way that does not involve the transfer of personal data to avoid privacy concerns.

The unit would also order "Facebook to increase its interoperability with competing social media platforms. Platforms would need to secure consumer consent for the use of any of their data" and restrict Google's ability to secure its place as the default search engine on mobile devices and browsers in order to introduce more choice for users.

The digital unit can order Facebook to give consumers a choice over whether to receive personalised advertising and introduce a "fairness-by-design" duty on the platforms to ensure that they are making it as easy as possible for users to make meaningful choices.

"While this recommendation is UK-focused, many of the problems that the CMA has identified are international in nature. It will therefore continue to take a leading role globally in relation to these issues as part of the CMA's wider digital strategy," said the watchdog.