Wednesday 18 December 2019 5:24 pm

Rivals ‘can’t compete’ with Google and Facebook on digital advertising, watchdog warns

Tech giants Google and Facebook dominate Britain’s digital advertising market to such a great extent that rivals can no longer compete with them on “equal terms”, the competition watchdog has warned. 

The Competition and Markets Authority (CMA) also raised concerns over the pair’s dominance undermining the ability of newspapers and other providers to produce “valuable content” to the “detriment of broader society”.

Read more: Watchdog steps up probe into tech giants over digital ad dominance

Google has an over 90 per cent share of the UK’s search advertising market with revenues of around £6bn, the CMA found, while Facebook is responsible for almost half of the £5bn display advertising market. 

The pair are “now so large and have such extensive access to data that potential rivals can no longer compete on equal terms,” said the watchdog in a new report.

This could “lead to reduced innovation and choice in the future and to consumers giving up more data than they feel comfortable with.”

“Weak competition in digital advertising can increase the prices of goods and services across the economy and undermine the ability of newspapers and others to produce valuable content, to the detriment of broader society,” said the watchdog in its report.

The CMA launched an investigation into tech giants’ tight grip over digital advertising in July, and is now considering a range of possible interventions to improve competition in the market.  

These interventions could include a code of conduct governing the behaviour of platforms with market power in the sector, rules giving consumers greater control over their data. 

The CMA is also considering interventions to address the sources of the market power of Google and Facebook, including possible “data access remedies, measures to increase interoperability and structural interventions,” it said. 

The Financial Times reported that the government will create a new tech regulator next year to enforce these interventions after Brexit, citing several people involved in the process.

Individuals within the Business Department (BEIS) have been meeting with competition lawyers and academics in recent months to establish the new regulator’s remit, it reported.

Responding to the report, a BEIS spokesperson denied that the creation of a new regulator had been agreed.

“Digital services are an important part of everyday life, but they must work for everyone. No decision has been made on whether a regulator is the best way to ensure this,” they said.

“We are grateful to the CMA for their work to date and look forward to the final recommendations.”

“Most of us visit social media sites and search on the internet every day, but how these firms work can be a mystery,” said CMA chief executive Andrea Coscelli.

“So far in this study, we have used our legal powers to discover how major online platforms operate. Digital advertising fuels big businesses like Google and Facebook and we have been building a picture of how this complex new market works,” she continued.

Around 95 per cent of UK internet users access at least one site owned by Google per month, the watchdog found. 

Of the total time users spend online, just over a third is spent on sites owned by Google, which owns Youtube, or Facebook, which owns Instagram and Whatsapp.

Read more: Tech giants set to spend £25bn on advertising this year

“Digital advertising is the backbone of the modern internet… and we are pleased to see this recognised by the CMA,” said Antony Walker of industry body Tech UK.

“Competitive markets are extremely important to ensuring consumer choice and driving up standards. Tech UK believes an informed regulator is vital to securing this,” he added.