Tech firms such as Amazon, Google, and Facebook are now in the cross-hairs of the UK competition regulator, the Competition and Markets Authority (CMA).
It is concerned that the dominance of tech giants in the digital advertising sector could be harming competition.
The UK watchdog’s proposal comes after alleged ‘anti-competitive conduct’ at major tech companies is now being examined in America, including probes by the US Department of Justice and the Federal Trade Commission.
It comes after the CMA “published an update in its examination of online platforms and digital advertising, uncovering new detail about how the sector’s biggest names operate.”
“In July 2019, the CMA set out to find out more about how major online platforms like Google and Facebook operate,” said the UK regulator. “Whilst the services these firms provide appear to be free, consumers pay for them indirectly through providing their attention and personal data, which platforms use to sell digital advertising.”
“In the UK, people spend an average of 3 hours and 15 minutes online each day,” it said. “More than a third of that time is spent on sites owned by either Google (including YouTube) or Facebook (including Instagram and WhatsApp). As a result, the digital advertising sector has grown massively and is now worth around £13 billion – much larger than any other form of advertising.”
The CMA’s interim report found that last year Google accounted for more than 90 percent of all revenues earned from search advertising in the UK, with revenues of around £6 billion.
“In the same year, Facebook accounted for almost half of all display advertising revenues in the UK, reaching more than £2 billion,” the CMA report added.
The report admitted that ‘big’ is not necessarily ‘bad’ and these platforms have brought very innovative and valuable products and services to the market.
“But the CMA is concerned that their position may have become entrenched with negative consequences for the people and businesses who use these services every day,” said the regulator. “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 CMA said. “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.”
The CMA also noted that each year, about 15 percent of queries on Google have never been searched for before.
“Other search engines like Bing will not have the same access to these queries, putting Google in a powerful position of being able to better train its algorithms and provide more accurate search results than its rivals,” said the CMA.
The CMA also noted the situation regarding personal data, and noted that social media platforms such as Facebook do not allow consumers to opt out of personalised advertising.
“The CMA is also concerned about a lack of transparency in the way that business on these platforms works,” it said. “Publishers, such as newspapers, who rely on Google and Facebook for about 40 percent of their traffic, have expressed concerns about unexplained dramatic changes in the number people visiting their websites due to changes in Google’s search and Facebook’s news algorithms”
“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. “
“We’re now inviting comments on what we have found,” said Coscelli. “At the end of the study, we’ll present our findings to the new Government as they decide whether and how to regulate what is an increasingly central sector in all our lives.”
“At this stage, the CMA agrees with Professor Furman and his colleagues who carried out a wide-ranging review of digital markets earlier this year, 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,” Coscelli warned.
The CMA is now consulting on its interim report and is seeking views by 12 February 2020.