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UK competition regulator to investigate digital ad duopoly

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The UK competition watchdog – the Competition and Markets Authority (CMA) – has announced it will be investigating the domination of the digital advertising space by Facebook and Google.

The inquiry has a broad scope, and will attempt to determine the extent of the power of this duopoly, whether this negatively affects consumers, and whether the two internet giants collect and process data against the wishes of consumers. If the CMA finds evidence of problems, it will make specific recommendations to government.

“Much about these fast-changing markets is a closed book to most people,” said CMA chair Andrew Tyrie. “The work we do will open them up to greater scrutiny, and should give Parliament and the public a better grip on what global online platforms are doing.”

“These are global markets, so we should and will work more closely than before with authorities around the world, as we all consider new approaches to the challenges posed by them.”

The CMA is inviting comments from interested parties by 30 July, and is due to publish its final report in July 2020.

In August 2018, the Obama-era chief economist Jason Furman was hired to chair an expert panel on digital competition in the UK. The panel reported that laws governing mergers and antitrust enforcement should be updated to reflect the new digital landscape and boost competition.

According to a CMA statement, the typical adult in the UK spend over 3 hours a day on the internet with more than a third of this time spent on sites owned by Google (e.g.: YouTube) and Facebook (e.g.: Instagram). These two have been criticised as a ‘duopoly’ in digital advertising which make it near impossible for competitors to enter the market. A State of Digital Media White Paper published this year found that consolidation of revenue from digital advertising was growing, and that 80 per cent of all digital ad spending would go to Google and Facebook in the next five years.

While Google, Facebook, and some other platforms advertise their services as being free, “consumers are paying through the attention and data that they provide to the platforms, which the platforms monetise by selling digital advertising”, the CMA statement of scope said.

Google and Facebook are able to offer extremely sophisticated ad targeting as a result of their vast and unsettling data collection operations, which harvest data from all users’ web activity (and often real-world activity) to create detailed consumer profiles. These data collection and processing practices will be a key focus of the CMA investigation. Both Google and Facebook have come under increasing public and regulatory scrutiny over their data collection and sharing practices. In the US, Facebook is facing a $3-5bn fine from the Federal Trade Commission over its role in the Cambridge Analytica scandal, in which the data of 87 million Facebook users was harvested to create political ad targeting tools which were used by the 2016 Trump campaign.

“We propose to consider whether consumers have the knowledge, skills, and desire to control how data about them is collected and used by the online platforms, and how far they are able to exercise such choice,” the statement of scope said. “Within this theme, we will examine the relationship between consumers and consumer-facing online platforms and whether the choices of consumers are limited trough terms and conditions or other practices.”

The CMA said that if these companies were able to “exploit” consumers’ attention, this could lead to direct consumer harm, and suggested that a more competitive market may pay users for their data or provide consumers with greater control over how their data is used.

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