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Google and Facebook ‘dominance’ bad for consumers, says watchdog

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A Competition and Markets Authority (CMA) study has suggested that Google and Facebook’s digital advertising duopoly could be hurting consumers, including by passing on the increased cost of digital advertising to consumers.

In the UK, people spend a third of their time online using sites owned by either Google (such as YouTube) or Facebook (such as Instagram), rendering attention on these platforms extremely valuable to advertisers.

According to the watchdog’s interim report [PDF], Google accounted for more than 90 per cent (£6bn) of all UK revenue earned from search advertising in the UK in 2018. Meanwhile, Facebook accounted for almost half (more than £2bn) of display advertising revenue.

Google paid approximately £1bn to be installed as the search engine on mobile services, with the “vast majority” of payments going towards Apple. The companies also strengthened their dominance through greater access to market data (such as through new search queries to train algorithms) and personal data collection for ad targeting, with most people being forced to “share considerable amounts of personal data as a condition for using the service” and privacy settings being made difficult to access.

The CMA warned that the dominance of these two companies is driving up prices for products and services – including flights, electronics and insurance – as a consequence of advertising prices being pushed up. Consumers could also be missing out on new ideas from potential rivals.

“Most of us visit social media sites and search on the internet every day, but how these firms work can be a mystery,” said Andrea Coscelli, the CMA's chief executive. “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’ve looked especially at how these firms collect and use people’s data, how they monetise it and what this means for rival companies who want to compete, as well as the people and businesses using these services every day.”

Coscelli explained that at the end of the full study, the CMA would submit its findings to the government to help inform decisions about whether and how to regulate the digital advertising sector. “There is a strong argument for the development of a new regulatory regime,” the CMA said in a statement, specifying issues around behaviour of online platforms and giving people greater control over their own data. However, many of the problems identified in the interim report are international in nature.

Ronan Harris, vice president for Google UK and Ireland, said: “The digital advertising industry helps British businesses of all sizes find customers in the UK and across the world and supports the websites that people know and love with revenue and reach.

"We've built easy-to-use controls that enable people to manage their data in Google's services - such as the ability to turn off personalised advertising and to automatically delete their search history. We'll continue to work constructively with the CMA and the Government on these important areas, so that everyone can make the most of the web.”

A spokesperson for Facebook commented: “We are fully committed to engaging in the consultation process around the CMA's preliminary report and continuing to deliver the benefits of technology and relevant advertising to the millions of people and small businesses in the UK who use our services.

"We agree with the CMA that people should have control over their data and transparency around how it is used. In fact, for every ad we show, we give people the option to find out why they are seeing that ad and an option to turn off ads from that advertiser entirely.

"We also provide industry-leading tools to help people control their data, like 'Off Facebook Activity', and to transfer it to other services through our data transfer tools. We look forward to further engagement with the CMA on these topics.”

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