Chancellor Philip Hammond has pushed for the UK competition watchdog to investigate the digital advertising market following a report saying it was “dominated by two players”: Facebook and Google.
In a letter sent today to Competition and Markets Authority chairman Lord Andrew Tyrie, Hammond asked him to prioritise a decision on whether the CMA will carry out a formal market study into the digital ad industry.
The watchdog has previously said that it “stands ready to assist the government”, but its ability to launch new projects is “heavily dependent” on the outcome of EU Brexit negotiations.
Said Hammond: “The CMA’s expertise and information gathering powers make it uniquely placed to shine a light on this sector, which has been widely described as lacking transparency, and when appropriate to make recommendations to Government.”
The Digital Competition Expert Panel review into competition within the tech sector, led by former Obama economic advisor Jason Furman, was commissioned by HM Treasury.
It published its recommendations today – among them that the CMA should launch a study into the digital ad market. The review said the market “suffers from a lack of transparency”.
The five-strong expert panel had “received strong representations from news publishers” about the dominant role of Google in the digital advertising supply chain, it said, with publishers arguing that they are “unable to achieve a fair return from digital advertising associated with their content”.
The CMA has already been tasked with carrying out a market study into the online advertising industry under a proposal made by the Cairncross Review into the sustainability of the press in the digital age, published last month.
Culture Secretary Jeremy Wright MP has also said his department would review how online advertising is regulated.
Writing about the digital ad market, the Furman review said: “It is clear that the market is opaque, with limited information disclosed either at an aggregate or an individual level.
“A thorough investigation of its workings, encompassing the entire value chain, would be helpful in either identifying any valid grounds for concern about effective competition, or dispelling the mistrust that exists.”
It added that any investigation into the digital ad market should consider whether “the importance of data in digital advertising” and if the market could be more transparent for publishers and advertisers.
Review lead Furman said: “The digital sector has created substantial benefits but these have come at the cost of increasing dominance of a few companies which is limiting competition and consumer choice and innovation.
“Some say this is inevitable or even desirable. I think the UK can do better.”
In a statement on today’s report, Chancellor Philip Hammond said: “Competition is fundamental to ensuring the market works in the interest of consumers, but we know some tech giants are still accumulating too much power, preventing smaller businesses from entering the market.
“The work of Jason Furman and the expert panel is invaluable in ensuring we’re at the forefront of delivering a competitive digital marketplace.”
He said he would “carefully examine the proposals put forward by the panel” and respond to its findings later this year.
Press Gazette has contacted Facebook and Google for comment.
The Digital Competition Expert Panel said digital competition is “currently insufficient with winner-takes-most dynamics in many markets” and that a new approach is needed to sustain and promote competition.
The report also suggested that the Government strengthen the powers of regulators to tackle “illegal anti-competitive practices” in the tech sector and make it simpler to challenge the “bullying tactics” of market leaders.
The News Media Association, which represents local and national news publishers, welcomed the Furman review’s findings which echoed its own call to investigate the digital ad market over the past two years.
An NMA spokesperson said: “There is now a growing chorus of voices, from Cairncross to the Lords and Commons Communications Committees, government departments and now the Furman Panel, demanding action.
“All recognise that distortion and opacity in the digital advertising market is fuelling many of the problems around online harms, data privacy, fake news and damage to a free press.”
Press Gazette’s own Duopoly campaign, launched in April 2017, has been calling on Facebook and Google to stop destroying journalism and pay more back to news publishers on whose content they rely.
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