The CMA’s interim report into online platforms and digital advertising, published yesterday, has already been welcomed by ISBA. Stretching to 283 pages, with 13 Appendices, the report deserves careful reading by anyone seeking to understand the structure and workings of the search and online display advertising markets. For those who want the management summary, here are some highlights.

The report makes clear that “big” is not necessarily “bad” and highlights the undoubted value of the services provided free to the public, including search, social media and access to news journalism, before addressing the central question of whether the markets for digital advertising are working well for consumers.

The dominance of the major platforms in the non-substitutable markets of search and online display is indisputable and clearly laid out. Many of the themes examined here are familiar and rooted in competition for the user: network effects and economies of scale, the power of defaults over consumer decision-making and unequal access to user data. More specifically for advertisers, lack of transparency and asymmetric information are identified as having the potential to create or exacerbate market problems through the impact they have on all market participants. This will be a theme that resonates with those familiar with ISBA’s agenda.

Turning to vertical integration, Google’s large share in the market for the intermediation of “open display” advertising is highlighted. More broadly, the report recognises, too, “that there are legitimate concerns about perceived conflicts of interests for actors that operate at multiple levels of the intermediation value chain.” While the report stresses that the CMA is still considering the concerns it has heard, it is clear that this area will be one for further investigation in preparation for its final report. ISBA members will be aware of our focus on this issue and we expect the results of ISBA’s ground-breaking Programmatic Supply Chain Study, in partnership with PwC, will be a valuable contribution to the CMA’s understanding.

While the CMA is clear in its analysis of the harms that could flow from the factors it identifies, it is not drawing conclusions at this stage, other than in identifying the sustained high profitability of major platforms. The CMA is also circumspect in its laying out of potential remedies. It argues that there is a strong case for a pro-competitive regulatory regime and leans towards an enforceable Code of Conduct for those players with market power, plus rules to enforce transparency for market participants and give users greater control of their data. It is also considering interventions to counter market power in search and social media, recognising that some of these would be highly interventionist.

The CMA has decided not to recommend a full market investigation, relying rather on a suite of recommendations which government can take forward in regulatory reform. In doing so it recognises also the global nature of its challenge and has indicated a commitment to work with other international regulators. Through the report the CMA also makes clear that it is liaising closely with the ICO on questions of data, a co-ordination which ISBA welcomes.

The CMA is now consulting further and we will be exploring these themes and responding to their questions as we prepare ISBA’s submission, which is due by 12 February.

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Written 20th December 2019
By Phil Smith