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How the CMA intends to tackle Facebook and Google’s dominance

Earlier this week, the Competition and Markets Authority (CMA) unveiled a series of proposals for cracking down on Google and Facebook’s dominance in Britain’s online advertising market.

The move comes amid concerns that the firms have established a so-called “duopoly” over the sector, having hoovered up an estimated 62.7 per cent of the UK’s online ad spend in 2018 and with that figure set to rise this year.

The CMA’s report concluded that there is now a “strong argument” for the development of a new regulatory regime to oversee Facebook and Google’s advertising businesses, echoing the findings of a preliminary review of the sector earlier this year.

While the CMA signalled it is not in favour of breaking up Facebook and Instagram at present, it refused to rule out such a measure in the future if new efforts to boost competition fail. The CMA has now launched a consultation on a series of proposals, including:

Forcing Google to provide third-party access to click and query data to rival search engines

The CMA reports that each year, 15 per cent of Google searches have never been performed before, giving the company an advantage over its rivals when it comes to training its algorithms. By forcing Google to share click and query information, the CMA hopes to help them “overcome Google’s scale advantages”.

Creating mechanisms for determining the default search engine on devices and browsers

One of the key concerns Google’s rivals shared with the CMA was around the efforts it goes to to ensure it is the default search engine across a number of operating systems (OS), including its mobile OS, Android. In order to address this issue, the CMA is considering whether to restrict Google’s ability to buy default positions and create stricter rules around how it designs “choice screens” that give Android users the option to choose a rival’s search product.

“There have been concerns around the design and implementation of these choice screens, including concerns that Google auctions slots to be on the choice screen and unduly restricts the number of slots to maximise its revenues from the auction,” the CMA said.

Drawing up syndication agreements

This proposal would allow smaller search engines to buy search results for a price “that is low enough to provide an incentive to enter the market but high enough to reward providers of search results and maintain the incentive for third parties to develop their own web index,” according to the CMA.

Increasing interoperability between Facebook and other platforms

“One way of achieving greater competition between social media platforms,” the CMA states, “would be through increased interoperability with Facebook’s large network of users.”

But it is yet to determine exactly how interoperable different social media networks should be, acknowledging that “there is a cost to mandating interoperability”. “Most stakeholders that we have spoken to in the first half of the study, including challenger social media platforms, have not supported so-called ‘full protocol interoperability’ in which all the functionality of social media platforms would be made interoperable,” the report states. “There has, however, been support for specific functions being made interoperable.”

Another aspect of this is that the authority is considering whether Facebook should be allowed to “impose restrictions on competitors’ use of the interoperable features” and give developers greater access to its API once again.

Separating Google’s ad server from the rest of its business

This proposal is designed to “address concerns relating to […] conflicts of interest in the open display market”. Specifically, the CMA is concerned that “when operating on behalf of the publisher, [businesses] might have an incentive to favour bids coming through [their] own advertiser-side intermediaries”.

Giving users the right to use services without receiving personalised ads

This is one of the more radical proposals outlined by the CMA, which admits it would represent a “significant change” that would “require careful consideration”. “We are also mindful of the risk that these changes would damage the business model of platforms, particularly for new entrant and challenger platforms that currently generate limited revenue,” it said.

Commenting on the findings, a Facebook spokesperson said:

“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.”

Google’s UK and Ireland chief, Ronan Harris, added:

“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.”