UK government to probe duopoly's digital ad dominance

Google and Facebook will be subject to the probe

The UK government has called on the competition watchdog to launch an inquiry into the UK's digital ad market, specifically to probe the dominance of the Facebook-Google duopoly.

UK chancellor Philip Hammond has requested that the Competition and Markets Authority (CMA) launch a review after an independent report he commissioned detailed how the UK's competition framework isn't fit for the economic challenges posed by digital markets, at home and internationally.

Led by Jason Furman, Barack Obama’s chief economic adviser, an independent panel of experts found that the digital advertising market "is dominated by two players and suffers from a lack of transparency".

It recommended the CMA launch a formal market study to probe Google and Facebook. The panel of experts also suggested changes to merger rules were needed so the government had "more power" to stop digital acquisitions that were likely to "damage future competition, innovation and consumer choice".

In a letter to CMA chairman Lord Tyrie, Hammond said: "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."

He added that official investigation into market practices would provide a greater understanding of the existence, nature and "potential solutions to any problems within the digital advertising market". He also expressed the view that it would give the government an "understanding of the operation of platform markets which rely on digital advertising for revenue" and enhance the CMA’s ability to detect and assess digital mergers when these may be of concern.

The CMA confirmed that subject to an orderly exit from the EU (and therefore resources) it will carry out a review to assess how regulation affects competition in the UK business environment.

In his spring statement, Hammond also said the government would make technology companies "pay their fair share" and "protect consumers from online harm". Westminster would, he claimed, "lead the world in delivering a digital economy that works for everyone".

Google and Facebook are coming under increasing scrutiny from regulators, not just in the UK but also in the US and in Europe. Last year, the former was hit with a record $5bn antitrust fine from EU regulators who ordered it to stop using its popular Android mobile operating system to block rivals. Google said it was to appeal the ruling.

Hammonds announcement follows on from a seperate report from the House of Lords published earlier this week which said the government should create a central 'Digital Authority' to take responsibility for regulating the myriad watchdogs already operating in the space.

Noting that more than a dozen bodies — including the Advertising Standards Authority (ASA) and the Information Commissioners' Office (ICO) — have a remit that spans digital, the Lords have told government that the Digital Authority would be "an internal centre of expertise on digital trends which helps to scan the horizon for emerging risks and gaps in regulation".

In February, culture secretary Jeremy Wright said he had also asked the CMA to launch a study of the “largely opaque and extremely complex” world of online advertising.

Double-digit growth will push digital advertising spend in the UK above £15bn in 2019, according to forecasts from Barclays. Facebook and Google are expected to hoover up the bulk of that spend.

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