Australia latest to eye laws to curb Google’s adtech dominance

Australia’s competition watchdog is the latest to push for legal powers to curb Google’s dominance in the adtech sector.

It has made the call as it published its final report on an inquiry examining competition concerns in the digital advertising sector. In the report, the Australian Competition and Consumer Commission (ACCC) concludes that new regulatory solutions are needed to address Google’s dominance and competition to the adtech sector — “for the benefit of businesses and consumers”.

The tech giant’s grip on first party data is a particular focus in the report, with the regulator floating the idea of special measures being needed to tackle Google’s dominance — such as data separation powers or data access requirements.

“We have identified systemic competition concerns relating to conduct over many years and multiple adtech services, including conduct that harms rivals. Investigation and enforcement proceedings under general competition laws are not well suited to deal with these sorts of broad concerns, and can take too long if anti-competitive harm is to be prevented,” said ACCC chair Rod Sims in a statement.

“We are concerned that the lack of competition has likely led to higher adtech fees. An inefficient adtech industry means higher costs for both publishers and advertisers, which is likely to reduce the quality or quantity of online content and ultimately results in consumers paying more for advertised goods,” he added.

In a specific finding against Google, the ACCC found the tech giant has used its position to preference its own services (aka self-preferencing) and shield them from competition — with the watchdog giving the example of how Google prevents rival adtech services from accessing ads on YouTube (which it said gives Google’s adtech services an “important advantage”).

More generally, it found Google has a dominant position in key parts of the adtech supply chain — estimating that more than 90% of ad impressions traded via the adtech supply chain passed through at least one Google service last year.

Google’s dominance is underpinned by multiple factors, per the ACCC’s analysis — including access to consumer and other data; access to exclusive inventory; and integration across its adtech services.

The report also highlights key acquisitions by Google — including of DoubleClick in 2007, AdMob in 2009, and YouTube in 2006 — which the regulator said had helped Google entrench its position in adtech.

The lack of transparency in the sector is another target, with the report highlighting opaque pricing and operation which it said compounds the complexity of the market, making it difficult for advertisers and publishers to understand how the supply chain is functioning and detect misconduct.

The UK’s competition watchdog highlighted similar concerns in its own adtech sector report last year. And UK lawmakers are now working on a digitally focused reform of domestic competition law.

As well as calling for new legal powers to curb Google’s dominance in the advertising sector, the ACCC recommends that the industry establishes standards — such as requiring providers to publish average fees and take rates to enable their customers to easily compare fees across different providers and services.

It also recommends an industry standard to enable “full and independent verification of the services advertisers use in the supply chain”. And it flags Google’s refusal to participate in the publisher-led ‘header bidding’ push — an industry initiative, developed around 2014/15, which tried to boost competition for publishers’ inventory but was stymied by lack of support from Google — highlighting that Google previously allowed its services to have a ‘last look’ opportunity to outbid rivals, in another critical observation.

“Google has used its vertically integrated position to operate its adtech services in a way that has, over time, led to a less competitive adtech industry. This conduct has helped Google to establish and entrench its dominant position in the ad tech supply chain,” said Sims.

“Google’s activities across the supply chain also mean that, in a single transaction, Google can act on behalf of both the advertiser (the buyer) and the publisher (the seller) and operate the ad exchange connecting these two parties. As the interests of these parties do not align, this creates conflicts of interest for Google which can harm both advertisers and publishers.”

Perhaps the really striking point here is that none of the ACCC’s findings feel especially new. Rather these are problems that regulators and lawmakers all over the world have been fixing on — and considering how best to fix.

The Australian watchdog’s report follows a major penalty levied again Mountain View in France this summer, for instance, in a case also relating to self-preferencing in the adtech sector.

France’s competition authority also extracted a number of commitments from Google on interoperability in the adtech market.

The ACCC is recommending that the government Down Under creates rules to manage conflicts of interest; prevent anti-competitive self-preferencing; and ensure rival ad tech providers “can compete on their merits” — also echoing many of the concerns European Union legislators have similarly identified in a set of proposed ex ante rules aimed at tech giants like Google (aka, so-called “gatekeeper” platforms).

And, as mentioned above, the UK is also planning to update competition rules to give regulators bespoke powers to tackle platform giants. While — in Germany — legislators have already updated competition rules to target digital giants, passing an update to the law at the start of this year which gives antitrust regulator powers to intervene again Internet giants by, for example, banning self-preferencing.

The ACCC notes that it’s considering specific allegations against Google under existing competition laws. But the report emphasizes that new regulatory mechanism are essential to tackle its dominance.

“We have identified systemic competition concerns relating to conduct over many years and multiple ad tech services, including conduct that harms rivals. Investigation and enforcement proceedings under general competition laws are not well suited to deal with these sorts of broad concerns, and can take too long if anti-competitive harm is to be prevented,” said Sims.

Simultaneously, Australia is also considering broader regulations for the digital sector — with a report on that due in a year’s time.

The ACCC said that report should also consider how to implement sector-specific rules for adtech — and whether they need to form part of a broader regulatory scheme to address “common competition and consumer concerns” the watchdog said it has identified in digital platform markets.

“Many of the concerns we identified in the adtech supply chain are similar to concerns in other digital platform markets, such as online search, social media and app marketplaces,” added Sims. “These markets are also dominated by one or two key providers, which benefit from vertical integration, leading to significant competition concerns. In many cases these are compounded by a lack of transparency.”

Consultation on that piece of work will kick off in the first quarter of 2022 — with the ACCC saying it will “take into account” overseas legislative proposals to deal with these issues.

The EU presented its plan for grappling with Big Tech in the Digital Markets Act proposal at the end of last year, along with a broader set of rules for digital platforms (the Digital Services Act) that aims to dial up accountability more generally across Internet services, targeting areas like illegal content or the sale of dangerous goods online.

While in Germany — which is pushing ahead of any pan-EU measures — the FCO has opened a raft of procedures against tech giants (including Amazon, Apple, Facebook and Google), looking at whether their market power is significant enough for their businesses to fall under scope of its new law. So the competition authority there could soon step in to curb market abuses.

Asia has also been taking an increasingly active stance against regulating tech giants. Earlier this month, for example, South Korea fined Google $177M for market abuse related to how it operates its smartphone operating system, Android. While, in China, the regime is turning its guns on all big tech — even homegrown companies.

And even on home turf, US tech giants — including Google and Facebook — are facing regulatory challenges on a number of fronts, including over how they operate app stores, and on issues like self-preferencing and predatory market consolidation.

The tl;dr is there is now a global consensus that big tech must be cut down to size. The only questions are over how that happens — see, for example, Australia already pushing ahead with legislation for a news media bargaining code that targets Facebook and Google — and how quickly digital markets can be rebooted.

Responding to the ACCC’s report, a Google spokesperson offered this statement:

“Google’s digital advertising technology services are delivering benefits for businesses and consumers — helping publishers fund their content, enabling small businesses to reach customers and grow, and protecting people online from bad ad practices.
Analysis by PwC Australia for Google Australia found that three quarters of Google’s adtech customers are Australian small and medium businesses — and three in four businesses surveyed observed important benefits from using Google’s services including cost savings, time savings and business growth, compared to other services.
PwC also estimated that the existence and use of Google’s advertising technology directly supports more than 15,000 full-time equivalent jobs and contributes $2.45 billion to the Australian economy annually.
As one of the many advertising technology providers in Australia, we will continue to work collaboratively with industry and regulators to support a healthy ads ecosystem.”