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New powers over digital giants ‘would enhance journalism’: CMA report

Posted on: July 2, 2020 by Ian Murray

Competition watchdog The Competition and Markets Authority  (CMA) is calling on the Government to create new powers to regulate the digital advertising market, a move it says will preserve and enhance journalism in the UK and combat fake news.

In a 400-page report, the CMA has found that newspapers are reliant on Google and Facebook for almost 40% of all visits to their sites, a dependency that potentially squeezes their share of digital advertising revenues, undermining their ability to produce valuable content.

“Issues such as a lack of transparency in the ad tech supply chain exacerbate issues with revenue shares received by publishers and raise concerns about the long-term sustainability of high-quality and plural news content,” the report added.

 “Greater competition to Google and Facebook can as a result be expected to improve the quality and accuracy of journalism and see a decline in the prevalence of so called ‘fake news’.”

In response Facebook said: “Providing a free service, funded by advertising that is relevant and useful, gives millions of people and businesses in the UK the opportunity to connect and share.”

The tech giant said it was already facing competition from the likes of Google, Amazon, and TikTok.

A response from Ronan Harris, Google’s vice president for the UK and Ireland, said: “We support regulation that benefits people, businesses and society and we’ll continue to work constructively with regulatory authorities and Government on these important areas so that everyone can make the most of the web.”

In its 440-page final report on the digital advertising market, the CMA calls for the creation of a pro-competition regulatory regime to govern the behaviour of major digital platforms.

Announcing the report’s findings, the CMA:

“The dynamic nature of digital advertising markets and the types of concerns identified by the Competition and Markets Authority (CMA) in its market study are such that existing laws are not suitable for effective regulation. It is therefore recommending a new pro-competition regulatory regime to govern the behaviour of major platforms funded by digital advertising, like Google and Facebook.

“This recommendation to government is the result of a year-long examination of the markets. The CMA used its statutory information gathering powers to lift the lid on how advertising revenue drives the business model of major platforms.

“UK expenditure on digital advertising was around £14bn in 2019, equivalent to about £500 per household. About 80% of this is earned by just 2 companies: Google and Facebook. Google enjoys a more than 90% share of the £7.3 billion search advertising market in the UK, while Facebook has a share of over 50% of the £5.5 billion display advertising market. Google’s revenue per search has more than doubled since 2011, while Facebook’s average revenue per user has increased from less than £5 in 2011 to over £50 in 2019.

“The services provided by Facebook and Google are highly valued by consumers and help many small businesses to reach new customers. While both originally grew by offering better services than the main platforms in the market at the time, the CMA is concerned that they have developed such unassailable market positions that rivals can no longer compete on equal terms

“These issues matter to consumers. Weak competition in search and social media leads to reduced innovation and choice, as well as to consumers giving up more data than they would like.

“Google and Facebook’s market positions also have a profound impact on newspapers and other publishers. The CMA has found that newspapers are reliant on Google and Facebook for almost 40% of all visits to their sites. This dependency potentially squeezes their share of digital advertising revenues, undermining their ability to produce valuable content.

“The scale and nature of these issues mean that a new pro-competition regulatory regime is needed so that users can continue to benefit from innovative new services; rival businesses can compete on a level playing field and publishers do not find their revenues unduly squeezed. The CMA’s proposals are consistent with those made by Professor Jason Furman in his report for the government.

The CMA has proposed that within the new regime a ‘Digital Markets Unit’ should have the ability to:

  • enforce a code of conduct to ensure that platforms with a position of market power, like Google and Facebook, do not engage in exploitative or exclusionary practices, or practices likely to reduce trust and transparency, and to impose fines if necessary.
  • order Google to open up its click and query data to rival search engines to allow them to improve their algorithms so they can properly compete. This would be designed in a way that does not involve the transfer of personal data to avoid privacy concerns.
  • order Facebook to increase its interoperability with competing social media platforms. Platforms would need to secure consumer consent for the use of any of their data.
  • restrict Google’s ability to secure its place as the default search engine on mobile devices and browsers in order to introduce more choice for users.
  • order Facebook to give consumers a choice over whether to receive personalised advertising.
  • introduce a “fairness-by-design” duty on the platforms to ensure that they are making it as easy as possible for users to make meaningful choices.
  • order the separation of platforms where necessary to ensure healthy competition.”

Ronan Harris, Google’s vice president for the UK and Ireland, said: “Digital advertising helps businesses find customers and supports the websites that people know and love. Advertisers today choose from a wide range of platforms that compete with each other to deliver the most effective and innovative ad formats and products.”

A Facebook spokesperson said: “Providing a free service, funded by advertising that is relevant and useful, gives millions of people and businesses in the UK the opportunity to connect and share.

“We face significant competition from the likes of Google, Apple, Snap, Twitter and Amazon, as well as new entrants like TikTok, which keeps us on our toes.

“Giving people meaningful controls over how their data is collected and used is important, which is why we have introduced industry leading tools for people to control how their data is used to inform the ads they see. We’re also exploring new ways through which people can move their data to other services through our Data Transfer Project.

“We look forward to engaging with UK government bodies on rules that protect consumers and help small businesses rebuild as the British economy recovers.”