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Australia is the latest country to enact laws to limit Google’s adtech dominance

Australia’s competition watchdog is pushing for legal powers to limit Google’s dominance of the adtech industry.

The final report of an inquiry into digital advertising competition has been published by the Australian Competition and Consumer Commission (ACCC). The Australian Competition and Consumer Commission (ACCC), concludes in the report that new regulatory solutions must be found to deal with Google’s dominance and the competition to the adtech industry — “for both the benefit of consumers and businesses”.

The report focuses on the tech giant’s control over first-party data. The regulator suggested that special measures be taken to counter Google’s dominance, such as data access restrictions or data separation powers.

“We have identified systemic concerns about competition relating to conduct over many decades and multiple adtech service, including conduct that hurts rivals. Rod Sims, chair of the ACCC, stated that enforcement and investigation under general competition laws is not well-suited for dealing with such broad concerns. They can also take too long if anticompetitive harm must be prevented.

“We are concerned about the fact that there has been less competition, which may have led to higher adtech charges. He said that an inefficient adtech sector means higher costs for advertisers and publishers, which will likely reduce the quality and quantity of online content. This in turn could lead to consumers paying more for advertised goods.

The ACCC made a specific finding against Google. It found that the tech giant used its position (aka self-preferencing), to prefer its own services and protect them from competition. The watchdog gave the example of Google blocking rival adtech service from accessing YouTube ads. This, it claimed, gives Google’s adtech offerings an “important advantage”.

It also found that Google holds a dominant position within key parts of the advertising supply chain. The study estimated that over 90% of all ad impressions passed through the adtech chain last year.

According to the ACCC’s analysis, Google’s dominance is based on multiple factors including access to consumers and other data; exclusive inventory; and integration across its Adtech services.

The report also highlights Google’s key acquisitions, including DoubleClick in 2007 and AdMob 2009, which were said to have helped Google cement its position in adtech.

Another target is the lack of transparency in this sector. The report highlighted opaque pricing and operations, which, it claimed, compound the market’s complexity, making it difficult to understand the supply chain and spot misconduct.

In its own report on the adtech sector, last year’s U.K. competition watchdog raised similar concerns. The U.K. legislature is now working to reform domestic competition law in a digitally focused manner.

The ACCC also calls for new legal powers to limit Google’s dominance of the advertising sector. It recommends that the industry establish standards, such as requiring providers publish average fees and take rate to allow customers to compare fees between different providers.

It also suggests an industry standard that will allow “full, independent verification” of services used by advertisers in the supply chain. It also mentions Google’s refusal of participation in the publisher-led header bidding push. This industry initiative was developed in 2014/15 and aimed to increase competition for publishers’ inventory. However, it was stymied due to lack of support by Google. Another critical observation is that Google has previously allowed its services to have a last look to outbid rivals.

“Google has made its vertically integrated position a tool to manage its adtech services in such a way that it has over time led to a lower-competitive adtech sector. Sims stated that this conduct has allowed Google to establish and sustain its dominant position within the adtech supply chain.

Google’s activities in the supply chain mean that Google can also act for both the advertiser (the buyer), and publisher (the seller) in one transaction and manage the ad exchange linking these two parties. Google can create conflicts of interest when the interests of both publishers and advertisers are not aligned.

The most striking thing about the ACCC’s findings is the fact that they are not new. These are issues that regulators and legislators around the globe have been working to solve — and evaluating how to do it.

The report by the Australian watchdog follows a major penalty against Mountain View, France, this summer. This was in relation to self-preferencing in an adtech industry case.

France’s competition authorities also obtained a number commitments from Google regarding interoperability on the adtech marketplace.

ACCC recommends that Down Under establish rules to manage conflict of interest, prevent anti-competitiveself-preferencing, and ensure that rival adtech providers can “compete on their merits”. This is in line with many of the concerns European Union legislators identified in a proposed set of ex ante rules targeted at tech giants such as Google (aka “gatekeeper” platforms).

As mentioned, the U.K. plans to update its competition rules in order to give regulators unique powers to deal with platform giants.

Following complaints from the adtech sector, the country’s competition watchdog is currently investigating a Google proposal that would see third-party tracking cookies removed (aka Privacy Sandbox) and replaced with “pro-privacy alternatives”. The tech giant refused to proceed with the plan until the CMA was satisfied that the transition away 3P cookies would not adversely impact competition.

While legislators in Germany have updated competition rules to target digital titans, they passed an update to the law in January which gives antitrust regulators the power to intervene against internet giants. This includes banning self-preferencing.

The ACCC noted that it is currently considering specific accusations against Google under existing competition laws. However, the ACCC report stresses that it must establish new regulatory mechanisms to combat its dominance.

“We identified systemic concerns about competition relating to conduct over many decades and multiple adtech services, including conduct which harms rivals. Sims stated that enforcement and investigation under general competition laws is not well-suited for dealing with such broad concerns and that it can be too slow if anticompetitive harm must be prevented.

Simultaneously Australia is considering wider regulations for the digital sector. A report will be available in a year.

ACCC stated that the report should also examine how sector-specific rules can be implemented for adtech. It will also discuss whether these regulations need to be part of a larger regulatory scheme to address “common concurrence and consumer concerns” it identified in digital platform markets.

Sims added that many of the concerns identified in the adtech supply chains are similar to those in other digital platform markets such as social media, online search and app marketplaces. Sims said that these markets are dominated by a few key providers who benefit from vertical integration. This can lead to serious competition concerns. These problems are often exacerbated by a lack transparency.

The ACCC stated that it will consult on this piece of work in the first quarter 2022. It also said that it will “take into consideration” any overseas legislative proposals.

At the end of last year the EU presented its plan to deal with Big Tech in the Digital Markets Act. It also included a wider set of rules (the Digital Services Act), which aims to increase accountability across all internet services. This includes areas such as illegal content and the sale of dangerous products online.

The FCO opened a series of proceedings against tech giants, including Amazon, Apple and Facebook, while Germany is pushing for any pan-EU measures. It is looking into whether their market power is sufficient to allow their businesses to be included in the new law. The competition authority could also soon intervene to stop market abuses.

Asia has been taking a more active stance against tech giants being regulated. For market abuse in relation to its Android smartphone operating system, South Korea, Google was fined $177 million earlier this month. China’s regime is waging war on Big Tech, even domestic companies, while in South Korea, Google was fined $177 million for market abuse related to its smartphone operating system, Android.

Even on their home turf, U.S. tech titans like Google and Facebook are still facing regulatory challenges. These include how they operate app shops and issues such as self-preferencing or consolidation of predatory markets.

Global consensus is that Big Tech needs to be reduced in size. There are many questions about how this happens. Australia is already moving forward with legislation to create a news media bargaining system that targets Facebook and Google. It also raises the question of how fast digital markets can be re-established.

A spokesperson for Google responded to the ACCC report with 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.”

“The ad-supported internet is at risk if digital advertisement practices don’t adapt to people’s changing expectations about how data is used and collected,” said the tech giant. Google’s Privacy Sandbox was created in collaboration with the industry to protect users’ privacy and support publishers.