An ACCC inquiry into advertising technology (ad tech) has found significant competition concerns and potential harms to publishers, advertisers, businesses and consumers from Google’s dominance of the sector.
More than 90% of ad impressions traded via the ad tech supply chain are estimated to have gone via at least one Google service in 2020.
The regulator’s report argues that it currently lacks the power to address the problem under existing competition laws and needs stronger, more timely legislation to act to prevent any misuse of market power.
The ACCC report accuses Google of using its dominance to preference its own services and shield them from competition. For example, Google prevents rival ad tech services from accessing ads on YouTube, providing its own ad tech services with an important advantage.
For example, the report cites Google’s refusal to participate in publisher-led header bidding, an industry innovation aimed at increasing competition for publishers’ inventory, and previously allowed its services to have a ‘last look’ opportunity to outbid rivals.
Less competitive market
ACCC Chair Rod Sims said Google has operated in a way that led to a less competitive ad tech industry.
“This conduct has helped Google to establish and entrench its dominant position in the ad tech supply chain,” he said.
“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.”
The ACCC’s concerns and focus on the issue is sparked by the growing importance of ad tech services in the digital economy. The report estimates that at least 27% of Australian advertiser spendis sold that way.
Sims is concerned about the potential for higher costs due to a lack of competition and the ACCC is investigating specific allegations against Google, including conduct that harms rivals, under existing competition laws, but says any report will take too long to prevent further damage to competition.
“An inefficient ad tech 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 said.
“New regulatory solutions are needed to address Google’s dominance and to restore competition to the ad tech sector for the benefit of businesses and consumers. We recommend rules be considered to manage conflicts of interest, prevent anti-competitive self-preferencing, and ensure rival ad tech providers can compete on their merits.”
“Many of the concerns we identified in the ad tech supply chain are similar to concerns in other digital platform markets, such as online search, social media and app marketplaces. 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.”
Sims said the legal framework for the proposed rules and powers recommended in the new report will be considered as part of a broader ACCC report due in September 2022.
Consultation on that report will commence in the first quarter of 2022 and will take into account overseas legislative proposals to deal with these issues.
Data creates dominance
The ACCC argues Google’s access to a large volume and range of first-party data from its customer-facing services, such as Search, Maps and YouTube has help build its dominance in the market. But the regulator says the extent to which Google uses that data to advantage its ad tech businesses is not clear and is a source of confusion among industry stakeholders.
Rod Sims said that want Google makes clear how it uses its data through clear public statements in its terms and conditions and other material it uses to sell its services.
The report also recommends that under the proposed new sector-specific rules, the ACCC be given the power to develop and implement special measures to address competition issues caused by an ad tech provider’s data advantage, such as data separation or data access requirements to address the competition risks.
Greater transparency needed
The ACCC also found that the pricing and the operation of ad tech services lack transparency. Part of the problem is the complexity of the supply chain, making it difficult for advertisers and publishers to understand how it works and detect misconduct.
The regulator recommends the industry establish standards, requiring ad tech providers to publish average fees and take rates to enable ad tech customer to easily compare fees and take rates across different ad tech providers and services. It also recommends an industry standard to enable full and independent verification of the services advertisers use in the supply chain.
The report also identified specific transparency issues with Google’s publisher services, and recommends that Google should be required to provide publishers with information about the operation and outcomes of its publisher ad server auctions.
“If Google fails to provide sufficient information, or the industry’s voluntary standards do not achieve transparency, then new requirements should be able to be put in place to address this,” Sims said.
You can download and read the ACCC’s Digital advertising services inquiry report here.