CMA calls on government to revamp regulations for tech giants

The Competition and Markets Authority (CMA) is calling on the government to create a new regulatory regime to stop technology giants such as Facebook and Google dominating online advertising.  

The CMA has spent the past year examining the digital advertising markets, and has found that the current laws are “not suitable for effective regulation”.

The regulator said it wants to “lift the lid” on how major platforms use digital advertising to fuel their business models. The total UK expenditure on digital advertising in 2019 was £14bn, amounting to £500 per UK household. Some 80% of this is earned by Facebook and Google alone, the CMA research found.  

Although the services provided by Facebook and Google are welcome and valued by customers and small businesses, said the CMA, it is concerned that “they have developed such unassailable market positions that rivals can no longer compete on equal terms”.

The two organisations have “unmatchable access” to user data, said the regulator, which means they can specifically target its wanted user base in ways that other companies cannot to. Both organisations have also made several acquisitions in recent years, resulting in less competition.

CMA CEO Andrea Coscelli said that through its examination of the marketplace, the regulator had discovered “how major online platforms like Google and Facebook operate and how they use digital advertising to fuel their business models”.

“What we have found is concerning,” he said. “If the market power of these firms goes unchecked, people and businesses will lose out. People will carry on handing over more of their personal data than necessary, a lack of competition could mean higher prices for goods and services bought online, and we could all miss out on the benefits of the next innovative digital platform.”

Together with Ofcom and the Information Commissioner’s Office (ICO), the CMA has launched a Digital Markets Taskforce, aiming to advise the government on a new regulatory regime. The taskforce was created in March as part of the 2020 Budget, but has now officially begun its work.   

The CMA proposes that the government should also create a Digital Markets Unit that will have the power to enforce a range of rules, including a code of conduct, on the platforms to stop them engaging in exploitative or exclusionary practices, and will be able to impose fines on the tech giants if necessary.

The unit, first touted in the government’s report on digital competition published last year, should also be able to order Google to open up its click and query data to rival search engines so they can improve their own algorithms, as well as order Facebook to increase interoperability with other social media platforms, said the CMA.

The regulator is also concerned that the tech giants are interpreting the General Data Protection Regulation (GDPR) in a way that “favours their business models, instead of a way that gives users control of their data”. It said the platforms may share user data freely across their own ecosystem, but refuse to share it with third parties.

“Our clear recommendation to government is that a new pro-competitive regulatory regime be established to address the concerns we have identified and regulate a sector which is central to all our lives,” said Coscelli.

The UK’s search advertising market is worth £7.3bn, with Google reaping 90% of the benefits, while Facebook accounts for more than 50% of the £5.5bn display advertising market.