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CMA market study into online platforms and digital advertising in the UK

The Competition and Markets Authority (CMA) has launched a market study into online platforms and digital advertising in the UK, which will be conducted over the next year.

This forms part of the CMA's Digital Market Strategy, which sets out how the CMA plans to foster innovation while protecting consumers in the rapidly developing digital economy. The CMA describes the market study as being “core” to the strategy and expects it to play a major part in informing policy, especially in relation to advertising-funded business models.

Background to the market study

The market study follows calls from the government for the CMA to conduct a review of the digital advertising sector given its wider implications for the digital economy. These include calls resulting from the Furman and the Cairncross reviews.

The Furman review, a panel appointed by HM Treasury, looked at competition in the digital economy and was completed in March 2019. It identified the risks associated with the concentration of digital markets and expressed concerns that the rate of policy change has been lagging behind the pace of development in the digital economy. To address these issues, it recommended, among other things, that the CMA investigate the digital advertising market to examine whether competition is working effectively.

The Cairncross review was completed by Dame Frances Cairncross in February 2019 at the government's request and looked at the future of the UK news industry. The final report called for the CMA to conduct a review of the online advertising sector, due to competition concerns identified. These relate to the uneven balance of power between news publishers and the online platforms that distribute their content, among other concerns.

Scope of the market study

As part of its market study, the CMA published a market study notice providing an overview of the study and outlining the timeframe for its completion and a statement of scope, setting out the issues which will be the focus of the study.

According to the statement of scope, the market study will assess the nature of competition on both sides of the digital advertising market, namely the consumer-facing market, which provides the relevant service to consumers in exchange for their data, and the business-facing market, which monetises consumers' data by selling advertising space. The market study focusses on the following three key areas:

The market power of online platforms

The CMA aims to examine whether online platforms enjoy market power in consumer-facing markets and, if they do, the extent to which such market power raises barriers to entry for potential competitors and creates a concentration in digital advertising. In doing so, the CMA will focus particularly on understanding the role of consumer data, and the extent to which access to such data by online platforms creates a barrier to competition in digital advertising.

Consumer control over data collection practices

The market study aims to examine the level of control and understanding consumers have over online platforms' practices in relation to data collection and use. The CMA will consider the extent to which consumers have sufficient knowledge, understanding and tools to engage effectively with online platforms in relation to the collection and use of their data. It will also examine how consumer data is used across the services online platforms provide and whether this harms or benefits consumers.

Competition in the supply of digital advertising

The CMA would like to better understand whether there is effective competition in the supply of digital advertising. The CMA acknowledges the complexity of the digital advertising market but also notes that there is a lack of transparency in the way it operates. The CMA therefore aims to develop a better understanding of the different elements of the digital advertising supply chain, including how money and information flow between different market participants. 

Possible remedies

If the market study results in competition law concerns that need to be addressed, the CMA will consider the need for remedies. The CMA notes that any remedies it will consider are likely to build on proposals made by the Furman review, including the implementation of legislative changes for the development of a regulatory regime to control the activities of online platforms and the creation of a new regulatory body to enforce any new provisions under the regime.

Other potential areas of reform include giving consumers greater protection in respect of their data and improving transparency and oversight for participants in digital advertising markets on both financial flows and the delivery of advertisements.

Next steps and comment

The CMA will conduct the market study over the next year, analysing evidence gathered from a wide range of stakeholders. In light of that evidence, it may reconsider the focus of its study, if required. The deadline for the submission of responses in relation to the issues raised in the statement of scope was 30 July 2019. The CMA will publish an interim report by 2 January 2020 and is expected to release its final report by 2 July 2020.

The launch of the market review by the CMA shows its intention to respond to the competition concerns raised by the Furman and Cairncross reviews and play an active role in the area of digital advertising. The CMA has indicated a number of actions it may take, in the event that the market study results in competition law concerns that need to be addressed. The outcome of the market study and the CMA's approach to any such concerns identified by it remain to be seen. We will monitor this area and report on further developments.

This publication is intended for general guidance and represents our understanding of the relevant law and practice as at September 2019. Specific advice should be sought for specific cases. For more information see our terms and conditions.

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