The UK’s Competition and Markets Authority (CMA) has said that Facebook and Google will face new rules next year to prevent abuse of their market dominance.
The Issues
For the CMA, the issues that were highlighted back in July and are now in the forefront again focus on the facts that:
– A massive 80 per cent of the UK’s expenditure on digital advertising, which is the equivalent of £500 per household, goes to Facebook and Google.
– Google a has 90+ per cent share of the UK’s £7.3 billion search advertising market and Facebook has a greater than 50 per cent share of the £5.5 billion display advertising market.
– Google has doubled its revenue per search since 2011, and Facebook’s average revenue per user has risen from under £5 in 2011 to over £50 last year.
– The massive user bases of both are sources of market power e.g. in the training of Google’s algorithms compared to other search engines and in enabling Facebook to enjoy ‘must-have’ status for communications.
– Both have un-matchable access to user data and use their default settings to gain more user data.
– Unlike many rivals, both companies have been able to acquire positions in other markets.
– The media industry has lost a large proportion of its advertising revenues to Facebook and Google.
Meaning?
From the CMA’s perspective, these facts represent serious potential barriers to new competition and appear to show that Facebook and Google now have unassailable market positions that make it very difficult for other companies to compete on equal terms.
New Rules in 2021
The new rules in 2021 will take the form of a statutory code of conduct, enforceable by a new Digital Markets Unit (to be set up in April 2021) working with Ofcom and the ICO. The government says that the code will give consumers more choice and control over how their data is used, give businesses a chance to better promote their products online, and support the sustainability of the news publishing industry to rebalance the relationship between publishers and online platforms.
Expectations and Requirements
The new code will set-out expectations for the behaviour of Google and Facebook in terms of their interaction with competitors and users and will require platforms funded by digital advertising to be more transparent about their services and how consumer data is used. These platforms will also be required to give consumers a choice over whether to receive personalised advertising and not to place restrictions on customers that make it hard for them to use rival platforms.
What Does This Mean For Your Business?
The figures appear to show a very clear market dominance by Facebook and Google. New rules such as these would, therefore, be good news for rival platforms, media companies and other publishers. Such a ‘Unit’ with statutory power working to create more of a level playing field for them could help to lower the current competitive barriers. For advertisers, new rules could be the beginning of having a greater choice. Although Google and Facebook have a weight of experience, data and services that are used by businesses to advertise effectively and, therefore, provide a valuable service to businesses, there are many who share the view that the dominance of just a few big tech companies brings less innovation, higher advertising prices, less choice (and control for consumers), and can curtail the growth of the sector, ultimately impacting upon the businesses that use their services. There is, however, some scepticism about how effective the government will be in trying to enforce rules upon powerful and influential tech companies that have resisted and avoided many attempts in the past to control them.
