Chancellor Urges CMA Study Into Digital Marketplace ‘As Soon As Possible’ 

Philip Hammond has become the latest senior figure to ask the Competition and Markets Authority to conduct a market study into the digital advertising marketplace, saying that the body should prioritise the issue.

Following the publication of the Furman report, which aligned closely with the Cairncross review on many recommendations including the call for a CMA market study, the Chancellor wrote to CMA chair Lord Tyrie saying a decision on whether to move forward with a market study should be made “as soon as you consider it possible to do so.”

Mr Hammond said: “The CMA’s expertise and information gathering powers make it uniquely placed to shine a light on this sector, which has been widely described as lacking transparency, and when appropriate to make recommendations to Government.

“A Market Study would provide greater understanding of the existence, nature and potential solutions to any problems within the digital advertising market, and would further develop understanding of the operation of platform markets which rely on digital advertising for revenue. It would also enhance the CMA’s ability to detect and assess digital mergers when these may be of concern.”

Two separate independent inquiries – the Furman report and the Cairncross review – as well as the Culture Secretary and the Commons DCMS and Lords Communications select committees have now recommended a CMA market study into the digital advertising marketplace. The News Media Association has been calling on the CMA to investigate the digital advertising marketplace for for two years.

Responding to the Furman review yesterday, the NMA said: “The NMA gave evidence to Jason Furman and his panel and we welcome his report which concludes that the tech giants have simply become too dominant and the market must now be opened up to ensure greater choice for consumers and competition for businesses.

“One of the report’s main recommendations is for a CMA market study into the digital advertising market which is dominated by two players and suffers from a lack of transparency. The NMA has been calling for the past two years for the government and regulators to investigate this market.

“There is now a growing chorus of voices, from Cairncross to the Lords and Commons Communications Committees, government departments and now the Furman Panel, demanding action. All recognise that distortion and opacity in the digital advertising market is fuelling many of the problems around online harms, data privacy, fake news and damage to a free press.”

The Furman report highlighted a series of concerns with the digital advertising marketplace, such as the lack of transparency, the dominance of the tech giants and the collection and use of consumers’ data, stating that there “may be anti-competitive practices and potential for abuse of dominance in parts of the market.”

The report also repeatedly referenced the Cairncross review and its concerns about the impact of the tech giants on the ability of news media publishers to produce and invest in journalism on a sustainable basis.

The report said: “Dame Frances’ call for the CMA to review digital advertising markets, and for codes of conduct to be drawn up to ensure fair terms of trade where platforms are dominant, align closely with the findings of this review.” 

It added: “The question of how much revenue provided by advertisers reaches publishers or content providers, and conversely how much goes to companies in the value chain, has been widely commented upon.  

“Research commissioned by DCMS for the Cairncross Review gave best estimates of publishers receiving about £0.62 of every pound of advertiser investment, with a range of £0.43 to £0.72.”

The report also proposed changes to the mergers regime to curb the tech companies and for the Information Commissioner’s Officer’s secondary competition role to be boosted. 

The report added: “A lack of effective competition in the digital advertising market may lead to harm for consumers and businesses, for example through higher prices for advertisers, higher prices for consumers for goods and services that use digital advertising if these costs are passed through and/or a lower quality advertising experience for example seeing more (or more intrusive) adverts.”

The Furman report said a CMA investigation should consider:

• the importance of data in digital advertising including in programmatic trading, including how data may be leveraged across digital platforms operating at different levels of the value chain;
• whether the market is sufficiently transparent, including to advertisers and publishers as well as to consumers in how their data is used;
• the extent to which digital platforms grant preferential treatment to their own businesses across the value chain and/or act in other ways which are likely to disadvantage third-party competitors.