ACCC finds Google’s dominance in adtech supply chain harms businesses and consumers

Mariam Cheik-Hussein
By Mariam Cheik-Hussein | 28 September 2021

An inquiry into the adtech sector has found Google’s dominance in the supply chain harms business and consumers.

The Australian Competition and Consumer Commission (ACCC) has been looking into markets for the supply of digital advertising technology services and digital advertising agency services since February 2020.

In its final report released today, the watchdog found the sector has “significant” competition concerns and that existing Australian laws are not enough to address the issues. Instead, the ACCC recommends it be given powers to develop rules in response.

The report also finds that Google has a dominant position in key parts of the adtech supply chain and estimates that in 2020 more than 90% of ad impressions traded via the adtech supply chain passed through at least one Google service.

“Google’s dominance in the adtech supply chain is underpinned by multiple factors including its access to consumer and other data, access to exclusive inventory and integration across its adtech services,” the ACCC says.

“Key acquisitions by Google, including of DoubleClick in 2007, AdMob in 2009, as well as YouTube in 2006 have helped Google entrench its position in adtech."

The report goes on to find that Google has used its position to preference its own services and “shield” them from competition.

For example, Google prevents rival adtech services from accessing ads on YouTube, which gives its own adtech services an advantage. However, Google argues this is common throughout the industry, with most tech platforms offering exclusive access their their inventory.

The ACCC says Google has also refused 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.

“Google has used its vertically integrated position to operate its adtech services in a way that has, over time, led to a less competitive ad tech industry,” says ACCC chair Rod Sims.

“This conduct has helped Google to establish and entrench its dominant position in the ad tech supply chain.

“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.”

‘An inefficient adtech industry’
The report also estimates that in Australia at least 27% of advertiser spend on ads sold via the adtech supply chain was retained by adtech providers in 2020.

“We are concerned that the lack of competition has likely led to higher ad tech fees,” Sims says.

“An inefficient adtech 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.”

“The ACCC is considering specific allegations against Google under existing competition laws. However new regulatory solutions are needed to address Google’s dominance and to restore competition to the adtech 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.”

“We have identified systemic competition concerns relating to conduct over many years and multiple ad tech services, including conduct that harms rivals. Investigation and enforcement proceedings under general competition laws are not well suited to deal with these sorts of broad concerns, and can take too long if anti-competitive harm is to be prevented.

“Many of the concerns we identified in the adtech 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.”

Confusion over Google’s use of first-party data
The report says the extent to which Google uses its first-party data to advantage its adtech businesses is not clear and is a “source of confusion among industry stakeholders”.

“We recommend that 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,” Sims says.

The report also recommends that the ACCC be given the power to develop and implement special measures to address competition issues caused by an adtech provider’s data advantage, such as data separation or data access requirements to address the competition risks that may arise from the use of first party data.

Industry standards recommended to boost transparency
The report also found that the pricing and the operation of adtech services lack transparency.

The complexity of the supply chain contributes to this lack of transparency and can make it difficult for advertisers and publishers to understand how the supply chain is operating and detect misconduct.

The ACCC recommends the industry establish standards, requiring adtech providers to publish average fees and take rates to enable adtech customers to easily compare fees and take rates across different adtech 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 says.

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