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CMA cedes its own market power in release of market study interim report

The Competition Markets Authority ("CMA") has today released its initial findings following a nearly six-month market study into online platforms and digital advertising. The report reveals some interesting insights into the market – including the statistic that Google enjoys a more than 90% share of the £6 billion per annum search advertising market in the UK.  However, the overall report appears to be something of a misfire, instead re-issuing broad comments and outsourcing further heavy lifting.
Expectedly, much of the report centres on the market power of Google and Facebook, concluding that "a lack of real competition" to these behemoths "could mean people are already missing out on the next great new idea from a potential rival".  While it is important from a public law perspective that regulatory bodies such as the CMA build a case and clearly set out the information gathered and found, conclusions such as the above barely go beyond those identified in the CMA's own scoping document published at the start of the process.  Similarly, the CMA appears to have acquired information to confirm that data collection "plays an important role in driving Google and Facebook's powerful market position by allowing them to target their advertisements more effectively than others".  Comments such as these provide little new insight and offer little by way of clarity for businesses or consumers who are affected by the issues identified by the CMA.
Having drawn these findings, the CMA has indicated its initial view not to make a market investigation reference.  This decision was somewhat unexpected for industry who had braced itself for a further deep dive into its practices.  It will also come as a surprise those who review the interim report, given that many of the interim conclusions reached would raise serious issues for consumer welfare if accurate.  Instead, the CMA has made the provisional decision not to conduct a market investigation on the basis that three other workstreams justify its preliminary decision:
  1. Government has already committed to substantial regulatory reform in the broader digital area.  Specifically, the CMA cites the government's work in regulating online harms as meaning that any targeted reforms on a narrow set of companies would risk "complicating" the landscape;
  1. The recommendations contained in the Furman Review (delivered earlier this year) in many respects cover the areas of concern identified by the CMA.  In particular, the CMA agrees that government should implement a pro-competitive regulatory regime for online platforms, and that Google and Facebook should be subject to a code of conduct; and
  1. The global nature of this industry means that any UK-specific policies, such as enforcing ownership separation, may be ineffective if implemented unilaterally in the UK.
Some more detailed potential interventions are outlined, and the CMA will continue to investigate these preliminary findings through to July 2020.  Of particular interest in this regard is the regulator's consideration as to whether separation of Google's intermediation activities would help tackle what the CMA regards as the company's "conflicts of interest and lack of transparency" in the intermediated market for display advertising.  Overall, however, the CMA appears to be kicking the big issues to another day and/or another body.  When the Furman Review was released, many anticipated that the CMA would be the best fit to host a new Digital Markets Unit.  The question now is whether it even wants the job.
To speak to one of our experts on how to most effectively provide views on the CMA's initial findings before the deadline of 12 February 2020, contact Edward Bowie or John Cassels.

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