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International developments give CMA a mandate for next steps on Big Tech

Edward Bowie
22/04/2020
As the CMA continues its wide-reaching market study into online platforms and the digital advertising market, the Covid-19 pandemic has given added impetus to the need to take stock of the UK's advertising and news media industries. International policy developments suggest that the CMA may now feel the need – or opportunity – to think more creatively as it prepares to publish its final report by July 2020. 
 
The UK's competition regulator kicked off its market study last July and is examining the impact on consumers of the market power dynamics in the digital advertising sector and held by online platforms.

In its draft report, released in December, the CMA indicated that it was minded not to conduct a full market investigation principally on the basis that numerous other policy workstreams were already underway. As noted in this blog post, that raised the question as to what role the CMA saw itself playing in the policy landscape. If it felt it was duplicating other work and on that basis would choose not to make bold policy recommendations and interventions, then why bother with the time consuming market study that demands so much of industry participants?

Now, the CMA's international counterparts are leading the way and it remains to be seen whether the UK's regulator will take a similarly proactive and bold approach. 

Most notably, the Australian government stunned Big Tech and the news media industry this week when it announced that it would force Facebook and Google to share advertising revenue with Australian media companies. The government has instructed its competition watchdog to develop a mandatory code of conduct for the digital giants as a result of a sharp decline in advertising, heightened by the coronavirus pandemic.

The mandatory code will require Big Tech to negotiate in good faith on how to pay news media for use of their content that shows up on tools like Google News, and to advise news media in advance of any changes to algorithms that would affect content rankings. It will also include penalties and a binding dispute resolution mechanism to kick in where the negotiations between digital platforms and news media fail.

The Australians have vowed to learn the lessons of France and Spain who have each recently developed similar mechanisms. Earlier this month, France's competition authority ordered Google to negotiate with publishers to pay for reuse of snippets of their content. Meantime, Spain has made payments to publishers mandatory – with the result being that Google has decided to remove its Google News service from the country.

While Facebook has noted its "disappointment" with the Australian decision, the government has vowed not to give in to any threats made by Big Tech. This is unlikely to come as a surprise to Facebook, this move being the latest in a series of Australian regulatory interventions in the last 12 months ranging from profit-shifting to ad tracking and hate content regulation.

This latest surprise decision also demonstrates the importance of regulated entities' careful engagement with government and regulators. The Australian government had already instructed Big Tech to negotiate with the competition authority and local media companies to develop a voluntary code of conduct by the end of this year. However, the prevailing view was that the companies were reluctant to negotiate a voluntary agreement, in effect forcing the government to step in and impose this mandatory code. Facebook has disputed the allegation that it was dragging its feet but the damage is done – and in doing so highlights the delicate balance that companies must strike when seeking to improve or slow down new regulation.

These international policy developments only heighten the pressure on the CMA to deliver something substantive in its final July report. Having already established in its draft that "a lack of real competition" between Facebook and Google could mean that consumers are missing out, Covid-19 has brought into sharp focus another favourite topic of the regulator: media plurality. An agile and proactive competition regulator could look to marry together its pre-existing concerns about digital advertising dominance and the sustainability of news media more generally. The question now is whether the CMA has the appetite to do so.
 
Please review our Covid-19 hub for updates and get in touch if you require further information.

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