ACCC calls for laws to counter Google's ad tech dominance

An ACCC inquiry into the advertising technology (or ‘ad tech’ sector) has identified significant competition concerns and likely harms to publishers, advertisers and ultimately, consumers. The report revealed that enforcement action under Australia’s existing competition laws is not enough to address the competition issues in the sector, and that the ACCC should be given powers to develop specific rules in response. Ad tech services facilitate complex transactions for the selling and buying of advertising space on websites or apps, resulting in the ads that are displayed to consumers. Ad tech services also perform an important role in the digital economy, helping Australian businesses reach consumers, and publishers fund online content. The report estimates that, in Australia, 27% of advertiser spend on ads sold via the ad tech supply chain was retained by ad tech providers in 2020.

ACCC Chair Rod Sims said there is a concern that the lack of competition has led to higher ad tech fees, noting that an inefficient ad tech industry means higher costs for publishers and advertisers, which could reduce the quality or quantity of online content, and ultimately result in consumers paying more for advertised goods. The report identified systemic competition concerns relating to conduct over many years and multiple ad tech services, including conduct that harms rivals. Sims said that 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 ad tech 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,” Sims said.

The report found that Google holds a dominant position in key charts of the ad tech supply chain, and estimated that more than 90% of ad impressions traded via the ad tech supply chain passed through at least one Google service in 2020. Google’s dominance in the ad tech supply chain is underpinned by multiple factors, including its access to consumer and other data, access to exclusive inventory and integration across its ad tech services. Key acquisitions of DoubleClick in 2007, AdMob in 2009, and YouTube in 2006 have also helped Google cement its position in ad tech. The report found that Google has used its position to preference its own services and shield them from competition; for example, Google prevents rival ad tech services from accessing ads on YouTube, providing its own ad tech services with an important advantage.

Google has also refused to participate in the publisher-led header bidding, an industry innovation aimed at increasing competition for publishers’ inventory, and allowed its services to have a ‘last look’ opportunity to outbid rivals. ACCC Chair Rod Sims said Google has used its vertically integrated position to operate its ad tech services in a way that has led to a less competitive ad tech industry, adding that this conduct has helped Google 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,” Sims said.

Sims added that the ACCC is considering specific allegations against Google under existing competition laws, and acknowledged that new regulatory solutions are needed to address Google’s dominance and restore competition to the ad tech 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,” Sims said.

Sector-specific regulation, such as that proposed in the ACCC’s report, is not new. Other industries, such as telecommunications, have specific rules which can address particular competition and transparency concerns identified in those sectors. Sims said a broader ACCC report, due in September 2022, will consider how the recommendations in this Report will be put into effect, along with the legal framework for the proposed rules and powers. The report will also look at whether the proposed rules for ad tech need to form part of a broader regulatory scheme to address common competition and consumer concerns, as identified in digital platform markets. Consultation on that report will commence in the first quarter of 2022 and will consider overseas legislative proposals to deal with these issues.

“We are also engaging very closely with our international counterparts who are at different stages of introducing similar rules to deal with these issues,” Sims said.

Google has access to a large volume and range of first-party data gathered through its customer-facing services, such as Search, Maps and YouTube. The extent to which Google uses its first-party data to advantage its ad tech business is not clear, and is a source of confusion among industry stakeholders. The ACCC recommends that Google clarify how it uses its data through clear public statements in its terms and conditions and other materials it uses to sell its services.

The report also recommends that under the proposed new sector-specific rules, the ACCC be given the power to develop and implement special measures to address competition issues caused by an ad tech 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. The ACCC also found that the pricing and the operation of ad tech services lack transparency, with the complexity of the supply chain contributing to this lack of transparency and making it difficult for advertisers and publishers to understand how the supply chain is operating and detect misconduct.

The ACCC recommends establishing standards that require ad tech providers to publish average fees and take rates to enable ad tech customers to compare fees and take rates across different ad tech 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 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 said.

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