The Competition and Markets Authority has provisionally found that Google is using anti-competitive practices in open-display ad tech, which it believes could be harming thousands of UK publishers and advertisers. In its 2019 market study into digital advertising, the CMA found that advertisers were spending around £1.8 billion annually on open-display ads, marketing goods and services via apps and websites to UK consumers.
When placing digital ads on websites, most publishers and advertisers use Google’s ad tech services to bid for and sell advertising space. The CMA is concerned that Google is actively using its dominance in this sector to preference its own services. It says that Google disadvantages competitors and prevents them competing on a level playing field to provide publishers and advertisers with a better, more competitive service that supports growth in their business.
The open display ‘ad tech stack’ and the CMA’s concerns
The digital advertising technology sector (known as the ‘ad tech stack’), is made up of various intermediaries that facilitate the sale of online open-display advertising space on websites or mobile apps between ‘sellers’ (i.e. publishers) and ‘buyers’ (i.e. advertisers). When a user opens a website or app, while the content loads on the page, a near-instantaneous series of auctions and transactions takes place to decide which ads will be shown to that user on that webpage or app. This process involves sending requests for bids and, in response, advertiser bids being sent through a chain of various intermediaries to match the space on the webpage with the advertiser willing to pay the most for it.
The CMA’s investigation has focused on Google’s role as an intermediary in three key parts of this chain, where it has a powerful market position with high market shares. For advertisers, Google operates two ad buying tools, known as “Google Ads” and “DV360”. For publishers, it operates a publisher ad server, known as “DoubleClick For Publishers” (DFP). In the centre of the ad tech stack, Google operates an ad exchange, known as “AdX”. Ad exchanges typically receive requests for bids from publishers and responding bids from advertisers, and then conduct an auction to match these two sides. AdX is where Google charges its highest fees in the ad tech stack (approximately 20% of the bid amount).
Summary of the ad tech stack, key intermediaries and Google’s ad tech products
The CMA’s provisional findings relate to anti-competitive ‘self-preferencing’ by Google. The CMA has provisionally found that, since at least 2015, Google has abused its dominant positions using both its buying tools and publisher ad server to strengthen AdX’s market position and to protect AdX from competition from other exchanges. In addition, because of the highly integrated nature of Google’s ad tech business, the CMA has provisionally found that Google’s conduct has also prevented rival publisher ad servers from being able to compete effectively with DFP, harming competition in this market.
Various practices give AdX competitive advantages, disadvantage Google’s rivals, and are against the interests of Google’s advertiser and publisher customers. They include:
- providing AdX with exclusive or preferential access to advertisers that use Google Ads’ platform;
- manipulating advertiser bids so that they have a higher value when submitted into AdX’s auction than when submitted into rival exchanges’ auctions; and
- allowing AdX to bid first in auctions run by DFP for online advertising space, effectively giving it an ‘right of first refusal’ – with rivals potentially not having any chance to submit bids.
The CMA has provisionally found that this anti-competitive conduct is ongoing and so is considering what may be required to ensure that Google ceases the anti-competitive practices, and that Google does not engage in similar practices in the future.
The CMA will now consider representations from Google before reaching its final decision. The CMA may impose a financial penalty on any business found to have infringed the Chapter II prohibition in the Competition Act 1998 of up to 10% of its annual worldwide group turnover. When calculating financial penalties, the CMA takes into account the seriousness of the infringement(s), turnover in the relevant market and any mitigating and/or aggravating factors. The CMA may also issue legally binding directions to bring an infringement to an end.
