June 30, 2020

With the CMA due to publish its findings further to its investigations into Online Platforms and Digital Advertising in July we take a brief look back at what has been going on and what is likely to come of it.

Who, what and where?

When we started to cast our minds back and consider where we are up to with investigations into online regulation, we had to remind ourselves: who is involved; what are they trying to achieve; and where will the outcomes of this investigation be felt the most?

The online world is evolving at a frighteningly quick pace and so there are various workstreams being considered by multiple bodies. We thought it might be helpful to recap who is doing what:

1. First, there is the UK government which, after publishing its “Digital Charter” in 2018, committed to ensuring the UK would be the safest place in the world to be online. It published the Online Harms White Paper which detailed a set of measures, including the establishment of a new duty of care on relevant companies, to tackle online harms. The consultation period ended in July 2019 and so pressure to speed up the timetable for the introduction of legislation is now mounting. We understand there are plans to publish a full response before the end of the year.
2. Separately, the UK treasury is considering competition in digital markets and whether the current competition policy and enforcement tools in the UK are fit for purpose in respect of such digital markets. The House of Lords Committee also published a report on “Regulating in a digital world” which closely aligned with the government’s approach set out in its Digital Charter.
3. Then, focusing on data, the Centre for Data Ethics and Innovation was launched by the UK government with the initiative of ensuring that data-driven technologies are used for the maximum benefit in society. The Centre has so far focused on online targeting and bias in algorithmic decision making and recently published its “AI Barometer” report which highlights the potential for AI and data-driven technology to address society’s greatest challenges.
4. Also focused on data, the ICO has been closely looking into the AdTech industry’s use of personal data with a focus on Real Time Bidding to ensure consumers have confidence in, and understand, how their data is being used.
5. The EU Commission has published a report on “Competition Policy for the Digital Era” as well as carrying out its ongoing enforcement work, which includes fining Google for anti-competitive behaviour attached to Android and abusing its monopoly in online advertising (AdSense for Search). Given the geographical reach of digital markets, it is important to consider the international regulatory frameworks and policies and seek to align them as much as possible.
6. Last but not least is the Competition and Markets Authority (CMA) which has been extremely busy with several digital market workstreams. It was asked by the DCMS to look at assessing broad potential sources of harm to consumers in connection with the market for digital advertising and secondly it also launched its own “Digital Markets Strategy” which is what we’re going to focus on from here, as we eagerly anticipate the publication of its findings.

CMA’s Digital Markets Strategy

In July 2019 the CMA set out its Digital Markets Strategy with the intention of protecting consumers in rapidly developing markets whilst still fostering innovation.

It wanted to find out more about how major platforms such as Google and Facebook operate as these platforms are funded by digital advertising. Consumers, through using the platforms, indirectly pay for the digital services by providing (or making available) their personal data which is then used to sell digital advertising on the platforms.

Pre-lockdown, the stats showed that people in the UK spend an average of 3 hours and 15 minutes online a day and more than a third of that time is spent on Google (including YouTube) or Facebook (including Instagram and WhatsApp). This hints at the scale of the exponentially expanding digital advertising ecosystem and so the CMA’s Digital Markets Strategy seeks to consider the impact of this ecosystem on consumers.

One element of the Digital Markets Strategy was the launch of a market study into online platforms and digital advertising. The study was actually something that the UK government had called for in March 2019 when the Digital Competition Expert Panel issued its report on “Unlocking digital competition” (the Furman Review), and noted the lack of transparency and dominance of two major players: Facebook and Google.

The Furman Review

There is a huge amount of work being done in looking at the online world from a regulatory perspective. The Furman Review suggested that a new approach is needed to tackle digital markets and ensure competitive regulation. Its key proposals related to adapting merger control rules; strengthening competition enforcement powers; monitoring developments in relation to machine learning algorithms and artificial intelligence; and creating a new ‘digital markets unit’ which would be tasked with securing competition, innovation and beneficial outcomes for consumers and businesses with powers to: (i) establish a code of conduct for digital platforms and companies with ‘strategic market status’; (ii) to promote a greater openness on data; and (iii) support greater consumer choice through data portability.

CMA’s response to the Furman Review

The CMA welcomed the Furman Review and was supportive of the overall approach. It agreed that traditional tools of enforcement are no longer suitable for dealing with wider challenges in the digital markets as some of the traditional forms of analysis, such as focusing on price effects, may not cause the same impact on competition online. Interestingly, however, the Furman Review didn’t think that fundamental changes to the existing legislative regime were necessary at this stage.

CMA’s progress to date

The CMA set to work on assessing the potential sources of harm to consumers in connection with digital advertising. It wanted to review the impact of platforms with market power on consumers; whether consumers can control how data about them is used and collected; and whether competition in digital advertising is distorted by the market power held by platforms.

An interim report confirmed that Google accounted for more than 90% of all revenues earned from search advertising with a revenue of £6bn and Facebook accounted for around half of UK online display advertising revenues, reaching more than £2bn in 2018. The CMA expressed concern that although they bring innovative and valuable products, their position creates a lack of competition which consequently means that people are missing out on the next great new idea; there is a lack of proper choice for consumers; higher prices for advertising; and other publishers may struggle to produce valuable content as their share of revenue is squeezed by large platforms.

In gathering information, the CMA could build a clearer picture of how these platforms use personal data to assess whether it believes that consumers have knowledge and control over how their personal data is used. The CMA’s work fits here with the ICO’s investigation into the AdTech industry and Real Time Bidding, which has been paused during the Covid-19 pandemic but published an interim report expressing its disappointment in the industry’s overall response to its call for market engagement in reforming the problematic practice in which data is used.

The CMA’s interim report highlighted a few issues with personal data. Namely that it didn’t think consumers were in control of their data, as platforms don’t always allow consumers to opt out of personalised advertising, and the service is very much ’take it or leave it‘. It found that consumer engagement with privacy settings and controls is low which indicates that such protections aren’t promoted enough and there is a lack of transparency with regards to default settings.

What will the final report say?

After publishing the interim report, the CMA sought industry responses and feedback which it will consider before publishing its full findings, which is still scheduled for July 2020. We anticipate that the CMA will make detailed recommendations to the government which build upon the proposals set out in the Furman Report, it seems unlikely that such recommendations will be considered in the wider context, alongside amongst other workstreams, which ultimately the government will need to do.

Wider response

In looking at what else has been going on, the “Online Harms White Paper” proposed the establishment of a new independent regulator, which would be responsible for enforcing against relevant companies who breached a duty of care by failing to take reasonable precautions to prevent their users from online harms. The relevant companies aren’t just big tech players such as Facebook and Google but any company which allows users to share content or interact with each other online. It could be that this regulator takes some responsibility for, or leads, the ‘digital markets unit’ envisaged by the Furman Review and initially supported by the CMA.

The Centre for Data Ethics and Innovation also proposed introducing an independent regulator further to the work they carried out around online targeting. Their view was that the regulator would focus on improving accountability, transparency and user empowerment. Again, these are common principles that chime with the ICO’s work to date. However, with Ofcom rumoured to take on the new role, it will be interesting to see how the responsibilities are allocated amongst the ICO and CMA, as other regulators, to prevent duplication and ensure a clear remit. It shouldn’t be forgotten that these authorities already have and can use significant power. Co-existence remains an open question as a coordinated approach is required to navigate the tricky environment of multiple regulators.

Lastly, the global nature of digital markets means that it is increasingly important to consider issues at an international level and to have effective frameworks for cooperation in place to facilitate this. We’ve recently seen tech giants including Facebook, Google, Microsoft and Twitter commit to work with each other in Project Protect to improve the cross-industry response to keeping content relating to child abuse off their platforms. From an Online Harms perspective, the UK is keen to be one of the first to legislate. However, the extremely complex task of balancing the definition of harm with fundamental rights, such as freedom of expression, is further complicated when considering how this model might be exported to other countries across the world.