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July 1, 2020updated 02 Jul 2020 9:15am

CMA: Someone Should Break Up Google and Facebook, But Not Us…

"The CMA is very much passing the baton to the UK government"

By CBR Staff Writer

The Competition and Markets Authority (CMA) today warned that Google and Facebook’s digital advertising dominance was damaging consumer choice, and urged the government to consider “highly intrusive interventions” — including attempting to break up the companies.

But the watchdog washed its hands of responsibility for that task, saying the government should set up a new “Digital Markets Unit” to tackle that task.

In 2019 Google had more than a 90 percent share of the £7.3 billion search advertising market in UK, while Facebook has over 50 percent of the £5.5 billion display advertising market, the CMA noted today.

CMA Report: Google’s Prices are 40% Higher than Bing’s

This dominance is having a detrimental impact on consumers, the CMA added, saying in a substantial report published today, that the CMA’s investigation found that “Google’s prices are around 30% to 40% higher than Bing when comparing like-for-like search terms on desktop and mobile.”

It now wants Google to open up its search data to rival search engines, saying Google should share its “click and query data to rival search engines to allow them to improve their algorithms so they can properly compete.”

“There are two contexts in which we think the use of separation powers in
some form may be necessary in the markets we have reviewed – to address
Google’s vertical integration and conflicts of interest in open display and to
address the competition effects of the joint ownership of Facebook and
Instagram, the CMA said today in a 437-page report.

It is calling for the government to set up a new “Digital Markets Unit” (DMU) to help establish a “pro-competition regulatory regime”, in a tacit acknowledgement that it has neither the resource nor the authority to take the kind of interventions it believes need to be seen in the market.

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“While we recognise that these would be highly intrusive interventions, they might also have the potential to change the nature of competition substantially. We therefore think that both operational and ownership separation powers, should available to the DMU, the CMA said in its report.

Ronan Harris, VP, Google UK & Ireland, said: “Advertisers today choose from a wide range of platforms that compete with each other to deliver the most effective and innovative ad formats and products. We support regulation that benefits people, businesses and society and we’ll continue to work constructively with regulatory authorities and Government on these important areas so that everyone can make the most of the web.”

The company insists that adtech competition is increasing, costs are falling, and advertising itself is getting cheaper and more accessible.

Christian Ahlborn, Global Head of Competition at Linklaters, commented: The CMA is very much passing the baton to the UK government with a range of politically controversial proposals, including the potential break-up of Google and Facebook, adding to the government’s already ambitious digital agenda.”

He added: “The regulator’s reasoning for forgoing a market investigation is puzzling given that the legislative process for introducing its proposed package is likely to take far longer than a market investigation. However, whilst the CMA cites the need for a holistic approach and Covid-19 for its decision, one is left wondering whether the fact that many of its ideas would have caused political ructions on the other side of the Atlantic has played a significant role.”

Facebook said in an emailed comment: “We face significant competition in every aspect of our business, including from companies that facilitate communication and the sharing of content and information, companies that enable marketers to display advertising, companies that distribute video and other forms of media content, and companies that provide development platforms for applications developers.”

The company named “Google, Apple, Snap, Twitter and Amazon, as well as new entrants like TikTok” as among its rivals, adding: “Advertisers can and do freely move their marketing spend between TV, radio, print, broadcast, and other online channels.

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