Google utterly dominates Australian advertising, and only new rules can curb the harm its dominance does to local and global markets.
So says Australia's Competition and Consumer Commission (ACCC) in the final report from its Digital Advertising Services Inquiry, released on Tuesday.
The thrust of the report can be divined in the title of a subhead in its executive summary: "Google's dominance in the ad tech supply chain creates problems for competition, advertisers and publishers".
The report backs up that statement with an estimate that "over 90 per cent of ad impressions traded via the ad tech supply chain passed through at least one Google service".
"Google is by far the largest supplier of each key ad tech service. Its share of impressions is over 70 per cent at each stage of the supply chain, and it has a share of between 40–70 per cent of revenue for services where revenue data is available," the report adds.
The search and ads giant achieved that dominance through "multiple factors including its data advantage, access to exclusive inventory and advertiser demand, and integration across its services". Google's dominance also derives from its unusual status as both the operator of sites that feature advertising and a publisher of ads to rival properties. And Google has not been shy about using that integration to its advantage, by doing things like restricting access to YouTube for third-party ad-slingers.
The report assesses that the cumulative effect of Google's behaviour "has been to prevent both actual and future rivals of Google's ad tech services from competing effectively with Google's vertically integrated services".
"The lack of effective competition in the supply of ad tech services also harms publishers and advertisers, depriving them of lower prices, higher quality services and/or greater innovation. The cost of this reduction in competition is ultimately passed onto consumers."
What to do? The report reckons that Google needs to be more transparent about how it uses data it collects about users, and spell that out in its Terms of Service documents and privacy policies.
The regulator also feels that Google should reveal more information about ad markets, as participants today struggle to compare offers made by rivals to the search colossus.
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But even if Google does what the ACCC wants, the regulator feels the time has come for it to be given new powers to keep the ad giant in check.
The report envisions "powers to develop rules to manage conflicts of interest, prevent anti-competitive self-preferencing, ensure rivals can compete on their merits by having nondiscriminatory access to certain services, and address transparency concerns". Industry participants would be consulted to define powers for the regulator to wield.
The ACCC wants those rules and the powers they confer to align with similar efforts to regulate digital ads that are currently under way in the European Union, the United States, Japan, and Germany.
The Australian regulator has form taking on Google, sometimes with impactful results. For instance, Australia's News Media Bargaining Code requires Google and Facebook to pay local publishers for the right to link to their news content. The Code was noted with considerable interest by regulators around the world. The ACCC's conclusions in this matter will likely also be noted beyond Australia's shores. ®