UK’s CMA launches investigation into digital advertising and its “potential harm” to consumers

Just two weeks after the UK’s Information Commissioner published a damning report setting out major privacy and other concerns about programmatic advertising, today the country’s Competition and Markets Authority poured more cold water on the digital advertising industry that could have a direct impact not just on digital advertising leaders like Google and Facebook, but the wider ecosystem of companies that form the adtech market.

The CMA has today launched an investigation to assess “three broad potential sources of harm to consumers in connection with the market for digital advertising”: the extent of market power held by platform providers; consumers’ control over their data; and competition in the space.

Or, in its own words:

“to what extent online platforms have market power in user-facing markets, and what impact this has on consumers; whether consumers are able and willing to control how data about them is used and collected by online platforms; and whether competition in the digital advertising market may be distorted by any market power held by platforms.”

If competition, data protection or other violations are found, this could have a direct impact on the companies involved. The CMA has a track record of using its investigations to mandate changes at the company level, with one recent example being its order to Facebook and eBay to crack down on fake reviews. If companies fail to comply, there is then scope to use the evidence the CMA has amassed of illegal activity to take them to court and levy fines.

The online advertising industry is a massive beast that fuels a large part of how we interact online, with companies that account for the majority of our online activity, such as Facebook and Google, also some of the biggest names in digital ads. In the US, it’s predicted that digital ads will overtake spend on traditional marketing sometime this year, and the state of affairs in the UK is not far behind.

But while advertising is the great cash cow of the online world, it’s not all green fields and sunshine. Many consumers are not happy about the extent of commercial profiling, and — at a time when we are faced with daily examples of data breaches — even less so at how murky the business of online advertising really is. That’s before considering regulatory frameworks like GDPR that have also helped to raise awareness.

The launch of the investigation comes some four months after Philip Hammond, the Chancellor of the Exchequer, wrote to the CMA asking for it to launch an investigation. That request came on the heels of an independent review commissioned by the government recommended the investigation.

In the end, the CMA has coincided this investigation with the launch of its wider Digital Markets Strategy, a new framework that it has created to navigate the new and often tricky waters of providing consumer protection while at the same time fostering digital innovation. (The recent controversy around Superhuman is just the latest example of the contradiction that can sometimes exist between the two.)

The CMA said that it will be accepting comments relevant to the topic and the three areas it has outlined until the end of this month — July 30. To get a full picture of the situation, the CMA says it wants to hear from the full spectrum of organizations and businesses impacted, including online platforms themselves, advertisers, publishers, intermediaries within the ad tech stack, representative professional bodies, government and consumer groups.

These need to come in writing and can be emailed to onlineplatforms@cma.gov.uk.

From August to December, the CMA will then evaluate what it receives. If it decides that there is no need for further investigation, the CMA says that it will publish a statement closing the matter by January 2, 2020. If it decides that it will dig deeper, the resulting report will come out by July 2, 2020.

One important caveat: the investigation and any subsequent actions that might get taken are dependent on the UK not being spun into chaos over a no-deal Brexit, where the UK exits the European Union with no trade, immigration or other agreements in place. Such a situation could create unexpected (extra) work for different government organizations, which would likely take precedence over this, making this yet another example of how the Brexit mess is getting in the way of actually useful work getting done.