Who: Competition Markets Authority (CMA)
Where: United Kingdom
When: 1 July 2020
Law stated as at: 31 July 2020
The CMA published its final report on 1 July on its market study on online platforms and digital marketing and published its recommendation that a new regulator, or a unit within a regulator, the Digital Markets Unit (DMU), should be established to implement a new pro-competition regime.
The market study examined competition within the online platform market in relation to: (i) the extent to which large platform providers have accumulated market power; (ii) whether consumers are able to control their data on the platforms; and (iii) whether competition may be distorted due to the two platform providers currently dominating the UK market.
The CMA report identified the following issues within the market:
- The market dominance by two online platform providers in search advertising, social media and digital advertising is resulting in increased prices paid by advertising businesses and, as a result, an increase in prices for
- The excessive extraction of data from consumers due to the lack of competition that large online platform providers face, and their ability therefore to impose unfavourable requirements on consumers and businesses.
- The high market share that online platform providers have ensures that they are able to improve their click-and-query data faster and maintain their leading market position, while new entrants struggle to improve their services due to receiving fewer clicks and, in return, less data on which to improve, leading to possibly less innovation and lower-quality service for consumers.
The report’s findings focused on the harm that lack of competition could pose to consumers and businesses:
- Quality of service – Competition nurtures innovation and an increase in value and quality of service to consumers. With large online platform providers dominating the sector, there is a risk that innovation and quality could be impacted as new entrants to the market struggle with providers who have become the default-go-to provider in the market.
- Increase in price – The CMA’s analysis shows that digital advertising pricing has increased due to the market being dominated by two platform providers and their ability to set the price with little competition, which increases prices for consumers. Platforms which control a significant amount of advertising inventory are able to exert a significant amount of market power and potentially exclude competitors from the market.
- Control over data – The limited choice for consumers results in less control over their data as consumers are faced with the choice of “take it or leave it” when signing up to online platform standard terms. Limited competition has also resulted in consumers receiving limited benefits and services in return for their data. In a more competitive market, further rewards might be available.
In light of the CMA’s findings in the market research, the CMA recommends that the DMU receive powers to: (i) enforce a code of conduct on online platforms deemed to have a strategic market status; (ii) make pro-competition interventions, such as to increase interoperability of services, provide access to platform provider’s data to increase competitors and consumer choice, or order large platforms working in an own brand multi-application ecosystem to split -up; and (iii) introduce measures to increase consumer choice in how they share their data.
Why this matters:
Online platform providers could see legislative changes and proposals developing as the government announced a cross-regulator taskforce within the CMA, the DMU, and accepted the six recommendations of the Furman Review in March 2020 on “securing competition, innovation, and beneficial outcomes for consumers and businesses”. Large platform provider ecosystems could see their ability to share consumer data internally barred or be forced to share certain data with competitors in a bid to strengthen competition, and consumers could see developments which will see their control over their data increase as competition in the market grows.