EU’s Vestager urged to probe how tech giants cash in on ads

  • TECH
  • Tuesday, 04 Dec 2018

FILE PHOTO: European Competition Commissioner Margrethe Vestager at a news conference at the EU Commission in Brussels, Belgium, July 24, 2018. REUTERS/Francois Lenoir/File Photo

European Union antitrust enforcers are being urged to scrutinise how ads fuel profits at tech giants such as Google and Facebook Inc as watchdogs from France to Australia start to investigate how the market works. 

Brave Software Inc, which makes an ad-blocking browser, wrote to EU Competition Commissioner Margrethe Vestager warning how a handful of companies control how ads are placed with web publishers, a situation that might allow them to dictate prices and terms. 

Despite online advertising’s size and importance “it is an opaque market” that may be “distorted by severe concentration issues, and perhaps by anti-competitive behaviour”, Johnny Ryan, Brave’s chief policy officer, said in the letter seen by Bloomberg. He’s calling for the EU to start a wide “sector inquiry” to examine the entire online ad industry. 

Online ads are already a focus for several smaller antitrust agencies in Europe, often prompted by complaints from media companies as advertising spend shifts to the Web. France’s competition authority has flagged the scale of Google’s ad offer and data as a potential concern. Germany started an inquiry in February and Dutch regulators have been looking at how media companies generate ad revenue. The UK recently signalled it plans to start its own inquiry. 


“The online advertising sector is often accused of boiling down to a duopoly,” said Marietje Schaake, a Dutch member of the European Parliament. “A European sector inquiry could play a useful role in shining light on why there is a lack of new entrants on the online adverting space.” 

Alphabet Inc.’s Google has been a target of EU antitrust investigations for almost a decade, racking up €6.7bil (RM31.63bil) in fines over how it displays rival product search ads and strikes pacts to distribute search and browser apps on phones. A third probe, into its AdSense advertising service, is “approaching the end”, Vestager has said. Google warned of “significant uncertainty” on its outcome. 

In that case, the EU has taken aim at contracts that prevented Google customers accepting rival search ads, required them to purchase a minimum amount of ads from Google and to place its ads prominently. 

Ryan said in the letter that potential problems go far beyond the AdSense case or what smaller European authorities are doing. 

In 2017, Google brought in around €25bil (RM118.03bil) in European digital ads, according to estimates from Pivotal Research Group’s Brian Wieser. Google and digital rival Facebook accounted for 71% of the entire European market. 

'Big noise’ 

“The EU already knows a lot about online advertising,” said Nicolas Petit, a law professor at the University of Liege. The added value would come from “making a big noise” around the issue, he said, pointing to how a recent EU inquiry into online retail pushed manufacturers to drop curbs that hampered website sales. 

Ryan also points to how some companies gain an unfair advantage from the user data they already have. “This may also create barriers to entry for existing and potential competitors and create a serious competition issue,” he said in the letter. 

Facebook, Google and the European Commission didn’t immediately respond to requests for comment on the call for a sector inquiry. Inc’s use of data is already under scrutiny from the EU which is checking whether it gathers information on bestsellers from companies that use its marketplace platform and then launches its own rival versions. Vestager has said she wants to know if Amazon’s ability to collect and sift through masses of sales data may be hurting the “small guy”. 

Stiff competition 

Still, EU regulators may be reluctant to wade into advertising as the market changes rapidly, with people watching content on and offline. That means that a near-monopoly on the web may face stiff competition elsewhere. 

A wide-ranging sector inquiry would allow the EU to chart what’s going on, said Ioannis Kokkoris, a law professor at the Queen Mary University of London. “Intervention is much more effective when the market is fully understood.” 

Outside Europe, Australia is looking at how digital platforms affect media and advertising, and in the US, the Federal Trade Commission held a hearing in November on the economics of online advertising. 

Even this year, Facebook chief executive officer Mark Zuckerberg had to explain at a Senate hearing how the company makes money. “Senator, we run ads,” he said. – Bloomberg

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