UK Forms New Agency To Scrutinize Big Tech’s Market Dominance

The U.K. government is in the process of establishing a digital markets unit (DMU), a new regulatory agency to curb the market dominance of tech giants Google and Facebook. Will this create a level playfield for small companies and a fair market for consumers?

After dominating the global ad tech market for decades, internet behemoths Google and Facebook will now be heavily scrutinized by a new U.K.-based antitrust agency. On November 27, 2020, the U.K. government announced its plans to set up a new agency called the Digital Markets Unit (DMU) to regulate the anti-competitive practices of the tech giants.

As part of the competition and markets authority (CMA), the DMU will enforce a new code that will set new regulations on the behavior of big tech platforms and attempt to create a level playfield for other players. The new unit will start operating in April 2021.

Alok Sharma, Secretary of State for Business, Energy, and Industrial Strategy, tweeted that the new, pro-competition regime will ensure that consumers have more choice and smaller firms are not pushed out of the competition.

Our new pro-competition regime, Digital Markets Unit & code of conduct will ensure consumers have more choice and control over their data, and help stop smaller firms being pushed out of the digital services market 👇🏽 pic.twitter.com/2VavPiGfBFOpens a new window

— Alok Sharma (@AlokSharma_RDG) November 27, 2020Opens a new window

Also Read: The Transition of Power: What Biden’s Victory Means for Tech

The Duopoly of Facebook and Google in Digital Advertising

According to the U.K.’s CMA market studyOpens a new window , Google has significant market power in search ads. Similarly, Facebook dominates the social media and display ad market. A new report by eMarketerOpens a new window found that Google and Facebook’s duopoly in the U.K. digital ad market is set to grow more than 65% by 2021. 

The rise of duopoly’s market power is because both platforms offer brand advertisers an unparalleled audience reach, first-party consumer data, better targeting abilities, and platform convenience. The CMA’s interim reportOpens a new window revealed that Google controlled more than 90% of the U.K.’s $8.8 billion search advertising market in 2019. And Facebook accounted for 50% of the total online display ad revenue. 

In fact, Google has ruled the digital ad market with key products such as Google Search, Google Cloud, Adwords, DoubleClick, YouTube video platform, and the Android mobile operating system. At the same time, Facebook has the lion’s share of online ad revenue due to its news feed and Instagram video ads. 

Adding a political angle, Bill Fisher, eMarketer U.K. analyst, explainedOpens a new window , “The duopoly’s stranglehold on the U.K. digital advertising market is strengthening, with Brexit uncertainties being the main driver of this trend.”

Apart from this, both Google and Facebook have a treasure trove of personal data that helps them target ads for consumers more effectively than other digital platforms, including Microsoft Bing, DuckDuckGo, Twitter, and Snapchat. This has easily stifled competition, reduced consumer choice and innovation.

Such market dominance has drawn the attention of regulators from the U.K., U.S., and Europe. On October 22, 2020, the U.S. DoJ filed an antitrust lawsuit against Google’s anti-competitive practices. The search engine giant has been penalized several times by the European Union (E.U.) over anti-competitive and antitrust rules. In 2017, the E.U. fined Facebook $122 millionOpens a new window over its WhatsApp acquisition while the FTC imposed a $5 billion fineOpens a new window on the company for violating consumers’ privacy rights in 2019.

However, Sissie Hsiao, VP, product management at Google, has a completely different outlook towards the competition in the ad sector. She explainedOpens a new window , “To suggest that the ad tech sector is lacking competition is simply not true. On the contrary, the industry is famously crowded. There are thousands of companies, large and small, working together and in competition with each other to power digital advertising across the web, each with different specialties and technologies.”

Also Read: Can the Justice Department’s Antitrust Lawsuit Blunt Google’s Ad Tech Dominance?

How Will the DMU Regulate Market Power of the Ad Giants?

The new code of conduct will give consumers more choices and control over their data and enable small businesses to promote themselves online. The DMU will also demand digital platforms to be more transparent about consumer data and offer better choices to consumers.

A press release by The Department of Digital, Culture, Media, and Sport (DCMS) sharedOpens a new window , “The new unit could be given powers to suspend, block, and reverse decisions of tech giants, order them to take certain actions to achieve compliance with the code, and impose financial penalties for non-compliance.”

Alok Sharma saidOpens a new window , “Digital platforms like Google and Facebook make a significant contribution to our economy and play a massive role in our day-to-day lives — whether it’s helping us stay in touch with our loved ones, share creative content or access the latest news. But the dominance of just a few big tech companies is leading to less innovation, higher advertising prices, and less choice and control for consumers.”

Oliver Dowden, Secretary of State for Digital, Culture, Media and Sport at DCMS, addedOpens a new window , “There is growing consensus in the U.K. and abroad that the concentration of power among a small number of tech companies is curtailing the growth of the sector, reducing innovation and having negative impacts on the people and businesses that rely on them. It’s time to address that and unleash a new age of tech growth.”

According to the CMA, around $19 billion were spent on digital advertising in the U.K., in which Google and Facebook accounted for 80% of the ad spend. The duopoly holds a significant share of ad revenue that calls for a need for an independent regulatory board. Such a board would scrutinize the market dominance of the big tech companies and ensure that they ensure transparency in consumer data policies and business practices. This, in turn, will boost market competition and innovation and build trust among consumers.

Do you think this antitrust unit will succeed in creating a level playfield for small companies and a fair market for consumers? Comment below or let us know on LinkedInOpens a new window , TwitterOpens a new window , or FacebookOpens a new window . We’d love to hear from you!