Google and Facebook are so dominant in the advertising market they risk pushing up the cost of flights and electronics, a competition watchdog has warned.
The Competition and Markets Authority (CMA) says it fears the tech giants’ large market share could allow them to increase what they charge companies to advertise.
They say these higher charges could be passed on to consumers, pushing up prices.
Google controlled 90 per cent of search advertising in the UK in 2018 and Facebook held more than half of the display advertising market, the interim report found.
The two companies made revenues of more than £8 billion in the UK in 2018 from running adverts on their products or on other services.
Google and Facebook are so dominant in the advertising market they risk pushing up the cost of flights and electronics, a competition watchdog has warned
Google’s 90 per cent share of the advertising revenues in the UK worked out at a revenue of about £6 billion, according to the CMA.
Facebook’s half of display advertising revenues were worth £2 billion in 2018.
The watchdog claims that Google paid about £1 billion – the equivalent of 16 per cent of its total annual UK search revenues – to be the default search engine on mobile devices, with the ‘vast majority’ of these payments going to Apple.
There is also concern that the advertising power of Google and Facebook is making it impossible for rivals to compete on ‘equal terms’.
The CMA says it is also squeezing newspapers and other publishers, jeopardising their ability to produce content.
‘Most of us visit social media sites and search on the internet every day, but how these firms work can be a mystery,’ said CMA chief executive Andrea Coscelli.
‘So far in this study, we have used our legal powers to discover how major online platforms operate.’
Ronan Harris, vice president for Google UK and Ireland, said the digital advertising industry helps all sizes of British businesses find customers worldwide.
A Facebook spokesman said the company was ‘fully committed’ to continuing to deliver the benefits of technology and relevant advertising to millions of people and small businesses in the UK who use their services.
‘Digital advertising fuels big businesses like Google and Facebook and we have been building a picture of how this complex new market works’, said Ms Coscelli.
‘We’ve looked especially at how these firms collect and use people’s data, how they monetise it and what this means for rival companies who want to compete, as well as the people and businesses using these services every day.’
The interim report – which is open to views by February ahead of a full report later in 2020 – says people must be in control of their data.
It notes that big is not necessarily bad, highlighting the innovative and valuable products and services introduced by tech giants.
They will present their findings by the end of 2020 and it will be up to Boris Johnson’s new government to decide how to regulate ‘what is an increasingly central sector in all our lives’.
On concerns raised by the CMA on how users data is being used by the advertising technology giants, Mr Harris from Google said they have ‘easy-to-use controls.
‘They enable people to manage their data in Google’s services – such as the ability to turn off personalised advertising and to automatically delete their search history.
‘We’ll continue to work constructively with the CMA and the Government on these important areas so that everyone can make the most of the web.’
Facebook says it agreed with the CMA that people should have control over their data and transparency over how it is used.
‘In fact, for every ad we show, we give people the option to find out why they are seeing that ad and an option to turn off ads from that advertiser entirely’, a spokesperson for the social media company said.
‘We also provide industry-leading tools to help people control their data, like ‘Off Facebook Activity’, and to transfer it to other services through our data transfer tools. We look forward to further engagement with the CMA on these topics.’
Caroline Normand, Which? Director of Advocacy, said the evidence from the CMA backs up their findings which suggest people feel ‘deeply concerned’ about how their personal dat ais collected, shared and sold online.
‘People feel powerless in the face of giants such as Google and Facebook’, she said.
‘We now need to see measures introduced that give consumers more control over their data and protect them from harm in this sector.’
The interim report is available to view on the UK Government website.
HOW IS FACEBOOK REFORMING ITS ADVERTISING POLICY?
Facebook says it is making advertising on the social network more ‘transparent’ by publishing more information about the adverts firms are running on the site.
The social network has added a new feature which enables users to see the adverts any firm with a Facebook page is running on the site at that time and to report any adverts they believe are suspicious.
Facebook said it would also start displaying more information about pages, even if they do not advertise, to give users a better understanding of their history.
The firm said this information would include any recent name changes as well as information on when the page was created.
Facebook confirmed it will add more information to this section in the ‘coming weeks’.
The new details on firms can be found by visiting its Facebook page and clicking on the ‘Info and Ads’ section.
‘The vast majority of ads on Facebook are run by legitimate organisations – whether it’s a small business looking for new customers, an advocacy group raising money for their cause, or a politician running for office,’ the social network said.
‘But we’ve seen that bad actors can misuse our products, too. These steps are just the start – we’re always looking for more ways to improve.
‘By shining a bright light on all ads, as well as the pages that run them, we’ll make it easier to root out abuse – helping to ensure that bad actors are held accountable for the ads they run.’
Facebook has come under intense scrutiny over a wide range of its business practices, including how its advertising network is used for political purposes.
Alongside the new transparency measures, Facebook said it would soon begin rolling out labeling for political advertising on the platform in Brazil, ahead of the country’s general election in October.