26 October 2021
The recently released final report from the Australian Competition and Consumer Commission’s (ACCC) Adtech Inquiry has recommended substantial regulatory reform to address the ACCC’s competition concerns.
On 10 February 2020 the Australian Treasurer tasked the ACCC to conduct an 18 month inquiry into the markets for the supply of digital advertising technology (adtech) services and digital advertising agency services. The ACCC was required to focus in particular on the competitiveness, efficiency, transparency and effectiveness of the markets for the supply of adtech services.
Adtech services are, in short, any services that are used in the automated buying, selling and delivery of digital display advertising. Digital display advertising refers generally to the advertising a consumer sees on websites or apps (including social media sites) that consumer visits, for example, banner ads and video ads. Display advertising is to be contrasted with digital classified advertising (that is, on classified websites such as Trading Post or Seek) and digital search advertising (which appears when a search engine is used, for example, when the user types into Bing search “where is the best Mexican restaurant near me”). The report did not consider either digital classified or search advertising.
There are two ways that display advertising may be sold, through “open display” channels or through “closed channels”. The most well known closed channel is Facebook. A closed channel provides for the publisher (such as Facebook) to sell inventory to advertisers directly, using the publisher’s own systems. The Adtech Inquiry did not consider closed channels, but instead focussed on open display channels, which enable publishers to sell their advertising space (called inventory) to many different advertisers, potentially using different adtech services to do so.
Given the ACCC’s Adtech Inquiry was focussed on display advertising sold through open display channels, it is unsurprising that it focussed on the dominant adtech services provider in that sector, Google. The ACCC found that in 2020, over 90% of ad impressions traded via the adtech supply chain passed through at least one Google service, making Google the largest supplier of each key adtech service in Australia. The ACCC concluded that this overwhelming dominance has been created as a result of Google’s data advantage (Google collects significantly more consumer data than any other adtech services provider or, indeed, any other digital platform), its access to exclusive inventory (noting it is the publisher of popular websites such as YouTube) and advertiser demand, as well as integration across its different adtech services.
The ACCC’s findings regarding Google’s behaviour, as set out in the final report, are damning. The ACCC has found that Google acts in an anti-competitive way by engaging in self-preferencing conduct, through conflicts of interest and by charging excessive fees. This anti-competitive conduct has a significant impact on the Australian economy, noting the ACCC estimates that display advertising via open display channels was worth approximately $2.8 billion in Australia in 2020. As a result of Google’s conduct, the ACCC considers that both publishers and advertisers face higher costs, which (on the publisher side) is likely to result in a reduced quantity of high quality content and higher prices for goods and services. Therefore Australian consumers are significantly negatively impacted.
What then is to be done about the issues the ACCC has uncovered? When he released the final report, ACCC Chair Rod Sims commented:
"The ACCC is considering specific allegations against Google under existing competition laws. However new regulatory solutions are needed to address Google’s dominance and to restore competition to the ad tech sector for the benefit of businesses and consumers. We recommend rules be considered to manage conflicts of interest, prevent anti-competitive self-preferencing, and ensure rival ad tech providers can compete on their merits."
The ACCC made 6 recommendations. The key recommendations are 2, 3 and 6:
The final report refers to the ACCC’s ongoing investigations in relation to Google’s actions to limit access by other adtech services providers to YouTube inventory, channelling demand away from other providers and its anticompetitive actions in relation to a type of advertising bidding known as “header bidding”. However, the ACCC makes clear that, even if it does commence proceedings in relation to one or more of these matters, this will not be enough to address its concerns and the regulatory reform it has recommended is key.
At a Lexology/Global Competition Review webinar on 22 October 2021, ACCC Chair Rod Sims and a distinguished panel deep-dived into the key findings and recommendations from the Adtech Inquiry and what needs to be done to promote a more competitive adtech industry both in Australia and overseas.
Key highlights from the Adtech Inquiry are:
If you would like to listen to the full discussion, register for the on-demand webinar here.
Author: Angela Flannery
 See the ACCC's media release
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