Online advertising: more antitrust enforcement to come

Transcription

1 9 March 2018 Online advertising: more antitrust enforcement to come On 6 March 2018, the latest in a string of antitrust inquiries and probes into the online sector touched down in France, as the French Competition Authority published its long-awaited opinion on online advertising. As a result of a nearly two-year inquiry, the Authority released an in-depth study in which it describes a market characterised by a fragile competitive equilibrium. It highlights some practices that could have anticompetitive effects and suggests a number of recommendations for improving the regulatory environment as regards data privacy and transparency. Simultaneously, the Authority announced its will to quickly initiate antitrust investigations of one or several players, without keeping the public in suspense about whether it has Google and Facebook in its sights. France's antitrust-enforcement agency s opinion (the Opinion ) comes about as the latest step in a series of significant inquiries conducted by competition authorities. Contents 1 The growth of online advertising and data processing 2 2 A complex environment dominated by two global stakeholders, Google and Facebook 2 3 Potential competition issues identified 3 4 Recommendations 4 5 Looking ahead at next steps 4 The French Competition Authority ( FCA ) had already published an opinion in 2010 on the online advertising sector. At that time it focussed primarily on search advertising (i.e. advertising in the context of search engines that are specifically linked to users queries), whereas its latest Opinion focuses on display advertising (i.e. all forms of advertising displayed on screens, such as animated banners or videos integrated into the web page), a practice which has seen rapid growth in recent years. In addition, the FCA also previously released a joint paper with the German Competition Authority on Big Data, wherein the two authorities assessed the potential market power arising from access to Big Data. On the same day that paper was published, 10 May 2016, the German Competition Authority also announced it had launched a separate investigation into Facebook, which led to an announcement, on 19 December 2017, that, according to its preliminary assessment, Facebook was abusing its dominant position by conditioning the use of its social network on being allowed to limitlessly amass multiple forms of data, including those generated by third-party websites. The FCA s latest Opinion echoes this joint paper, now with a particular focus on online advertising. Other competition authorities have also been active. The Italian Competition Authority opened a sector inquiry into big data in June 2017; the German 1

2 Competition Authority launched a sector inquiry into online advertising in February 2018 and the UK Competition Authority published a study on the commercial use of consumer data on 27 January At the European level, the Commission is currently conducting an investigation of Google for potential abuse of dominance through its online advertising platform AdSense. Furthermore, there have been numerous merger cases in which the Commission has had to analyse the sector dynamics (e.g. Microsoft/Yahoo! Search Business, Google/Doubleclick, Facebook/WhatsApp, Microsoft/Linkedin or the ongoing Apple/Shazam). 1 The growth of online advertising and data processing As a basis for its specific interest in the sector, the FCA notes that Internet has become the major medium in Europe for advertising campaigns, investments in internet advertising ( 36.8 billion in 2016 with a 17.8% annual growth) - especially in display (advertisements placed on websites or mobile apps)- and social network advertising, have now outpaced those made in television advertising ( 33.3 billion). The environment is characterised by a growing number of intermediaries between publishers and advertisers processing a vast quantity of proprietary or third-party data to improve targeting and campaign effectiveness, thereby increasing both the willingness of advertisers to pay and the value of the advertising. 2 A complex environment dominated by two global stakeholders, Google and Facebook According to the FCA s findings, the two leaders in online advertising benefit from their positions as heavyweights in this sector, both in absolute volume and share growth: Google and Facebook, which mainly provide free services to Internet users, currently derive 90% of their revenue from the sale of advertising services to publishers and advertisers. Their services, based on the mining of colossal volumes of information on individuals, publishers and advertisers, constitute strategic distribution channels for numerous publishers and online vendors: search engines, social networks, video-sharing platforms, mapping, etc. The strong positions of Google and Facebook on these markets largely explain the fact that these two companies capture most of the online advertising revenue at the global level as well as in France. The Opinion points out that this situation results from the cumulation of several significant competitive advantages of Google and Facebook: > Strong popularity among Internet users: The services provided by Google and Facebook have the highest audience numbers and generate very large, varied volumes of data that are frequently updated; such data is at the core of advertising targeting services. > Vertical integration and presence in both publishing and advertising intermediation: While other stakeholders are also present in these markets, Google and Facebook have the highest audience numbers and the advertising space on their sites and applications is only accessible 9 March

3 through their own advertising tools for the implementation of advertising campaigns. > Very powerful targeting capabilities: Google and Facebook have developed logged environments where users log in to access services, which are in turn sources for a high volume of data. The combined access to a high volume of varied data and sizeable advertising inventories offer advertisers the possibility of reaching broad and clearly defined audience segments. > Google specific advertising advantage related to searches: Google is present in both display advertising and search advertising, where it has held a strong position for nearly 20 years. It has developed several types of relationships between the two activities through an extensive range of advertising services (AdWords, DoubleClick and Google Analytics), which concern advertising campaigns, available targeting options, and campaign data analysis. 3 Potential competition issues identified During its investigation, the FCA gathered observations from all stakeholders (advertisers, publishers, intermediaries, service providers, data providers, etc.) to assess potential competition issues. As a result, the FCA identified the following practices which should warrant closer scrutiny: > Strategies involving bundling or tied sales (between access to data and certain intermediary services), low prices, and exclusivities: In this respect, the FCA refers to the soon to be adopted decision by the Commission concerning Google and its AdSense platform in relation to exclusivities preventing third-party websites from sourcing search ads from Google s competitors. > Leveraging effects: some players appear to leverage their key positions in certain service markets (e.g. media agency and data processing services) to develop on other markets (e.g. intermediation services to advertisers). > Discriminatory practices: Certain publishers and intermediaries are of the opinion that they are subject to different treatment by stakeholders in the advertising intermediation sector, for instance in access to certain market-places and advertising inventories. > Impediments to interoperability: The development of impediments to interoperability in the advertising intermediation sector could affect the interconnection conditions of certain intermediaries when implementing automated advertising campaigns. > Restrictions on the possibilities of collecting and accessing certain data: Certain stakeholders seem to refuse to integrate tracking information from campaigns for certain advertising formats, or supply research statistics for advertiser brands. Certain publishers consider that they are also subject to limitations regarding access to data generated by their services and distributed on other platforms. In light of these preliminary findings and concerns raised by stakeholders, in a press conference held on 6 March 2018 the FCA s President announced that the 9 March

4 FCA would rapidly initiate antitrust investigations, explaining that any decisions on whether Google and Facebook s behaviours should trigger antitrust probes would need to be made quickly in order to keep pace with the online advertising market s rapid development. 4 Recommendations The Opinion does not provide any recommendations with respect to the specific behaviours identified as potentially problematic under competition law, leaving such guidance to the individual antitrust investigations soon to be launched. However, the Opinion contains a number of recommendations in relation to the regulation of transparency (particularly the Decree n of 9 February 2017 applying the so-called Macron Law n of 6 August 2015) and on data privacy (particularly the eprivacy draft EU Regulation on data privacy of 10 January 2017). > As regards transparency: the FCA states that a balance should be stricken between the necessity of increased transparency and the importance of not imposing too heavy a burden on small intermediaries. > As regards data privacy: the FCA explains that a key element of competition between online advertising players is linked to the possibilities of processing personal data, which legal framework is about to be strongly reinforced by the EU General Data Protection Regulation n 2016/679 of 27 April 2016 and the eprivacy EU Regulation. The FCA notes that such new regulations are likely to strengthen the position of the major actors like Google or Facebook, and weaken the position of smaller online advertising players. In this respect, applying the principles already laid down in the EU General Data Protection Regulation n 2016/679 of 27 April 2016, the eprivacy EU Regulation will require that users consents be obtained at the web browser level in the form of an opt-in mechanism. However, this could significantly limit publishers ability to process data and provide personalized advertising, while favouring players, such as Google, which also operate web browsers, as well as those providing services in logged-in environments, such as Facebook, which are less dependent on tracers and cookies for data collection. In order to address this risk, the FCA recommends that users consents be collected at least at website level, in conditions ensuring that all players be on an equal footing. 5 Looking ahead at next steps In short, according to the FCA, the stakeholders which are reaping the most rewards are the companies having access to the greatest amount of high-quality personal data and the capacity to continue to process them under optimal conditions in terms of technologies, services, and sale of their inventories. This concerns namely Google and Facebook, which are very likely to face antitrust probes in the near future. 9 March

5 However, these cases are likely to prove challenging for the FCA to bring forward. The first difficulty for the FCA to overcome will be to demonstrate the existence of a dominant position: usually, two players cannot be found dominant at the same time on the same market, therefore it might be legally difficult to go after both Google and Facebook at the same time. Will the FCA have to choose between them? Will it let one of them off the hook while pursuing the other? Unless the FCA intends to put enough pressure on both parties to secure voluntary commitments addressing the issues it will have identified. The FCA s President announced that she wanted to move quickly on this, so we may find out reasonably soon. On the policy front, discussions around the eprivacy Regulation will be closely followed by the FCA, as well as other competition authorities, which might be worried that going too far in data privacy protection could disrupt the fragile competitive equilibrium of the online advertising sector. Contacts For further information please contact: Jonas Koponen Global Practice Head (+32) jonas.koponen@linklaters.com Thomas Elkins (+33) thomas.elkins@linklaters.com Clara Robert-Heidmann Managing Associate (+33) clara.robert-heidmann@linklaters.com Pauline Debré (+33) pauline.debre@linklaters.com Georgina Kon (+44) georgina.kon@linklaters.com Authors: Thomas Elkins, Clara Robert-Heidmann This publication is intended merely to highlight issues and not to be comprehensive, nor to provide legal advice. Should you have any questions on issues reported here or on other areas of law, please contact one of your regular contacts, or contact the editors. Linklaters LLP. All Rights reserved 2018 Linklaters LLP is a limited liability partnership registered in England and Wales with registered number OC It is a law firm authorised and regulated by the Solicitors Regulation Authority. The term partner in relation to Linklaters LLP is used to refer to a member of the LLP or an employee or consultant of Linklaters LLP or any of its affiliated firms or entities with equivalent standing and qualifications. A list of the names of the members of Linklaters LLP and of the non-members who are designated as partners and their professional qualifications is open to inspection at its registered office, One Silk Street, London EC2Y 8HQ, England or on Please refer to for important information on Linklaters LLP s regulatory position. We currently hold your contact details, which we use to send you newsletters such as this and for other marketing and business communications. We use your contact details for our own internal purposes only. You have a right of access to, and rectification of, all information relating to you. Should you wish to exercise these rights, please let us know by ing us at paris@linklaters.com. If you no longer wish to receive this newsletter or other marketing communications or if you wish to be removed from the list, please let us know by ing us at paris@linklaters.com 25 rue de Marignan Paris Telephone (+33) Facsimile (+33) March 2018