Google’s ad business creates conflicts of interest that harm businesses and consumers, a new ACCC report finds

Google’s ad business creates conflicts of interest that harm businesses and consumers, a new ACCC report finds
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  • The consumer protection watchdog says the country’s existing competition laws alone are not sufficient to address competition issues caused by Google’s dominance in the space, a new report has found.
  • It showed more than 90% of ad impressions touched a Google service in 2020.
  • The ACCC has called for a raft of new rules to manage conflicts of interest and increase transparency in the space.
  • Visit Business Insider Australia’s homepage for more stories.

Google’s dominant position in Australia’s advertising technology (ad tech) sector stifles competition and likely harms publishers, advertisers and consumers, the ACCC has found.  

The tech giant’s position within the ad tech supply chain meant more than 90% of ad impressions passed through at least one Google service in 2020.

In a report released on Tuesday, the consumer protection watchdog concluded the country’s existing competition laws alone are not sufficient to address competition issues in the sector, and that the ACCC should be empowered to develop rules in response. 

It follows a lengthy investigation which sought to scrutinise local markets for the supply of ad tech services and ad agency services.

Ad tech services enable transactions for selling and buying advertising space on websites or apps, resulting in the ads that are displayed to consumers.

The report found Google has refused to participate in practices developed to increase competition in the sector, in addition to maintaining privacy infrastructure that prevents competition and regulators from understanding how it operates. 

The company has refused to participate in publisher-led header bidding, an industry innovation aimed at increasing competition for publishers’ inventory.

The report also found Google used its position to preference its own services and shield them from competition. 

“For example, Google prevents rival ad tech services from accessing ads on YouTube, providing its own ad tech services with an important advantage,” the report said. 

Globally, Google maintains dominance in ad tech through its access to consumer and other data, along with acquisitions, including of YouTube and display advertising company DoubleClick.

These findings are significant because of the outsize role ad tech services have within the digital economy in helping Australian businesses reach consumers and publishers fund online content.

In Australia, at least 27% of advertiser spend on ads sold via the ad tech supply chain was retained by ad tech providers in 2020, according to the report. 

Rod Sims, chair of the ACCC, said Google’s conduct has helped it entrench its dominant position in the ad tech supply chain. 

“Google has used its vertically integrated position to operate its ad tech services in a way that has, over time, led to a less competitive ad tech industry,” Sims said. 

As a result, it can operate on every part of the ad supply chain, cutting out opportunities for pricing competition. 

“Google’s activities across the supply chain also mean that, in a single transaction, Google can act on behalf of both the advertiser (the buyer) and the publisher (the seller) and operate the ad exchange connecting these two parties,” Sims said. 

“As the interests of these parties do not align, this creates conflicts of interest for Google which can harm both advertisers and publishers.”

Action to rebalance power between global tech and digital publishers 

The report follows a series of actions, including the country’s news media bargaining code, that have created a new framework for media organisations to be compensated for content used by the tech giants. 

On September 13, a new industry body for independent Australian digital publishers, Digital Publishers’ Alliance (DPA), said Google and Facebook had agreed to fund its activities, including growing its share of the advertising market.

The organisation’s leader, Tim Duggan, founder of youth publication Junkee, said the tech giants would have no say over the priorities or decision-making of the industry body.

Earlier this year, the passing of the news media bargaining code compelled Facebook and search giant Google to enter into agreements with Australian news organisations to remunerate them for journalism shared on their platforms.

Sims said the ACCC was concerned the lack of competition had led to higher ad tech fees and an inefficient industry that has likely reduced the quality or quantity of online content and ultimately resulted in consumers paying more for advertised goods.

The report recommends a series of changes to ad standards and practices, including requiring ad tech providers to publish average fees, and empowering the ACCC to develop and implement measures to address competition issues.

To address transparency issues with Google’s publisher services, the report recommends Google should be required to give publishers information about the operation and outcomes of its publisher ad server auctions.

“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,” Sims said.