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The Treasurer has directed the Australian Competition and Consumer Commission (ACCC) to undertake two new inquiries. The inquiries form part of the Government’s response to the ACCC’s Final Report to the Digital Platforms Inquiry (DPI) (DPI Final Report), in support of the ACCC’s digital platforms agenda.  The inquiries - announced over the weekend – are as follows:

  • The Digital Advertising Services Inquiry (DAS Inquiry) – will review, over an 18 month period, digital advertising technology services and digital agency services, arising from recommendation 5 in the ACCC’s DPI Final Report (to inquire into the supply of ad tech services and advertising agencies).
  • The Digital Platforms Services Inquiry (DPS Inquiry) – will review, over a five year period, digital platform services, digital advertising services by digital platforms and data practices by digital platforms and data brokers.  The DPS Inquiry arises from recommendation 4 of the ACCC’s DPI Final Report (to proactively monitor, investigate and enforce issues in digital markets).

The new Digital Platforms Branch will conduct the inquiries, continuing the ACCC’s focus on digital platforms, technology and advertising. It also reflects an increasing use of compulsory notices by the ACCC beyond its enforcement role of investigating suspected breaches of the competition law.

Digital Advertising Services Inquiry

The DAS Inquiry was foreshadowed by the Government last year. The ACCC has now been tasked to consider the supply of digital display advertising services, digital advertising technology services and digital advertising agency services (display advertising markets) and issues such as:

  • the intensity and efficiency of competition in the digital advertising markets, including the availability of information, concentration of market power, revenues generated and shares of advertiser expenditure retained by suppliers, auction and bidding processes and the behaviour of suppliers in the markets;
  • relationships between suppliers and customers, including advertisers, and the impact of corporate structures or contractual arrangements between participants; and
  • whether services are being provided or performed to the satisfaction of all market participants.  

Concerns about advertising technology (‘ad tech’) services have been raised both domestically and overseas.

  • In Australia, the ACCC first expressed concerns in the DPI Final Report about the operation of auctions, the risk of self-preferencing and the lack of transparency as to the price paid for each advertising technology service.
  • Overseas, the French Competition Authority and Germany’s Bundeskartellamt have conducted in-depth reviews of the online advertising sector, and the UK’s Competition and Markets Authority (CMA) is currently in the midst of its own broad-ranging market inquiry into digital platforms and online advertising (CMA Market Study).  The CMA released its interim report in December 2019 with its final report due in July 2020.

The ACCC will no doubt be watching the CMA Market Study very closely as it starts to frame and begin its own inquiry in the coming months. It is required to produce an interim report by 31 December 2020 and final report by 31 August 2021.  The ACCC’s issues paper, which will provide further details on the inquiry’s areas of focus, is due to be published in March 2020. 

There are a few comparisons that can already be drawn between the current DAS Inquiry and the CMA Market Study, and other action taken by regulators in this space:

  • Narrower focus on display only: The DAS Inquiry is focussed on three display advertising markets. Search advertising is not within scope.  Internationally, the distinction between search and display advertising seems to have been blurred given increasing convergence and competition between the two types, although even the CMA Market Study interim report has recognised that some issues are much more acute in display advertising. Given the increasing convergence, despite the ACCC’s focus, it will be important for the ACCC to consider the constraint of search advertising. 
  • Concern around algorithms and auction bidding processes: The ACCC will have another opportunity to closely examine the “black box” of digital advertising bidding processes and algorithms, and how they impact competition for digital advertising, having referred to this supply chain as “particularly opaque” in the DPI Final Report. The CMA Market Study has also looked at auction processes in some detail and has grappled with how much transparency is appropriate to allow advertisers to compete in the auction yet balance the competition and data protection issues that arise with too much transparency. The CMA’s Market Study is now consulting on the potential for auditing and monitoring of algorithms by a regulator as a way to solve this issue. The ACCC will no doubt be keeping a close eye on what third parties have to say about that proposal’s workability and effectiveness.
  • Interoperability: It will be interesting to see how much the ACCC focuses on the interoperability of systems and software in its examination of pricing and other terms and conditions offered by suppliers to consumers and businesses in digital display advertising. Given the global scope of the interoperability debate if the ACCC explores these issues, it would be likely to consult closely with the CMA and other regulators.  
  • Following the money: One of the specific areas the Government has directed the ACCC to consider is revenues of suppliers of digital display advertising services, including revenues retained by suppliers from advertisers’ expenditure. The CMA Market Study has also closely considered this issue with third parties raising views that intermediaries in the ad tech supply chain extract a large share of advertisers’ expenditure, in effect extracting an “ad tech tax”.  In the second half of its study, the CMA is intending to carry out further work to investigate money flows along the intermediation chain and what it finds will likely be of real interest to the ACCC given the often multi-region nature of advertiser expenditure and relationships. 

No matter how the ACCC frames its scope in its upcoming issues paper, the DAS Inquiry will be closely watched in Australia and overseas given its significant impact on participants across the whole ad tech supply chain. 

Digital Platforms Services Inquiry

The Government has previously indicated its support for proactively investigating, monitoring and enforcing issues in markets in which digital platforms operate. The matters to be considered by the ACCC in the DPS Inquiry are broad, and include:

  • the intensity of competition in markets for the supply of digital platform services, with a particular focus to the concentration of market power, the behaviour of suppliers, mergers and acquisitions, barriers to entry or expansion and changes in the range of services offered by suppliers of digital platform services;
  • practices of suppliers in digital platform services markets which may result in consumer harm;
  • market trends that may affect the nature and characteristics of digital platform services; and
  • developments in markets for the supply of digital platform services outside Australia.

An interim report is due by 30 September 2020, with a final report due 31 March 2025.   

Although the DPS Inquiry follows on from the ACCC’s DPI, its scope is significantly broader given that the DPS Inquiry:

  • will review a range of digital platform services and is not limited to Google and Facebook. The DPS Inquiry will look at conduct by internet search engines (general and specific), social media services, private messaging, digital aggregation platform services, media referral services and electronic marketplace services;
  • is not limited to looking at the impact on media and advertising markets, rather the DPS Inquiry will look at the intensity of competition in all markets in digital platform services are supplied and also consider developments overseas; and
  • will run for 5 years which reflects the speed at which technology and services change in this area.

Given the wider scope, we can expect the DPS Inquiry will involve broad stakeholder engagement.