In February, the Treasurer directed the ACCC to commence the Ad Tech Inquiry, as part of the Government’s response to the ACCC’s Final Report to the Digital Platforms Inquiry (DPI Final Report). The Treasurer’s Ministerial Direction outlined a number of broad themes for the Ad Tech Inquiry to consider, as set out in our previous update. The ACCC’s issues paper (Issues Paper) now articulates the key areas of focus and calls for the feedback and information from third parties in relation to the competitiveness, efficiency, transparency and effectiveness of ad tech services and ad agency services.
The key issues to be considered by the ACCC are even broader than foreshadowed in the DPI. Specifically, the ACCC will consider:
- the efficiency and competitiveness of the markets for ad tech, ad agency and display advertising services, such as:
- issues related to market power concentration, market structure and the role and use of data;
- information availability and pricing transparency in the ad tech supply chain and its “black box” aspects, including the corporate structure of multinational ad agencies their revenue reporting and purchasing arrangements, and terms of supply to Australian ad agencies, reflecting specific concerns raised by stakeholders in the DPI;
- the auction and bidding processes of ad tech services, and consideration of potential for self-preferencing in these processes, particularly where suppliers are vertically integrated;
- the impact of mergers and acquisitions in ad tech services and ad agency markets, in light of the apparent trend to increased vertical integration along the ad tech supply chain;
- potential supplier behaviours in markets for ad tech services and ad agency services, including conduct related to vertical integration, data collection, management and disclosure, including self-preferencing of ad inventory and ad tech services over third party ad exchanges, interoperability limitations to favour own services, as well as potential behaviours by ad agencies that take advantage of supply chain opacity;
- the relationships between suppliers and customers, including negotiation of contracts, restrictive terms, and impact of corporate structure on competition and levels of transparency in these markets; and
- the satisfaction of market participants, and their perception of whether the market is effective and efficient for them.
The Ad Tech Inquiry is seeking the views of a broad range of stakeholders including small businesses to global brands.
Notably, the ACCC’s focus is not on the end consumer, but the ACCC has indicated it will look at whether there is a lack of transparency in how suppliers deal with consumer and other data and will examine the terms and conditions offered by suppliers of ad tech and ad agency services, including their policies around privacy, data collection, management and disclosure. This builds on a consistent theme from the Digital Platforms Inquiry about the clarity with which consumer data is collected and used online.
What comes next?
We see many parallels between the ACCC inquiry and the UK Competition and Market Authority's inquiry into digital platforms and online advertising (CMA Market Study). The ACCC Issues Paper has referred specifically to a number of the trends and examples of conduct which the CMA outlined in its interim report released in December 2019. As the CMA Market Study is a number of months ahead in its process, the ACCC may also consider potential remedies to resolve concerns for ad tech and ad agency services, including:
- the potential case for separation of ad tech services through the supply chain, such as separating Google’s publisher ad server from its intermediary operations; and
- the potential for a code of conduct addressing measures to improve transparency over ad tech fees and industry standardisation of ad verification and measurement.
In addition, there are recent and ongoing investigations that will be closely scrutinised, including the US Department of Justice’s current investigation of Google’s ad tools and the combination of its ad server and ad exchange functions, and both the French Competition Authority’s and German competition authority, the Bundeskartellamt, sector inquiries into online advertising which launched in 2016 and 2018 respectively.
While the Ad Tech Inquiry will of course be heavily focussed on understanding the Australian markets and supply dynamics in ad tech and ad agency services and any outcomes of this inquiry will need to be tied to impacts in Australia, the ACCC will seek coherence of a broader framework.
As this Ad Tech Inquiry unfolds, we can expect very broad stakeholder engagement and a range of views emerging on critical issues for all companies involved in the ad tech supply chain.
Submissions to the issues paper are due by 21 April 2020. The ACCC is required to provide a preliminary report to the Treasurer by 31 December 2020 and a final report by 31 August 2021.
This inquiry will run alongside the ACCC’s 5 year inquiry into digital platform services, which will proactively investigate, monitor and enforce issues in markets in which digital platforms operate under a broad remit.