Authored By: Anchit Nayyar
On 22nd June, 2021, the European Commission launched formal antitrust investigation into Google’s monopolistic practices in the provision of its AdTech services, ie. the intermediary services responsible for display of digital advertising on websites and applications. This comes closely after regulators in the UK and Australia concluded their detailed market studies into the sector. This article analyses the scope of the investigation, and its significance from an antitrust perspective. It further highlights the inherent conflict between competition and data protection laws in the sector, and also gives certain key arguments that might be raised against intervention. The article concludes by analysing the various remedies that could be adopted to alleviate the competition concerns in the investigation, while also addressing their privacy implications.
Digital display advertising (advertising in the form of banners, pictures etc. on mobile apps and webpages), with its ability to provide personalized, targeted advertisements is dominating the overall advertisement sphere, while also enabling tech companies to keep their services free for their users. There has thus been a huge demand for Online Advertising Technology (“AdTech”) for managing, hosting and delivering personalized digital display advertisements.
However, despite its rapid development, concerns have arisen regarding the state of competition in the industry, especially relating to Google’s dominant position in the market. On 22nd June 2021, the European Commission (“EC”) opened formal antitrust investigations into Google’s anti-competitive practices in the AdTech sector. This article discusses the scope of the EC’s investigation and its possible implications on future antitrust enforcement into Big Tech.
I. How does AdTech work
Delivery of digital display advertising is based on the programmatic trading model, wherein ad inventory is bought and sold within a matter of milliseconds through a series of algorithm run auctions. These auctions are data driven to ensure effective targeting of online advertisements. This process however necessitates the presence of various specialized intermediaries across the supply chain.
When a consumer visits a publisher’s website, the web browser intimates the publisher, who hires an intermediary called as a Publisher Ad Server, who is responsible for organizing and managing advertisements on the publisher’s website. The Publisher Ad Server then sends bid requests to various Supply Side Platforms (“SSPs”), who then send such requests to various Demand Side Platforms (“DSPs”). The DSPs, using the parameters set by the advertisers, then make bids on their behalf to the SSPs, who accept the bids based on the parameters set by the Publisher. These SSPs then send their best bids to the Publisher Ad Server, who compares and selects the best bid received.
Moreover, advertisers also hire an Advertiser Ad Server to host their creative content, manage their digital ad campaigns and track its effectiveness. (Australian Competition and Consumer Commission “ACCC” AdTech Report, Pg. 37). The process is illustrated in the chart below:
II. EC’s Investigation
The issues raised in EC’s investigation can broadly be classified into two categories:
§ Issues of Leveraging and Self-Preferencing
§ Creation of data related sustainability barriers
A. Issues of Leveraging and Self Preferencing
Google has a market leading presence across the entire AdTech supply chain. As per estimates by the Competition and Markets Authority (“CMA”), Google’s market share is as follows:
§ Publisher Ad Server: 90-100%;
§ Advertiser Ad Server: 80-90%;
§ SSP: 50-60%
Article 102 of the TFEU (akin to Section 4 of India’s Competition Act, 2002) prohibits any enterprise having a dominant position from abusing the same, which inter alia prohibits undertaking from imposing supplementary conditions having no relation with the subject of such contracts. Further, while self preferencing is not per se prohibited under EU law, it may constitute an abuse of dominance based on its consequent effects on the market (see Google-Android). In this context, EC’s investigation focusses on the following two practices:
1. Tying of YouTube Ad Inventory with Google’s DSPs
Tying refers to a practice whereby the seller of a particular good or service, as a precondition to the sale of the product, requires the buyer to purchase another good or service. In its investigation, EC has alleged that Google has tied the sale of advertisement spots on YouTube to the use of Google’s own DSPs.
Antitrust jurisprudence however states that tying is not per se anticompetitive, and its prohibition would depend on its consequent effects on the market (see Microsoft). The market strength or significance of the tying product is thus one of the key factors in determining potential effects. It is in this context that YouTube’s significance in the Online Advertising sphere becomes important. Since YouTube is the largest host of video content on the internet, it is often considered de-facto irreplaceable by advertisers. (AdTech Report, Pg. 126). This irreplaceability can thus act as a huge incentive for potential advertisers to use Google’s DSP, capable of foreclosing other AdTech intermediaries from the market, thereby raising concerns of anti-competitive tying.
2. Channeling demand from Google’s DSP to its own SSPs
EC has alleged that Google’s DSPs favours Google’s own SSP in demand side auctions. While EC’s press release has not elaborated on the exact conduct in question, the CMA in its Report on Digital Advertising found that a large proportion of demand from Google’s DSPs was being channeled through Google’s own SSPs. Its significance emanates from the fact that smaller advertisers are unlikely to multi-home (use more than one service provider at a time) with Google’s DSPs due to its ease of use, access to large amount of user data as well as its access to exclusive ad inventory like YouTube (CMA Report on Digital Advertising, Pg. 290). This thus enables Google to channel the ‘locked in’ demand from its DSPs to its own SSP, raising concerns of anti-competitive leveraging of dominance.
B. Creation of Data Related Sustainability Barriers
Data acts as the most essential input for intermediaries operating in the AdTech supply chain. Since the biggest advantage of Digital Advertising is personalization and targeted offering, entities having access to large sets of user data will be able to better identify and target users. (AdTech Report, Pg. 59).
This data can be collected directly from the users themselves (first-party data), or through the use of third-party cookies (third-party data). Due to the popularity of its numerous customer facing services, as well as its large network of third party cookies, Google is able to collect large sets of both first and third party data, giving it a significant data advantage over its competitors.
The EC’s investigation thus focusses on two main practices which could substantially increase Google’s already significant data-advantage, thereby increasing entry and sustainability barriers in the industry.
1. Privacy Sandbox Policy
In 2019, Google announced that it would phase out support for third party cookies on its web browser Chrome, and replace it with a set of measures called the ‘Privacy Sandbox’ proposals. Since Google has access to a large amount of first-party data, the concern here is that the changes would disproportionately affect other players in the AdTech industry, who place a heavier reliance on third party cookies.
In January 2021, the CMA had also opened formal antitrust investigations against Google scrutinizing these proposed changes. In its investigation, it noted that Google’s proposals were prima facie designed to increase its already significant data advantage. In June 2021 however, Google offered various voluntary commitments to the CMA. These include a bar on Google from using first-party user level data collected through some of its biggest services like Android, Chrome etc, and also gives the CMA the final say in the policies developed by Google to replace the use of third party cookies.
In my opinion, by imposing data separation requirements and giving the CMA an ex ante regulatory mandate, the commitments offered substantially address the competition concerns. The EC could thus look at these commitments as a guide to devise their own remedies.
2. Blocking Access to User Identifiers
While individual DSPs, SSPs and Ad Servers may collect data about various users, in a programmatic trade, these users must be able to be identified by all these intermediaries for targeting to work. For eg., if a Publisher Ad Server and the SSP identify a user using his/her IP address, but the advertiser and the DSPs, who may have large sets of data about that same user, recognize him/her using some other parameter, they would not be able to identify that user in the ad auction, and thus would not be able target their data.
Google uses two unique identifiers to track users-
§ DoubleClick ID to identify users across the internet; and
§ Android Advertising ID to identify users across various apps on Android.
While the DoubleClick ID used to be available to anyone who used Google’s Ad Server or DSPs, Google encrypted users’ DoubleClick ID in 2018, thereby disabling advertisers to merge data from their ad campaigns using other AdTech intermediaries. Similarly, while the Android Advertising ID was available to third parties by default, Google now gives Android users the option of signing out of personalized advertisements, subsequent to which third parties would not be given access to this Android ID. These changes however do not affect Google’s proprietary AdTech services, thereby giving them a substantial data advantage capable of eroding competition in the market.
Potential Arguments against Intervention
While the competition concerns from these policy changes are apparent, any enforcement action could face challenges on the following grounds
§ The argument of ‘essentiality’ of Google’s services; and
§ The objective justification of user privacy.
1. The Argument of Essentiality
The essential facilities doctrine states that before mandating third party access to an input/service provided by a dominant undertaking, antitrust regulators must ascertain whether there exists an objective necessity of that input/service, a denial of which could lead to elimination of competition in the market (see Oscar Bronner; BEH Gas). Thus, as long as there exist potential alternatives on which third parties can rely on to sustain in the market, access cannot be mandated (see Contact Software GmbH) .
Though DoubleClick and Android IDs are significant for third party AdTech providers in identifying users across the supply chain, the same functionality can also be achieved by a technique called ‘cookie syncing’, wherein various AdTech providers agree to share their unique identifiers with each other (AdTech Report, Pg. 62). For example, while targeting ads on a particular user, if the advertiser’s DSP and the publisher’s SSP are owned by different companies (and hence have their own unique identifiers for that user), to identify and therefore target their data on that user in the programmatic auction, these DSPs and SSPs could simply agree to share their unique IDs with each other.
The drawback to this technique however is that matching IDs and identifying users using this technique takes some additional time, and given that programmatic auctions take place within milliseconds, if a DSP takes too long to respond to an SSP’s bid, it may ‘time-out’ and therefore fail to submit bids to the SSP. (AdTech Report, Pg. 61). However, while there are certain technical difficulties relating to this technique, it also offers a promising alternative to AdTech intermediaries to replace their reliance on Google’s Identifiers such as the DoubleClick and the Android IDs.
Thus, while exclusive access to DoubleClick and Android IDs would give Google’s AdTech services a leg up over its competitors, it remains to be seen whether these IDs are irreplaceable for third parties to compete in the market. Mandating access to user IDs as a remedy could thus face a steep legal challenge.
2. The Objective Justification of User Privacy
One of the main considerations in any abuse of dominance case is whether the conduct of the dominant undertaking is objectively justified on commercial, economic or other valid grounds. The test of whether an exclusionary conduct is objectively justified is based on the net consumer benefits or harm that flow from it, and whether the exclusionary conduct in question is indispensable for the same (see ¶29-31, EU’s Guidance Report on Enforcement Priorities on Article 102)
From that perspective, the central question surrounding the investigation is the debate on how regulators should harmonize the conflicting requirements of data protection and competition laws in markets where access to user data is an essential parameter of competition. This is because while access to Google’s unique identifiers has been pleaded as a competition harm, it can also be justified on grounds of user privacy.
For instance, while Google’s practice of enabling Android users to turn off access to their Android ID could put third party AdTech providers at a substantial disadvantage, it is also in consonance with one of the main policy objectives of data protections laws, ie. giving users control over their personal data. (see Article I, General Data Protection Regulation). Similarly, Google has defended its Privacy Sandbox Policy, and its policy of blocking third party access to DoubleClick IDs by resorting to the popular policy demand of stopping companies from tracking their users across the internet.
While, the EC could look at the specifics of each practice and any differential conduct for Google’s own services, at a conceptual level, it would also need to address the inherent conflicts between competition and data protection laws in the industry. This deliberation would not only affect future investigations in AdTech, but would also have significant ramifications for antitrust enforcement around the world., especially