UK competition regulator demands power to take on Google and Facebook over their online stranglehold

The regulator said its existing powers were insufficient and an entirely new approach was needed.

It even wants powers to restrict Google’s ability to secure its place as the default search engine on mobile devices and browsers in order to introduce more choice for users.

And it wants Google to open up its click and query data to rival search engines.

The recommendation to government is the result of a year-long examination of the markets which uncovered the power of Google and Facebook online.

It said there was a "potential barrier" to new competition and that together Google and Facebook "work to reinforce each other and are extremely difficult to overcome".

"The scale and nature of these issues mean that a new pro-competition regulatory regime is needed so that users can continue to benefit from innovative new services; rival businesses can compete on a level playing field and publishers do not find their revenues unduly squeezed," it said.

UK spending on digital advertising was around £14bn in 2019, equivalent to about £500 per household - with 80% of that earned by just two companies - Google and Facebook.

Google enjoys a more than 90% share of the £7.3 billion search advertising market in the UK, while Facebook has a share of over 50% of the £5.5 billion display advertising market.

Google’s revenue per search has more than doubled since 2011, while Facebook’s average revenue per user has increased from less than £5 in 2011 to over £50 in 2019.

CMA chief executive Andrea Coscelli said: Through our examination of this market, we have discovered how major online platforms like Google and Facebook operate and how they use digital advertising to fuel their business models. What we have found is concerning – if the market power of these firms goes unchecked, people and businesses will lose out.

"People will carry on handing over more of their personal data than necessary, a lack of competition could mean higher prices for goods and services bought online and we could all miss out on the benefits of the next innovative digital platform.

"Our clear recommendation to government is that a new pro-competitive regulatory regime be established to address the concerns we have identified and regulate a sector which is central to all our lives."

The CMA say that Google and Facebook's large user base is a source of "market power".

It means that Facebook is a “must-have” network for users to remain in contact with each other, and enables Google to train its search algorithms in ways that other search engines cannot.

"Each has unmatchable access to user data, allowing them to target advertisements to individual consumers and tailor the services they provide," the regulator said.

"Both use default settings to nudge people into using their services and giving up their data."

It said Google paid around £1.2bn in 2019 to be the default search provider on mobile devices and browsers in the UK, while Facebook requires people to accept personalised advertising as a condition for using their service.

But the regulator added: "Their presence across many different markets, partially acquired through many acquisitions over the years, also makes it harder for rivals to compete.

"These issues matter to consumers. Weak competition in search and social media leads to reduced innovation and choice, as well as to consumers giving up more data than they would like.

"Further, if the £14bn spend in the UK last year on digital advertising is higher than it would be in a more competitive market, this will be felt in the prices for hotels, flights, consumer electronics, books, insurance and many other products that make heavy use of digital advertising. The CMA found that Google’s prices are around 30% to 40% higher than Bing when comparing like-for-like search terms on desktop and mobile."

It said that Google and Facebook’s market positions also have a profound impact on newspapers and other publishers.

The CMA found that newspapers are reliant on Google and Facebook for almost 40% of all visits to their sites.

"This dependency potentially squeezes their share of digital advertising revenues, undermining their ability to produce valuable content," it said.

The CMA has proposed that within the new regime a Digital Markets Unit should have the ability to enforce a code of conduct to ensure that platforms with a position of market power, like Google and Facebook, do not engage in "exploitative or exclusionary practices" or in a manner likely to reduce trust and transparency, and to impose fines if necessary.

It wants powers to restrict Google’s ability to secure its place as the default search engine on mobile devices and browsers in order to introduce more choice for users.

The unit should also have powers to insist Facebook give consumers a choice over whether to receive personalised advertising.

It wants Google to be ordered open up its click and query data to rival search engines to allow them to improve their algorithms so they can properly compete.

"This would be designed in a way that does not involve the transfer of personal data to avoid privacy concerns," it said.

And it said there should be teeth to insist Facebook increase its "interoperability" with competing social media platforms.

The unit would also oversee a “fairness-by-design” duty on the platforms to ensure that they are making it "as easy as possible for users to make meaningful choices".

And it could order the separation of platforms where necessary to ensure healthy competition.

Whilst the recommedations recommendation are UK-focused, many of the problems that the CMA identified were international in nature.

So the CMA said it will therefore continue to take a leading role globally in relation to these issues as part of a wider digital strategy.