An early Christmas present for the tech sector from the CMA?

18 December 2019

The Competition and Markets Authority (“CMA”) has today (18 December 2019) given the tech sector an early Christmas present by publishing its interim report on its market study, commenced earlier this year, into online platforms and digital advertising. It will take until well after the last turkey sandwich has been eaten to grapple with all of the issues raised by the report, given the main document alone runs to almost 300 pages and is accompanied by 13 detailed appendices. However, some initial observations may be made already about the potential implications for a broader range of players than just the tech giants of Google and Facebook.

What is the CMA market study?

The CMA’s study is part of its wider strategy for digital markets and was launched in July 2019. Since then it has been gathering data from a wide range of sources. Under the framework of the Enterprise Act 2002 (“EA 02”) under which this study has been undertaken, the CMA has the powers to refer the market for an in-depth market investigation reference (“MIR”) at the end of this process where it (i) has reasonable grounds to suspect a feature of a market in the UK prevents, restricts or distorts competition and (ii) making such a reference appears to be an appropriate and proportionate response. Following completion of such in-depth process and where appropriate findings are made, the CMA has extensive powers under the EA 02 to make binding orders to address the concerns identified. 

The CMA's provisional findings

In this case, the CMA’s provisional view is that there are reasonable grounds to suspect that there are features of markets – the open display advertising market, general search and search advertising markets and social media and display advertising markets – which distort competition. The concerns primarily relate to Facebook and Google and many of the proposed remedies relate to these companies which are described as platforms with Strategic Market Status.

Potential implications

However some of CMA’s proposals may have broader implications, either directly or perhaps indirectly. The CMA expressly recognises that many of the issues highlighted arise at the threshold between consumer, competition and data protection law and require engagement between the different regulators responsible for these areas. There is likely to be significant scope for influence between these particularly in light of the CMA’s comment that “cooperation is particularly important at the current time, when the interpretation and practical application of GDPR is still evolving.”

For example, the CMA is proposing a rule that all platforms should be required to give consumers an option to use their services without requiring in return the use of consumers’ data for personalised advertising. Arguably, this could worsen the web browsing experience of consumers if they are repeatedly shown inappropriate adverts and it could be detrimental to the sales of firms reliant on personalised advertising to generate business as well as potentially the website operators that sell the advertising space and intermediaries involved in the real time bidding of the same. The CMA is also proposing an ex ante obligation on platforms to design content and privacy policies in a way that facilitates consumer choice. This may necessitate a re-think by business owners about the functionality of their platforms without data tracking tools. In addition, updates may need to be made to privacy policies to set out the changes as to when personal data will be collected and how it will be used. Just-in-time cookie notices may also need to be updated to specifically provide consumers with the possibility of opting-in or out of the use of the cookies and similar technologies used to facilitate personalised advertising. These are proposed as remedies to improve transparency and give greater control over data. The CMA describes these as “significant changes” which would require “careful consideration.”

Next steps

The CMA does not, however, propose to make an MIR in order to take forwards these matters, despite the concerns it has identified and the powers it has at its disposal. Instead it proposes to make recommendations to government. It would therefore be left to government to decide whether to take forwards such proposals and on what timescales to do so. It will be interesting to see the extent to which the ICO might, as suggested above, be influenced by the CMA’s proposals in the interim.

Responses to the consultation on these areas, including the substantive concerns, remedies and the proposal not to make an MIR, are sought by 12 February 2020. The final report, taking account of responses to the consultation, is due in the summer of next year.

Further information

Please contact Alex Torpey if you would like to discuss these issues further.

About the authors

Alex Torpey is an Associate in the corproate and commercial department. Alex advises technologystartup and established companies as well as entrepreneurs on a variety of legal issues for commercial contracts including data protection compliance, licensing and ownership of intellectual property rights, confidentiality and liability.

 

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