France’s Competition Authority has fined Google €220m ($267m) for abusing its dominant position in the online advertising market. The landmark ruling sets an important precedent for regulating the online ad market and the technologies underpinning it. It also sheds light on the information asymmetries of digital markets and how they can be used to disadvantage rivals.
The EU has fined Google several times, but that has not stopped the company from operating as a monopoly. However, this was the first time that the tech giant did not contest the accusations leveled against it and even agreed to change its anticompetitive practices due to the investigation.
The investigation found that Google, which controls the software behind the whole ad sales process and is the biggest marketplace for online ads, had tied its products together in display advertising to gain an advantage over other competitors. The search giant’s system for selling ads across the web has been built over more than a decade, with a crucial step being the acquisition of DoubleClick in 2007, which offered advertising technology and acted as a marketplace.
US regulators have already come after Google
Google’s dominance in the online ad space has also attracted US regulatory scrutiny. In December 2020, attorneys general from ten states accused Google of abusing its monopoly over the technology that delivers ads online, overcharging publishers for the ads it showed across the web, and edging out rivals who tried to challenge its dominance.
The lawsuit was the first filed by US regulators focused on the tools that connect buyers of advertising space with publishers that sell it. Prosecutors argued that Google tried to destroy a process designed by publishers to introduce more competition into the market for online ads. Under that system, publishers could sell ad space in more online marketplaces at once, reducing their reliance on Google’s ad tech.
The US investigation highlighted that Google had maintained its dominance in part by reaching an agreement with Facebook to limit the social network’s involvement in this process. In return, it gave Facebook an advantage in other ad auctions.
Fines are not enough – ex ante regulation might be the solution
Fines against tech giants, including Google, have been easy for these companies to shrug off. Between 2017 and 2019, the EU has fined Google a total of €8.2bn ($9.9bn) for violating competition around search, the Android operating system, and advertising. The total fines amount to about 5.5% of Google’s total revenue in 2020 ($147bn). In general, Big Tech companies don’t have much incentive to change their anticompetitive behaviour after being fined.
The introduction of ex ante (before the event) regulation, i.e., strict and transparent rules applied to digital platforms before they engage in any anticompetitive behaviour, is increasingly viewed as a desirable solution by antitrust regulators worldwide. The EC’s proposed Digital Markets Act (DMA), which aims to constrain platforms so that they don’t become monopolies, is a vivid example.
The UK antitrust watchdog is exploring a similar approach, recommending a new regulatory framework capable of enforcing onerous rules on digital players that allegedly occupy strong market positions. The regulation’s core will be an enforceable code of conduct to be applied to online platforms with “strategic market status.”