Google and Facebook could face a full-blown investigation into their iron grip on digital advertising in a move that might even lead to the internet giants being broken up in the UK.
The Mail on Sunday can reveal that senior staff at Britain’s competition watchdog are pushing for an investigation over concerns that the two American firms have become too dominant.
In a scathing 283-page report by the Competition and Markets Authority (CMA) in December, Google was found to control more than 90 per cent of the UK’s £6 billion ‘search’ market for adverts that appear when internet users are trying to find information.
Facebook was found to control nearly half of the UK’s £5 billion ‘display’ market for adverts that appear as web-page images that users are encouraged to click on.
The watchdog stopped short of launching a full market investigation on the back of its study, hinting it might instead recommend tighter regulations such as forcing Google and Facebook to share data with rivals to boost competition.
In a letter sent to Lord Tyrie after he became CMA chairman, seen by The Mail on Sunday, Lord Howard (pictured) criticised ‘the ability of a relatively small number of large international companies to earn super profits because of the dominant position they occupy in their market places’
But now sources say senior CMA figures feel this does not go far enough – and are still pushing for an in-depth probe that could open the door to a major crackdown.
At the end of a full market investigation, the CMA can order companies to be broken up to improve competition. This would represent the most drastic action available to the watchdog and could see Google and Facebook forced to sell parts of their businesses.
The competition watchdog, which is chaired by former Tory MP Lord Tyrie, is set to publish its final report by July 2.
An investigation would deliver another blow to Google, which also faces two separate US probes into its dominance of online advertising – one by the Department of Justice and the other by a coalition of the legal chiefs from all 50 states.
Last night, former Conservative Party leader Michael Howard called on Lord Tyrie to be tough on the tech giants.
In a letter sent to Lord Tyrie after he became CMA chairman, seen by The Mail on Sunday, Lord Howard criticised ‘the ability of a relatively small number of large international companies to earn super profits because of the dominant position they occupy in their market places’. He added: ‘They have done this by buying up potential competitors, lobbying for regulations which skew the playing field in their favour and generally using their dominant power to the advantage of their shareholders and detriment of consumers. The only remedy for this is much tougher and more vigorous competition policy. I realise that there are legal constraints on your ability to deliver this but I would urge you to do whatever you can to invigorate the UK’s competition policy in order to contribute to this objective.’
Last night, former Conservative Party leader Michael Howard called on Lord Tyrie (pictured) to be tough on the tech giants
Lord Tyrie served as Shadow Treasury spokesman under Michael Howard while the Tories were in Opposition between 2003 and 2005.
Lord Tyrie took charge of the CMA in 2018 and the watchdog has since taken a robust stance on Silicon Valley’s tech companies.
Its interventions have included launching an investigation into Amazon’s deal to buy a stake in British takeaway delivery company Deliveroo.
A full-blown probe into digital advertising would be the clearest signal yet that Lord Tyrie plans to crack down on the tech giants.
Critics argue Google and Facebook have created a duopoly in digital advertising that has stifled competition and forced up prices for firms, which pass the extra costs on to consumers.
In its interim report, the CMA said it was concerned Google and Facebook were ‘both now so large and have such extensive access to data that potential rivals can no longer compete on equal terms’.
It added: ‘Weak competition in digital advertising can increase the prices of goods and services across the economy and undermine the ability of newspapers and others to produce valuable content, to the detriment of broader society.’
Richard Kramer, a senior analyst at technology research firm Arete Research, urged the CMA to launch a full investigation. ‘Doing a deep dive would potentially put a lot of data into the public domain that should see the light of day,’ he said.
In March last year, a separate Government-commissioned review by Harvard economist Jason Furman, a former adviser to Barack Obama, found that web giants had bought more than 400 smaller companies over the past decade. The move to swallow up rivals was described as a ‘killer strategy’ to extinguish competition.
In a statement, the CMA said: ‘Our online platforms and digital advertising market study is still ongoing and, as such, no final decision has been made.
‘In our interim report in December, we consulted on not carrying out a market investigation, on the basis that making recommendations to Government for regulatory reform would be the most effective way of tackling the concerns we identified.
‘Ultimately, the final decision will be made by the CMA board before the deadline of July 2, taking into account the responses to our consultation, market developments and the Government’s emerging position on regulatory reform in this area.’