Call for Information from the Digital Markets Taskforce - Which? response

Which? welcomes this opportunity to share its views with the Digital Markets Taskforce. As the Taskforce will be aware, Which? called for the CMA to conduct a market study on digital advertising in 2018 because we were concerned that the concentration of market power in Google and Facebook was causing poor outcomes for consumers and that consumers were unable to exercise sufficient control over their personal data. We are therefore pleased that the CMA has so thoroughly set out the competitive failings of the markets for online search and social media, and we are pleased that the Taskforce will be building on this work in the coming months.

In this submission we set out our reaction to the findings and recommendations of the market study and the implications we believe these have for the work of the Taskforce. Of course, we are continuing to analyse the problems in digital markets, especially those that have platforms which are not funded by digital advertising, and we hope to be able to continue to engage with the Taskforce as our thinking develops.  

The digital markets examined by the CMA play an integral part in the lives of most consumers, but it is clear that they are not competitive. The extensive evidence presented by the CMA makes an incontrovertible case that Google and Facebook are not subject to sufficient competitive pressure. Of the many striking findings in the CMA’s Final Report, we note that a cautious estimate of the excess profits earned by these two platforms in the UK in 2018 is more than £2 billion. 

The harms caused to consumers by this lack of competition are manifold, but include: higher prices, as higher advertising prices are passed through to the prices paid by consumers; a lack of competition on quality; reduced innovation; and consumers giving up more personal data than they would like. More generally, this uncompetitiveness leads to lower economic growth than could be achieved. 

Intervention is needed to increase competition in these markets and ensure that digital sectors deliver better outcomes for consumers. However, as the CMA makes clear, the current competition regime does not have sufficient powers to do this, which means that these harms grow all the while and economic damage becomes entrenched. It is imperative that the competition regime be strengthened as soon as possible. The longer it takes to implement the proposed measures the greater the risk that the harms caused by the lack of competition will become irreversible and the UK’s digital economy will be scarred by this. 

We are therefore pleased that the CMA has identified sensible and proportionate remedies to address the sources of market power and their consequent harms in these markets. There will need to be interventions to address Google’s market power in search (i.e. third-party access to click and query data, a restriction on default search engines and the introduction of choice screens, and possible separation of different parts of the business) and Facebook’s market power in social media (i.e. increasing interoperability with other platforms).

We particularly support measures that give consumers more control over how their data is used. These remedies can both reduce privacy harm and reduce the market power of the largest platforms by restricting the amount of personal data they have access to. Our response to question 8 below sets out our thoughts on this in more detail. 

Inevitably though, the nature of these markets means that some platforms will always have market power that will be open to abuse and so we agree with the CMA that there is a very compelling case for an enforceable code of conduct to manage their behaviour ex ante. We think clear ex-ante rules and guidance to provide clarity over what represents acceptable behaviour when interacting with consumers, other businesses and competitors will help to prevent and address harms to consumers and competition more rapidly.

We support the code as proposed with the three high-level objectives of fair trading, open choices, and trust and transparency as we think these are sufficiently broad to cover the anticompetitive effects in the digital markets analysed in the market study. As we set out below, we also think these principles will be appropriate to address anti-competitive behaviour in other digital markets.

For the ex-ante regulatory tools to work effectively, it is paramount that the DMU has appropriate powers to punish breaches of the code and the credibility that it will use these. We agree with the CMA’s prescription of required powers. It will be necessary for these to be accompanied with the appropriate resource. 

Building on the work of the CMA in the market study, we look forward to the Taskforce using the coming months to develop these recommendations further and determine where they might be relevant in other digital markets not covered by the market study.

We welcome that the expertise of the ICO, Ofcom and the CMA will be brought together by the Taskforce, and through the Digital Regulation Cooperation Forum. We also welcome the engagement of the CMA with other jurisdictions around the world looking at these issues. We hope and expect that the Taskforce will give clear and detailed advice to the Government that will speed the design of legislation.