Google and Facebook's dominance of the online advertising market means there is a "lack of real competition" that could be limiting choice for consumers and raising prices for advertisers, Britain's competition regulator said Wednesday.
The U.K. Competition and Markets Authority (CMA) detailed a long list of concerns with the prevailing market position of the two tech giants. Among its chief complaints were that default search settings and the collection of personal data are negatively impacting on competition.
Britain's antitrust watchdog found that Google earned more than 90% of the revenues in search-based advertising in the country, totaling about £6 billion ($7.8 billion), while Facebook accounted for nearly half of all online "display" ad revenues, raking in over £2 billion.
About 15% of questions on Google "have never been searched for before," the CMA said, and rival browsers like Microsoft's Bing wouldn't have the same access to such data. That means Google enjoys a "powerful position" as the Silicon Valley giant's engorged trove of information strengthens its algorithms and makes search results more accurate.
Google's practice of paying companies to make its search engine the default option on their products has also come into question. The CMA said it found Google was willing to pay roughly £1 billion, or 16% of its search-related revenues, to be the default provider on Apple's iPhones. The regulator also questioned Facebook's targeted advertising, saying consumers are forced to share their data "as a condition for using the service."
The regulator further warned of Google and Facebook's market power restraining the revenues of newspapers and other publishers, which have complained of unexpected drops in traffic due to changes to the platforms' algorithms.
While it stopped short of making any concrete plans, the CMA said there was a "strong argument for the development of a new regulatory regime" governing digital advertising. Google said it would "continue to work constructively" with U.K. authorities, while Facebook said it was "fully committed to engaging in the consultation process around the CMA's preliminary report."
Andrea Coscelli, chief executive of the CMA, said that the way such internet platforms operate can often be a "mystery."
"Digital advertising fuels big businesses like Google and Facebook and we have been building a picture of how this complex new market works," she added. "We've looked especially at how these firms collect and use people's data, how they monetise it and what this means for rival companies who want to compete, as well as the people and businesses using these services every day."
The news arrives at a tense time for such online platforms, which have found themselves in the firing line of antitrust authorities looking to reign in their rising influence. In the U.S., the likes of Google and Amazon have drawn the ire of politicians from President Donald Trump to Democratic presidential hopeful Elizabeth Warren, the latter of whom has been calling for a breakup of such companies.
The CMA's findings are the result of an initial market study into whether such firms are harming competition in the digital ad market. Former U.K. Finance Minister Philip Hammond had urged the regulator to investigate the digital advertising market earlier this year. The watchdog said it was likely to make recommendations to Boris Johnson's newly-elected government, though it "stands ready to act" if its concerns aren't addressed.
The regulator added that it is also considering proposals to curb the online ad dominance of Google and Facebook. It said it could implement measures that open up the search market by requiring Google to provide access to click and query data and limiting default search settings. Other suggestions from the CMA included forcing Facebook to "connect more seamlessly" with rivals and allowing users to switch off personalized ads.
On the issue of personalized advertising, Google's vice president of the U.K. and Ireland, Ronan Harris, said that it already had "easy-to-use controls" that let users turn such targeting off and delete their search history. A Facebook spokesperson said the social network now shows more context around the ads it shows and lets users choose to stop seeing ads from a particular marketer.
Data privacy has been another big source of contention for regulators scrutinizing digital companies, especially in the wake of revelations that Facebook improperly allowed now-defunct political consultancy Cambridge Analytica access to the personal information of 87 million people. The EU last year introduced strict new rules looking to give consumers more control over how their data is handled, while California is set to implement similar legislation in January.