The UK competition regulator has launched an investigation into online advertising over concerns about the dominance of tech giants and the way they collect and use personal data.
The Competition and Markets Authority will focus its probe on Facebook Inc (NASDAQ:FB) and Alphabet Inc's (NASDAQ:GOOG) Google, assessing whether the companies are harming consumers by not giving them control over how their personal data is handled.
READ: Alphabet’s Google fined $1.69bn by European Commission for anti-trust practices in online advertising
The watchdog will also look at whether the US technology firms are hurting competition by using their power to dominate the UK’s ad market.
Facebook and Google are the online advertising market’s biggest players, accounting for an estimated 61% share of digital ad revenues in the UK.
Facebook and Google scandals
Last year Facebook was fined £500,000 by the information commissioner after the personal data of about 50 million Americans and at least a million Britons were harvested from the social media site and improperly shared with data firm Cambridge Analytica.
The company has also been criticised for the dissemination of fake news.
Google saw several advertisers pull ads from its YouTube business last year after their content was found to appear next to extremist or hate videos on the video sharing site. The group has publicly apologised and taken measures to give brands more control over where their ads appear.
In March, Google was fined €1.49bn by the European Commission for abusing its market dominance by restricting third-party websites from displaying search ads between 2006 and 2016.
CMA chair, Andrew Tyrie, said the investigation will open the digital ad market up to greater scrutiny and should give parliament and the public a “better grip” on what global online platforms are doing.
“The market study will help us further lift the lid on how major online platforms work, especially how they collect and use personal data, how they monetise their content through digital advertising, and what this means for competition,” he said.
“The findings from this work will be used to influence the direction of policy and regulation in the digital sector.”
Price comparision and online classifed sites unaffected by CMA review
Analysts at Liberum pointed out that the review is focused on advertising-funded models such as Google and Facebook, leaving alone online classified portals such as Auto Trader and Rightmove or price comparison websites such as Moneysupermarket.com.
The broker thinks the regulator will at some point look at online classified sites like Auto Trader and Rightmove, which have high margins and high market shares.
The CMA will also look at price comparisons sites but less urgently, Liberum predicts.
It believes the watchdog is unlikely to look Just Eat, where the food delivery classified space is more immature and more competitive.
“In summary, we do not see a particular risk / issue here at least in the short to medium -term for online classified sites such as Auto Trader and Rightmove and even less so for the price comparison websites such as Moneysupermarket.com,” Liberum said.
Liberum has a ‘hold rating on Rightmove and a ‘buy’ recommendation on Just Eat, Auto Trader and Moneysupermarket.com.