Philip Hammond has called on the competition regulator to launch an investigation into the £13bn UK digital advertising market dominated by the US tech firms Google and Facebook.
The chancellor used his annual spring statement to ask the Competition and Markets Authority (CMA) to conduct a review of the digital advertising market following a recommendation made in an independent report conducted for the Treasury by Jason Furman, Barack Obama’s chief economic adviser.
The review concluded that a formal market study should be launched into the UK digital ad market which is “dominated by two players and suffers from a lack of transparency”.
Google and Facebook currently account for about two-thirds of the £13bn UK digital ad market, and by 2020 are forecast to control about 72%, according to the research firm eMarketer.
In a letter to Lord Tyrie, the chair of the CMA, Hammond said conducting a probe would “provide greater understanding of the existence, nature and potential solutions to any problems”. He asked the CMA to carry out the review as soon as possible, acknowledging that a no-deal Brexit would make it impossible in the near future.
“I wish to be clear that I recognise the potential challenges on CMA resourcing associated with scenarios relating to the UK’s departure from the European Union other than an orderly exit,” he said.
“This is including in relation to the CMA’s increased responsibility for ongoing competition cases with a European dimension and its new role in state aid.”
Last October, Andrea Coscelli, the chief executive of the CMA, said the body was “actively considering” launching an investigation into the digital advertising market. Coscelli said that if the CMA were to launch an investigation it would be hand-in-hand with the UK media regulator, Ofcom.
However, on Wednesday the CMA also said Brexit could provide a major impediment to taking on a significant new probe.
“The CMA has also been considering whether to undertake work in the digital advertising market,” the body said. “However, its ability to launch new projects is heavily dependent on the outcome of EU exit negotiations.”
Last month, Jeremy Wright, the culture secretary, told the House of Commons that he too had asked the CMA to launch a study of the “largely opaque and extremely complex” world of online advertising. The recommendation to launch the inquiry was included in Dame Frances Cairncross’s report on the future of the press.
By 2020, Facebook will be bringing in an estimated £3.8bn in UK advertising spending – £1bn more than in 2018 – and only slightly less than the value of the entire commercial TV market (£4.04bn).
The world’s two biggest advertisers, consumer goods firms Procter & Gamble and Unilever, have previously threatened to withdraw advertising from Facebook and Google-owned YouTube unless the platforms cleaned up the “swamp”.
