“Trust me, I’m fair”: analysing Google’s latest practices in ad tech from the perspective of EU competition law

In a first paper published in February 2019, we explained the mechanics of online display advertising and real-time bidding and noted that the system is extremely opaque. We identified Google as the leading, and most likely dominant player across the ad tech value chain and expressed the concern that it engages in prima facie anticompetitive conduct, in that it uses its leading ad server to favour its ad intermediation business. We also explained how lack of competition across the ad tech chain enables Google to exploit advertisers and publishers by charging hidden fees for ad intermediation on top of its disclosed commission. In March 2019 Google announced that it would be switching to a first-price unified auction by the end of 2019, arguing that its move will help create a fair and transparent market for everyone. Meanwhile, online advertising has attracted significant regulatory interest in the EU, the USA and Australia. In this new paper, we analyse whether Google’s switch to a unified auction has addressed the concerns we expressed in our first paper. Unfortunately, we conclude that Google’s latest switch does nothing to increase auction transparency. Worse, it seems to strengthen Google’s ability to extract hidden margins from its customers, while undermining the competitive pressure exercised by header bidding. If substantiated, Google’s conduct could result in significant welfare losses for publishers, advertisers and ultimately consumers. We conclude our paper by suggesting various structural and behavioural remedies that could help restore competition in ad tech should our concerns be substantiated.