Online advertising – Government acknowledges challenges ahead for competition law

We reported a few months ago on the House of Lords Communications Select Committee's report on advertising in the digital age.

The Committee’s report set out the challenges currently facing the UK’s advertising industry in light of factors such as Brexit and the ever-expanding digital economy.  Notably, the Committee called on the CMA and other regulatory bodies to adopt robust standards for online advertising and made several recommendations to the Government of ways to help ensure that digital advertising “is working fairly for businesses and consumers”.

Following on from that report, the Government has now published its response.

What was the Government's response?

The following aspects will be of interest to competition lawyers:

  • The Government acknowledged that the regulatory challenges posed by the online advertising industry are extensive. The Government encourages continued self-regulation of online advertising, but may consider legislating in this area. A White Paper that focuses on online harms will be published later this year, which may shed light on any planned legislation relating to online advertising. 
  • In relation to the lack of transparency in the digital media advertising market, the Government stated that it is keen to gather more evidence on the business models in this market. This will hopefully form part of the Digital Charter's work programme and will be included in the Carincross review into the sustainability of the press (expected early 2019). However, it noted that because the CMA is an independent authority, the Government‘s powers to direct the CMA to undertake an investigation or study are extremely limited. 
  • Despite receiving an increase in funding, it remains unlikely that the CMA will have sufficient resources to fund a wide-ranging market study into digital advertising. This is because the additional £23.6 million funds allocated to the CMA by the Treasury will be going towards preparation for Brexit.  Market studies are cost intensive for the regulator, and many have speculated that they may be a likely casualty of the CMA’s increased enforcement responsibilities. 
  • The Government is to conduct an overall consumer markets review, to be completed by April 2019. As part of this review, the Government will consider how best to ensure the UK's competition framework is effective in responding to challenges presented by digital services.

The response to the Committee’s report indicates that the Government acknowledges the need to gather more evidence and to develop better tools in order to be able to deal with potentially complex competition issues arising in digital ad markets.  It also notes the overall preference for self-regulation (which should allow markets to self-correct), rather than introducing a rigid regulatory framework. However, with the CMA about to take on the burden of cases that would normally be dealt with by the European Commission, it remains to be seen whether the UK will be able to adapt quickly to the particular challenges posed by rapidly evolving digital markets. 

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