As UK Gov reaches out to tech, investors threaten to ‘pull capital’ over M&A regulator over-reach

UK competition regulators are spooking tech investors in the country with an implied threat to clamp down on startup M&A, according to a new survey of the industry.

As the UK’s Chancellor of the Exchequer engaged with the tech industry at a ‘Chatham House’ style event today, the Coalition for a Digital Economy (Coadec) think-tank released a survey of over 50 key investors which found startup investors are prepared to pull capital over the prospect of the Competition and Markets Authority’s (CMA) new Digital Markets Unit (DMU) becoming a “whole-economy regulator by accident”. Investors are concerned after the CMA recommended the DMU be given ‘expanded powers’ regarding its investigations of M&A deals.

Controversy has been stirring up around the DMU, as the prospect of it blocking tech startup acquisitions – especially by US firms, sometimes on the grounds of national security – has gradually risen.

In the Coadec survey, half of investors said they would significantly reduce the amount they invested in UK startups if the ability to exit was restricted, and a further 22.5% said they would stop investing in UK startups completely under a stricter regulatory environment.

Furthermore, 60% of investors surveyed said they felt UK regulators only had a “basic understanding” of the startup market, and 22.2% felt regulators didn’t understand the tech startup market at all.

Coadec said its conservative estimates showed that the UK Government’s DMU proposals could create a £2.2bn drop in venture capital going into the UK, potentially reducing UK economic growth by £770m.

Commenting on the report, Dom Hallas, Executive Director of Coadec, said: “Startups thrive in competitive markets. But nurturing an ecosystem means knowing where to intervene and when not to. The data shows that not only is there a risk that the current proposals could miss some bad behavior in some areas like B2B markets whilst creating unnecessary barriers in others like M&A. Just as crucially, there’s frankly not a lot of faith in the regulators proposing them either.”

The survey results emerged just as Chancellor Rishi Sunak convened the “Treasury Connect” conference in London today which brought together some of the CEOs of the UK’s biggest tech firms and VCs in a ‘listening process’ designed to reach out to the industry.

However, at a press conference after the event, Sunak pushed back on the survey results, citing research by Professor Jason Furman, Chair, of the Digital Competition Expert Panel, which has found that “not a single acquisition” had been blocked by the DMU, and there are “no false positives” in decision making to date. Sunak said the “system looks at this in order to get the balance right.”

In addition, a statement from the Treasury, out today, said more than one-fifth of people in the UK’s biggest cities are now employed in the tech sector, which also saw £11.2 billion invested last year, setting a new investment record, it claimed.

Sunak also said the Future Fund, which backed UK-based tech firms with convertible loans during the pandemic, handed UK taxpayers with stakes in more than 150 high-growth firms.

These include Vaccitech PLC, which co-invented the COVID-19 vaccine with the University of Oxford and is better known as the AstraZeneca vaccine which went to 170 countries worldwide. The Future fund also invested in Century Tech, an EdTEch startup that uses AI to personalize learning for children.

The UK government’s £375 million ‘Future Fund: Breakthrough’ initiative continued from July this year, aiming at high-growth, R&D-intensive companies.

Coadec’s survey also found 70% of investors felt UK regulators “only thought about large incumbent firms” when designing competition rules, rather than startups or future innovation.

However, the survey found London was still rated as highly as California as an attractive destination for startups and investors.

#artificial-intelligence, #astrazeneca, #california, #chair, #coalition-for-a-digital-economy, #competition-and-markets-authority, #corporate-finance, #digital-markets-unit, #economy, #entrepreneurship, #europe, #finance, #jason-furman, #london, #money, #private-equity, #startup-company, #tc, #uk-government, #united-kingdom, #united-states, #venture-capital

Nvidia-ARM takeover raises serious antitrust concerns, finds UK’s CMA

The UK’s competition watchdog has raised serious concerns about Nvidia’s proposed takeover of chip designer, ARM.

Its assessment was published today by the government which will now need to decide whether to ask the Competition and Markets Authority (CMA) to carry out an in-depth probe into the proposed acquisition.

In the executive summary of the CMA’s report for the government the watchdog sets out concerns that if the deal were to go ahead the merged business would have the ability and incentive to harm the competitiveness of Nvidia’s rivals by restricting access to ARM’s IP which is used by companies that produce semiconductor chips and related products, in competition with Nvidia.

The CMA is worried that the loss of competition could stifle innovation across a number of markets — including data centres, gaming, the ‘internet of things’, and self-driving cars, with the resulting risk of more expensive or lower quality products for businesses and consumers.

A behavioral remedy offered by Nvidia was rejected by the CMA — which has recommended moving to an in-depth ‘Phase 2’ investigation of the proposed merger on competition grounds. 

Commenting in a statement, CEO Andrea Coscelli said: “We’re concerned that Nvidia controlling Arm could create real problems for NVIDIA’s rivals by limiting their access to key technologies, and ultimately stifling innovation across a number of important and growing markets. This could end up with consumers missing out on new products, or prices going up.

“The chip technology industry is worth billions and is vital to products that businesses and consumers rely on every day. This includes the critical data processing and datacentre technology that supports digital businesses across the economy, and the future development of artificial intelligence technologies that will be important to growth industries like robotics and self-driving cars.”

Nvidia has been contacted for comment.

In a statement on its website, the Department for Digital, Media, Culture and Sport said the UK’s digital secretary is now “considering the relevant information contained in the full report” and will make a decision on whether to ask the CMA to conduct a ‘Phase Two’ investigation “in due course”.

“There is no set period in which this decision must be made, but it must take into account the need to make a decision as soon as reasonably practicable to reduce uncertainty,” it added. 

The proposed merger has faced considerable domestic opposition with opponents including one of the co-founders of ARM calling for it to be blocked.

#arm, #artificial-intelligence, #competition, #competition-and-markets-authority, #europe, #nvidia, #self-driving-cars, #united-kingdom

Amazon and Google face UK CMA probe over fake reviews

The UK’s competition watchdog, the CMA, has opened another investigation into Big Tech — this one targeted at Amazon and Google over how well they handle (or, well, don’t) fake reviews.

The Competition and Markets Authority has taken an interest in online reviews for several years, as far back as 2015.

It also went after eBay and Facebook back in 2019 to try to squeeze the trade in fake reviews it found thriving on their marketplaces. After continuing to pressure those platforms the watchdog was given pledges they’d do more. Albeit, in the case of Facebook, it took until April 2021 for it to take down 16,000 groups that had been trading fake reviews — and the CMA expressed disappointment that it had taken Facebook over a year to take meaningful action.

Now the CMA has Amazon and Google in its sites, both of which control platforms hosting user reviews — saying it will be gathering evidence to determine whether they may have broken UK law by taking insufficient action to protect shoppers from fake reviews.

Businesses that mislead consumers or don’t take action to prevent consumers being misled may be in breach of UK laws intended to protect consumers from unfair trading.

The CMA says its investigation into Amazon and Google follows an initial probe, which it started in May 2020, which was focused on assessing several platforms’ internal systems and processes for identifying and dealing with fake reviews.

That work raised specific concerns about whether the two tech giants have been doing enough to:

  • Detect fake and misleading reviews or suspicious patterns of behaviour. For example, where the same users have reviewed the same range of products or businesses at similar times to each other and there is no connection between those products or businesses – or where the review suggests that the reviewer has received a payment or other incentive to write a positive review.
  • Investigate and, where necessary, remove promptly fake and misleading reviews from their platforms.
  • Impose adequate sanctions on reviewers or businesses to deter them and others from posting fake or misleading reviews on their platforms – including those who have published these types of reviews many times.

The regulator also said it’s concerned that Amazon’s systems have been “failing adequately to prevent and deter some sellers from manipulating product listings” — such as, for example, by co-opting positive reviews from other products.

And, well, who hasn’t been browsing product reviews on Amazon, only to be drawn up short by a reviewer earnestly referring to product attributes that clearly bear no relation to the sale item in question?

While the user reviews that pop up on, for example, Google Maps after a search for a local business can also display ‘unusual patterns‘ of 5-starring (or 1-starring) behaviour…

Commenting on its investigation into concerns that Amazon and Google are not doing enough to combat the problem of fake reviews the CMA’s CEO Andrea Coscelli had this to say, in a statement:

“Our worry is that millions of online shoppers could be misled by reading fake reviews and then spending their money based on those recommendations. Equally, it’s simply not fair if some businesses can fake 5-star reviews to give their products or services the most prominence, while law-abiding businesses lose out.

“We are investigating concerns that Amazon and Google have not been doing enough to prevent or remove fake reviews to protect customers and honest businesses. It’s important that these tech platforms take responsibility and we stand ready to take action if we find that they are not doing enough.”

Amazon and Google were contacted for comment.

A Google Spokesperson sent us this statement:

“Our strict policies clearly state reviews must be based on real experiences, and when we find policy violations, we take action — from removing abusive content to disabling user accounts. We look forward to continuing our work with the CMA to share more on how our industry-leading technology and review teams work to help users find relevant and useful information on Google.”

An Amazon spokesperson also said:

“To help earn the trust of customers, we devote significant resources to preventing fake or incentivized reviews from appearing in our store. We work hard to ensure that reviews accurately reflect the experience that customers have had with a product.  We will continue to assist the CMA with its enquiries and we note its confirmation that no findings have been made against our business. We are relentless in protecting our store and will take action to stop fake reviews regardless of the size or location of those who attempt this abuse.”

In a blog post earlier this month, Amazon — likely aware of the CMA’s attention on the issue — discussed the problem of bogus online reviews, claiming it “relentlessly innovates to allow only genuine product reviews in our store”; and offering up some illustrative stats (such as that, in 2020 alone, it stopped more than 200M “suspected fake reviews” before they were seen by any customers, mostly via the use of “proactive detection”).

However the blog post was also heavily on the defensive — with the ecommerce giant seeking to spread the blame for the fake reviews problem — saying, for example, that there’s an “increasing trend of bad actors attempting to solicit fake reviews outside Amazon, particularly via social media services”. 

It sought to frame fake reviews as an industry-wide problem, needing a coordinated, industry-wide solution — while reserving its heaviest fire for (unnamed) “social media companies” (cough Facebook cough) — and suggesting, for example, that they are the weak link in the chain:

We need social media companies whose services are being used to facilitate fake reviews to proactively invest in fraud and fake review controls, partner with us to stop these bad actors, and help consumers shop with confidence. It will take constant innovation and partnership across industries and law enforcement to fully protect consumers and our honest selling partners.”

Amazon’s blog post also called for coordinated assistance from consumer protection regulators “around the world” to support its existing efforts to litigate against “bad actors”, aka “those who have purchased reviews and the service providers who provided them”.

The company also told us it has won “dozens” of injunctions against providers of fake reviews across Europe — adding that it won’t shy away from taking legal action. (It noted, for example, a lawsuit it filed on June 9 with the London Commercial Court against the owners of the websites, AMZ Tigers and TesterJob — seeking a prohibitory injunction and damages.)

In light of the CMA’s investigation being opened now, Amazon’s blog post calling for regulatory assistance to support litigation against purveyors of fake reviews looks like a pre-emptive plea to the CMA to swivel its gaze back onto Facebook’s marketplace — and check back in on how the trade in fake reviews is looking over there.

We reached out to the CMA to ask whether its investigation into Amazon and Google will dig into the role that review trading groups hosted elsewhere, such as on social media platforms, may play in exacerbating the issue and will update this port with any response.

The CMA has been increasingly active in regulating Big Tech as it dials up attention on digital markets to prepare for planned UK reforms to competition law that look set to usher in an ex ante regime for dealing with competition-denting platform power.

The watchdog has a number of other open investigations into Big Tech — including into Google’s planned deprecation of tracking cookies. It also recently initiated a market study into Apple and Google’s dominance of the mobile ecosystem.

Given the watchdog’s focus on major platforms — as well as its long standing interest in fake reviews — it’s interesting to speculate whether iOS maker Apple may not face some UK scrutiny on this issue.

Concerns have also been raised over fake ratings and reviews on its App Store.

Earlier this year, for example, iOS app developer, Kosta Eleftheriou, filed suit against Apple — alleging it enticed developers to build apps by claiming the App Store is a safe and trustworthy place but that it doesn’t protect legitimate developers against scammers profiting from their hard work.

The CMA already has an open investigation into Apple’s App Store. So it will be paying close attention to aspects of the store, saying back in March that it would be investigating whether Apple imposes unfair or anti-competitive terms on developers — which then ultimately result in users having less choice or paying higher prices for apps and add-ons.

For now, though, the watchdog’s attention toward the fake reviews issue has been publicly focused elsewhere.

#amazon, #app-store, #big-tech, #cma, #competition-and-markets-authority, #competition-law, #ecommerce, #europe, #fake-reviews, #google, #social-media, #social-media-platforms, #tc, #united-kingdom

Update: Google is delaying its deprecation of tracking cookies

Update: Google has now confirmed the delay, writing in a blog post that its engagement with UK regulators over the so-called “Privacy Sandbox” means support for tracking cookies won’t start being phased out in Chrome until the second half of 2023.

Our original report follows below… 

Adtech giant Google appears to be leaning toward postponing a long planned deprecation of third party tracking cookies.

The plan dates back to 2019 when it announced the long-term initiative that will make it harder for online marketers and advertisers to track web users, including by deprecating third party cookies in Chrome.

Then in January 2020 it said it would make the switch within two years. Which would mean by 2022.

Google confirmed to TechCrunch that it has a Privacy Sandbox announcement incoming today — set for 4pm BST/5pm CET — after we contacted it to ask for confirmation of information we’d heard, via our own sources.

We’ve been told Google’s new official timeline for implementation will be 2023.

However a spokesman for the tech giant danced around providing a direct confirmation — saying that “an update” is incoming shortly.

“We do have an announcement today that will shed some light on Privacy Sandbox updates,” the spokesman also told us.

He had responded to our initial email — which had asked Google to confirm that it will postpone the implementation of Privacy Sandbox to 2023; and for any statement on the delay — with an affirmation (“yep”) so, well, a delay looks likely. But we’ll see how exactly Google will spin that in a few minutes when it publishes the incoming Privacy Sandbox announcement.

Google has previously said it would deprecate support for third party cookies by 2022 — which naturally implies that the wider Privacy Sandbox stack of related adtech would also need to be in place by then.

Earlier this year it slightly hedged the 2022 timeline, saying in January that any changes would not be made before 2022.

The issue for Google is that regulatory scrutiny of its plan has stepped up — following antitrust complaints from the adtech industry which faces huge changes to how it can track and target Internet users.

In Europe, the UK’s Competition and Markets Authority has been working with the UK’s Information Commissioner’s Office to understand the competition and privacy implications of Google’s planned move. And, earlier this month, the CMA issued a notification of intention to accept proposed commitments from Google that would enable the regulator to block any deprecation of cookies if it’s not happy it can be done in a way that’s good for competition and privacy.

At the time we asked Google how the CMA’s involvement might impact the Privacy Sandbox timeline but the company declined to comment.

Increased regulatory oversight of Big Tech will have plenty of ramifications — most obviously it means the end of any chance for giants like Google to ‘move fast and break things’.

#adtech, #competition-and-markets-authority, #computing, #europe, #google, #information-commissioners-office, #privacy, #privacy-sandbox, #sandbox, #software, #united-kingdom, #web-browsers

EU is now investigating Google’s adtech over antitrust concerns

EU antitrust authorities are finally taking a broad and deep look into Google’s adtech stack and role in the online ad market — confirming today that they’ve opened a formal investigation.

Google has already been subject to three major EU antitrust enforcements over the past five years — against Google Shopping (2017), Android (2018) and AdSense (2019). But the European Commission has, until now, avoided officially wading into the broader issue of its role in the adtech supply chain. (The AdSense investigation focused on Google’s search ad brokering business, though Google claims the latest probe represents that next stage of that 2019 enquiry, rather than stemming from a new complaint).

The Commission said that the new Google antitrust investigation will assess whether it has violated EU competition rules by “favouring its own online display advertising technology services in the so called ‘ad tech’ supply chain, to the detriment of competing providers of advertising technology services, advertisers and online publishers”.

Display advertising spending in the EU in 2019 was estimated to be approximately €20BN, per the Commission.

“The formal investigation will notably examine whether Google is distorting competition by restricting access by third parties to user data for advertising purposes on websites and apps, while reserving such data for its own use,” it added in a press release.

Earlier this month, France’s competition watchdog fined Google $268M in a case related to self-preferencing within the adtech market — which the watchdog found constituted an abuse by Google of a dominant position for ad servers for website publishers and mobile apps.

In that instance Google sought a settlement — proposing a number of binding interoperability agreements which the watchdog accepted. So it remains to be seen whether the tech giant may seek to push for a similar outcome at the EU level.

There is one cautionary signal in that respect in the Commission’s press release which makes a point of flagging up EU data protection rules — and highlighting the need to take into account the protection of “user privacy”.

That’s an interesting side-note for the EU’s antitrust division to include, given some of the criticism that France’s Google adtech settlement has attracted — for risking cementing abusive user exploitation (in the form of adtech privacy violations) into the sought for online advertising market rebalancing.

Or as Cory Doctorow neatly explains it in this Twitter thread: “The last thing we want is competition in practices that harm the public.”

Aka, unless competition authorities wise up to the data abuses being perpetuated by dominant tech platforms — such as through enlightened competition authorities engaging in close joint-working with privacy regulators (in the EU this is, at least, possible since there’s regulation in both areas) — there’s a very real risk that antitrust enforcement against Big (ad)Tech could simply supercharge the user-hostile privacy abuses that surveillance giants have only been able to get away with because of their market muscle.

So, tl;dr, ill-thought through antitrust enforcement actually risks further eroding web users’ rights… and that would indeed be a terrible outcome. (Unless you’re Google; then it would represent successfully playing one regulator off against another at the expense of users.)

The need for competition and privacy regulators to work together to purge Big Tech market abuses has become an active debate in Europe — where a few pioneering regulators (like German’s FCO) are ahead of the pack.

The UK’s Competition and Markets Authority (CMA) and Information Commissioner’s Office (ICO) also recently put out a joint statement — laying out their conviction that antitrust and data protection regulators must work together to foster a thriving digital economy that’s healthy across all dimensions — i.e. for competitors, yes, but also for consumers.

A recent CMA proposed settlement related to Google’s planned replacement for tracking cookies — aka ‘Privacy Sandbox’, which has also been the target of antitrust complaints by publishers — was notable in baking in privacy commitments and data protection oversight by the ICO in addition to the CMA carrying out its competition enforcement role.

It’s fair to say that the European Commission has lagged behind such pioneers in appreciating the need for synergistic regulatory joint-working, with the EU’s antitrust chief roundly ignoring — for example — calls to block Google’s acquisition of Fitbit over the data advantage it would entrench, in favor of accepting a few ‘concessions’ to waive the deal through.

So it’s interesting to see the EU’s antitrust division here and now — at the very least — virtue signalling an awareness of the problem of regional regulators approaching competition and privacy as if they exist in firewalled silos.

Whether this augurs the kind of enlightened regulatory joint working — to achieve holistically healthy and dynamic digital markets — which will certainly be essential if the EU is to effectively grapple with surveillance capitalism very much remains to be seen. But we can at least say that the inclusion of the below statement in an EU antitrust division press release represents a change of tone (and that, in itself, looks like a step forward…):

“Competition law and data protection laws must work hand in hand to ensure that display advertising markets operate on a level playing field in which all market participants protect user privacy in the same manner.”

Returning to the specifics of the EU’s Google adtech probe, the Commission says it will be particularly examining:

  • The obligation to use Google’s services Display & Video 360 (‘DV360′) and/or Google Ads to purchase online display advertisements on YouTube.
  • The obligation to use Google Ad Manager to serve online display advertisements on YouTube, and potential restrictions placed by Google on the way in which services competing with Google Ad Manager are able to serve online display advertisements on YouTube.
  • The apparent favouring of Google’s ad exchange “AdX” by DV360 and/or Google Ads and the potential favouring of DV360 and/or Google Ads by AdX.
  • The restrictions placed by Google on the ability of third parties, such as advertisers, publishers or competing online display advertising intermediaries, to access data about user identity or user behaviour which is available to Google’s own advertising intermediation services, including the Doubleclick ID.
  • Google’s announced plans to prohibit the placement of third party ‘cookies’ on Chrome and replace them with the “Privacy Sandbox” set of tools, including the effects on online display advertising and online display advertising intermediation markets.
  • Google’s announced plans to stop making the advertising identifier available to third parties on Android smart mobile devices when a user opts out of personalised advertising, and the effects on online display advertising and online display advertising intermediation markets.

Commenting on the investigation in a statement, Commission EVP and competition chief, Margrethe Vestager, added:

“Online advertising services are at the heart of how Google and publishers monetise their online services. Google collects data to be used for targeted advertising purposes, it sells advertising space and also acts as an online advertising intermediary. So Google is present at almost all levels of the supply chain for online display advertising. We are concerned that Google has made it harder for rival online advertising services to compete in the so-called ad tech stack. A level playing field is of the essence for everyone in the supply chain. Fair competition is important — both for advertisers to reach consumers on publishers’ sites and for publishers to sell their space to advertisers, to generate revenues and funding for content. We will also be looking at Google’s policies on user tracking to make sure they are in line with fair competition.”

Contacted for comment on the Commission investigation, a Google spokesperson sent us this statement:

“Thousands of European businesses use our advertising products to reach new customers and fund their websites every single day. They choose them because they’re competitive and effective. We will continue to engage constructively with the European Commission to answer their questions and demonstrate the benefits of our products to European businesses and consumers.”

Google also claimed that publishers keep around 70% of the revenue when using its products — saying in some instances it can be more.

It also suggested that publishers and advertisers often use multiple technologies simultaneously, further claiming that it builds its own technologies to be interoperable with more than 700 rival platforms for advertisers and 80 rival platforms for publishers.

#adtech, #android, #antitrust, #competition-and-markets-authority, #cory-doctorow, #doubleclick, #europe, #european-commission, #european-union, #fitbit, #france, #google, #information-commissioners-office, #margrethe-vestager, #marketing, #mobile-devices, #online-advertising, #privacy-sandbox, #targeted-advertising, #tc, #united-kingdom

Perspectives on tackling Big Tech’s market power

The need for markets-focused competition watchdogs and consumer-centric privacy regulators to think outside their respective ‘legal silos’ and find creative ways to work together to tackle the challenge of big tech market power was the impetus for a couple of fascinating panel discussions organized by the Centre for Economic Policy Research (CEPR), which were livestreamed yesterday but are available to view on-demand here.

The conversations brought together key regulatory leaders from Europe and the US — giving a glimpse of what the future shape of digital markets oversight might look like at a time when fresh blood has just been injected to chair the FTC so regulatory change is very much in the air (at least around tech antitrust).

CEPR’s discussion premise is that integration, not merely intersection, of competition and privacy/data protection law is needed to get a proper handle on platform giants that have, in many cases, leveraged their market power to force consumers to accept an abusive ‘fee’ of ongoing surveillance.

That fee both strips consumers of their privacy and helps tech giants perpetuate market dominance by locking out interesting new competition (which can’t get the same access to people’s data so operates at a baked in disadvantage).

A running theme in Europe for a number of years now, since a 2018 flagship update to the bloc’s data protection framework (GDPR), has been the ongoing under-enforcement around the EU’s ‘on-paper’ privacy rights — which, in certain markets, means regional competition authorities are now actively grappling with exactly how and where the issue of ‘data abuse’ fits into their antitrust legal frameworks.

The regulators assembled for CEPR’s discussion included, from the UK, the Competition and Markets Authority’s CEO Andrea Coscelli and the information commissioner, Elizabeth Denham; from Germany, the FCO’s Andreas Mundt; from France, Henri Piffaut, VP of the French competition authority; and from the EU, the European Data Protection Supervisor himself, Wojciech Wiewiórowski, who advises the EU’s executive body on data protection legislation (and is the watchdog for EU institutions’ own data use).

The UK’s CMA now sits outside the EU, of course — giving the national authority a higher profile role in global mergers & acquisition decisions (vs pre-brexit), and the chance to help shape key standards in the digital sphere via the investigations and procedures it chooses to pursue (and it has been moving very quickly on that front).

The CMA has a number of major antitrust probes open into tech giants — including looking into complaints against Apple’s App Store and others targeting Google’s plan to depreciate support for third party tracking cookies (aka the so-called ‘Privacy Sandbox’) — the latter being an investigation where the CMA has actively engaged the UK’s privacy watchdog (the ICO) to work with it.

Only last week the competition watchdog said it was minded to accept a set of legally binding commitments that Google has offered which could see a quasi ‘co-design’ process taking place, between the CMA, the ICO and Google, over the shape of the key technology infrastructure that ultimately replaces tracking cookies. So a pretty major development.

Germany’s FCO has also been very active against big tech this year — making full use of an update to the national competition law which gives it the power to take proactive inventions around large digital platforms with major competitive significance — with open procedures now against Amazon, Facebook and Google.

The Bundeskartellamt was already a pioneer in pushing to loop EU data protection rules into competition enforcement in digital markets in a strategic case against Facebook, as we’ve reported before. That closely watched (and long running) case — which targets Facebook’s ‘superprofiling’ of users, based on its ability to combine user data from multiple sources to flesh out a single high dimension per-user profile — is now headed to Europe’s top court (so likely has more years to run).

But during yesterday’s discussion Mundt confirmed that the FCO’s experience litigating that case helped shape key amendments to the national law that’s given him beefier powers to tackle big tech. (And he suggested it’ll be a lot easier to regulate tech giants going forward, using these new national powers.)

“Once we have designated a company to be of ‘paramount significance’ we can prohibit certain conduct much more easily than we could in the past,” he said. “We can prohibit, for example, that a company impedes other undertaking by data processing that is relevant for competition. We can prohibit that a use of service depends on the agreement to data collection with no choice — this is the Facebook case, indeed… When this law was negotiated in parliament parliament very much referred to the Facebook case and in a certain sense this entwinement of competition law and data protection law is written in a theory of harm in the German competition law.

“This makes a lot of sense. If we talk about dominance and if we assess that this dominance has come into place because of data collection and data possession and data processing you need a parameter in how far a company is allowed to gather the data to process it.”

“The past is also the future because this Facebook case… has always been a big case. And now it is up to the European Court of Justice to say something on that,” he added. “If everything works well we might get a very clear ruling saying… as far as the ECN [European Competition Network] is concerned how far we can integrate GDPR in assessing competition matters.

“So Facebook has always been a big case — it might get even bigger in a certain sense.”

France’s competition authority and its national privacy regulator (the CNIL), meanwhile, have also been joint working in recent years.

Including over a competition complaint against Apple’s pro-user privacy App Tracking Transparency feature (which last month the antitrust watchdog declined to block) — so there’s evidence there too of respective oversight bodies seeking to bridge legal silos in order to crack the code of how to effectively regulate tech giants whose market power, panellists agreed, is predicated on earlier failures of competition law enforcement that allowed tech platforms to buy up rivals and sew up access to user data, entrenching advantage at the expense of user privacy and locking out the possibility of future competitive challenge.

The contention is that monopoly power predicated upon data access also locks consumers into an abusive relationship with platform giants which can then, in the case of ad giants like Google and Facebook, extract huge costs (paid not in monetary fees but in user privacy) for continued access to services that have also become digital staples — amping up the ‘winner takes all’ characteristic seen in digital markets (which is obviously bad for competition too).

Yet, traditionally at least, Europe’s competition authorities and data protection regulators have been focused on separate workstreams.

The consensus from the CEPR panels was very much that that is both changing and must change if civil society is to get a grip on digital markets — and wrest control back from tech giants to that ensure consumers and competitors aren’t both left trampled into the dust by data-mining giants.

Denham said her motivation to dial up collaboration with other digital regulators was the UK government entertaining the idea of creating a one-stop-shop ‘Internet’ super regulator. “What scared the hell out of me was the policymakers the legislators floating the idea of one regulator for the Internet. I mean what does that mean?” she said. “So I think what the regulators did is we got to work, we got busy, we become creative, got our of our silos to try to tackle these companies — the likes of which we have never seen before.

“And I really think what we have done in the UK — and I’m excited if others think it will work in their jurisdictions — but I think that what really pushed us is that we needed to show policymakers and the public that we had our act together. I think consumers and citizens don’t really care if the solution they’re looking for comes from the CMA, the ICO, Ofcom… they just want somebody to have their back when it comes to protection of privacy and protection of markets.

“We’re trying to use our regulatory levers in the most creative way possible to make the digital markets work and protect fundamental rights.”

During the earlier panel, the CMA’s Simeon Thornton, a director at the authority, made some interesting remarks vis-a-vis its (ongoing) Google ‘Privacy Sandbox’ investigation — and the joint working it’s doing with the ICO on that case — asserting that “data protection and respecting users’ rights to privacy are very much at the heart of the commitments upon which we are currently consulting”.

“If we accept the commitments Google will be required to develop the proposals according to a number of criteria including impacts on privacy outcomes and compliance with data protection principles, and impacts on user experience and user control over the use of their personal data — alongside the overriding objective of the commitments which is to address our competition concerns,” he went on, adding: “We have worked closely with the ICO in seeking to understand the proposals and if we do accept the commitments then we will continue to work closely with the ICO in influencing the future development of those proposals.”

“If we accept the commitments that’s not the end of the CMA’s work — on the contrary that’s when, in many respects, the real work begins. Under the commitments the CMA will be closely involved in the development, implementation and monitoring of the proposals, including through the design of trials for example. It’s a substantial investment from the CMA and we will be dedicating the right people — including data scientists, for example, to the job,” he added. “The commitments ensure that Google addresses any concerns that the CMA has. And if outstanding concerns cannot be resolved with Google they explicitly provide for the CMA to reopen the case and — if necessary — impose any interim measures necessary to avoid harm to competition.

“So there’s no doubt this is a big undertaking. And it’s going to be challenging for the CMA, I’m sure of that. But personally I think this is the sort of approach that is required if we are really to tackle the sort of concerns we’re seeing in digital markets today.”

Thornton also said: “I think as regulators we do need to step up. We need to get involved before the harm materializes — rather than waiting after the event to stop it from materializing, rather than waiting until that harm is irrevocable… I think it’s a big move and it’s a challenging one but personally I think it’s a sign of the future direction of travel in a number of these sorts of cases.”

Also speaking during the regulatory panel session was FTC commissioner Rebecca Slaughter — a dissenter on the $5BN fine it hit Facebook with back in 2019 for violating an earlier consent order (as she argued the settlement provided no deterrent to address underlying privacy abuse, leaving Facebook free to continue exploiting users’ data) — as well as Chris D’Angelo, the chief deputy AG of the New York Attorney General, which is leading a major states antitrust case against Facebook.

Slaughter pointed out that the FTC already combines a consumer focus with attention on competition but said that historically there has been separation of divisions and investigations — and she agreed on the need for more joined-up working.

She also advocated for US regulators to get out of a pattern of ineffective enforcement in digital markets on issues like privacy and competition where companies have, historically, been given — at best — what amounts to wrist slaps that don’t address root causes of market abuse, perpetuating both consumer abuse and market failure. And be prepared to litigate more.

As regulators toughen up their stipulations they will need to be prepared for tech giants to push back — and therefore be prepared to sue instead of accepting a weak settlement.

“That is what is most galling to me that even where we take action, in our best faith good public servants working hard to take action, we keep coming back to the same questions, again and again,” she said. “Which means that the actions we are taking isn’t working. We need different action to keep us from having the same conversation again and again.”

Slaughter also argued that it’s important for regulators not to pile all the burden of avoiding data abuses on consumers themselves.

“I want to sound a note of caution around approaches that are centered around user control,” she said. “I think transparency and control are important. I think it is really problematic to put the burden on consumers to work through the markets and the use of data, figure out who has their data, how it’s being used, make decisions… I think you end up with notice fatigue; I think you end up with decision fatigue; you get very abusive manipulation of dark patterns to push people into decisions.

“So I really worry about a framework that is built at all around the idea of control as the central tenant or the way we solve the problem. I’ll keep coming back to the notion of what instead we need to be focusing on is where is the burden on the firms to limit their collection in the first instance, prohibit their sharing, prohibit abusive use of data and I think that that’s where we need to be focused from a policy perspective.

“I think there will be ongoing debates about privacy legislation in the US and while I’m actually a very strong advocate for a better federal framework with more tools that facilitate aggressive enforcement but I think if we had done it ten years ago we probably would have ended up with a notice and consent privacy law and I think that that would have not been a great outcome for consumers at the end of the day. So I think the debate and discussion has evolved in an important way. I also think we don’t have to wait for Congress to act.”

As regards more radical solutions to the problem of market-denting tech giants — such as breaking up sprawling and (self-servingly) interlocking services empires — the message from Europe’s most ‘digitally switched on’ regulators seemed to be don’t look to us for that; we are going to have to stay in our lanes.

So tl;dr — if antitrust and privacy regulators’ joint working just sums to more intelligent fiddling round the edges of digital market failure, and it’s break-ups of US tech giants that’s what’s really needed to reboot digital markets, then it’s going to be up to US agencies to wield the hammers. (Or, as Coscelli elegantly phrased it: “It’s probably more realistic for the US agencies to be in the lead in terms of structural separation if and when it’s appropriate — rather than an agency like ours [working from inside a mid-sized economy such as the UK’s].”)

The lack of any representative from the European Commission on the panel was an interesting omission in that regard — perhaps hinting at ongoing ‘structural separation’ between DG Comp and DG Justice where digital policymaking streams are concerned.

The current competition chief, Margrethe Vestager — who also heads up digital strategy for the bloc, as an EVP — has repeatedly expressed reluctance to impose radical ‘break up’ remedies on tech giants. She also recently preferred to waive through another Google digital merger (its acquisition of fitness wearable Fitbit) — agreeing to accept a number of ‘concessions’ and ignoring major mobilization by civil society (and indeed EU data protection agencies) urging her to block it.

Yet in an earlier CEPR discussion session, another panellist — Yale University’s Dina Srinivasan — pointed to the challenges of trying to regulate the behavior of companies when there are clear conflicts of interest, unless and until you impose structural separation as she said has been necessary in other markets (like financial services).

“In advertising we have an electronically traded market with exchanges and we have brokers on both sides. In a competitive market — when competition was working — you saw that those brokers were acting in the best interest of buyers and sellers. And as part of carrying out that function they were sort of protecting the data that belonged to buyers and sellers in that market, and not playing with the data in other ways — not trading on it, not doing conduct similar to insider trading or even front running,” she said, giving an example of how that changed as Google gained market power.

“So Google acquired DoubleClick, made promises to continue operating in that manner, the promises were not binding and on the record — the enforcement agencies or the agencies that cleared the merger didn’t make Google promise that they would abide by that moving forward and so as Google gained market power in that market there’s no regulatory requirement to continue to act in the best interests of your clients, so now it becomes a market power issue, and after they gain enough market power they can flip data ownership and say ‘okay, you know what before you owned this data and we weren’t allowed to do anything with it but now we’re going to use that data to for example sell our own advertising on exchanges’.

“But what we know from other markets — and from financial markets — is when you flip data ownership and you engage in conduct like that that allows the firm to now build market power in yet another market.”

The CMA’s Coscelli picked up on Srinivasan’s point — saying it was a “powerful” one, and that the challenges of policing “very complicated” situations involving conflicts of interests is something that regulators with merger control powers should be bearing in mind as they consider whether or not to green light tech acquisitions.

(Just one example of a merger in the digital space that the CMA is still scrutizing is Facebook’s acquisition of animated GIF platform Giphy. And it’s interesting to speculate whether, had brexit happened a little faster, the CMA might have stepped in to block Google’s Fitibit merger where the EU wouldn’t.)

Coscelli also flagged the issue of regulatory under-enforcement in digital markets as a key one, saying: “One of the reasons we are today where we are is partially historic under-enforcement by competition authorities on merger control — and that’s a theme that is extremely interesting and relevant to us because after the exit from the EU we now have a bigger role in merger control on global mergers. So it’s very important to us that we take the right decisions going forward.”

“Quite often we intervene in areas where there is under-enforcement by regulators in specific areas… If you think about it when you design systems where you have vertical regulators in specific sectors and horizontal regulators like us or the ICO we are more successful if the vertical regulators do their job and I’m sure they are more success if we do our job properly.

“I think we systematically underestimate… the ability of companies to work through whatever behavior or commitments or arrangement are offered to us, so I think these are very important points,” he added, signalling that a higher degree of attention is likely to be applied to tech mergers in Europe as a result of the CMA stepping out from the EU’s competition regulation umbrella.

Also speaking during the same panel, the EDPS warned that across Europe more broadly — i.e. beyond the small but engaged gathering of regulators brought together by CEPR — data protection and competition regulators are far from where they need to be on joint working, implying that the challenge of effectively regulating big tech across the EU is still a pretty Sisyphean one.

It’s true that the Commission is not sitting on hands in the face of tech giant market power.

At the end of last year it proposed a regime of ex ante regulations for so-called ‘gatekeeper’ platforms, under the Digital Markets Act. But the problem of how to effectively enforce pan-EU laws — when the various agencies involved in oversight are typically decentralized across Member States — is one key complication for the bloc. (The Commission’s answer with the DMA was to suggest putting itself in charge of overseeing gatekeepers but it remains to be seen what enforcement structure EU institutions will agree on.)

Clearly, the need for careful and coordinated joint working across multiple agencies with different legal competencies — if, indeed, that’s really what’s needed to properly address captured digital markets vs structural separation of Google’s search and adtech, for example, and Facebook’s various social products — steps up the EU’s regulatory challenge in digital markets.

“We can say that no effective competition nor protection of the rights in the digital economy can be ensured when the different regulators do not talk to each other and understand each other,” Wiewiórowski warned. “While we are still thinking about the cooperation it looks a little bit like everybody is afraid they will have to trade a little bit of its own possibility to assess.”

“If you think about the classical regulators isn’t it true that at some point we are reaching this border where we know how to work, we know how to behave, we need a little bit of help and a little bit of understanding of the other regulator’s work… What is interesting for me is there is — at the same time — the discussion about splitting of the task of the American regulators joining the ones on the European side. But even the statements of some of the commissioners in the European Union saying about the bigger role the Commission will play in the data protection and solving the enforcement problems of the GDPR show there is no clear understanding what are the differences between these fields.”

One thing is clear: Big tech’s dominance of digital markets won’t be unpicked overnight. But, on both sides of the Atlantic, there are now a bunch of theories on how to do it — and growing appetite to wade in.

#advertising-tech, #amazon, #andreas-mundt, #competition-and-markets-authority, #competition-law, #congress, #data-processing, #data-protection, #data-protection-law, #data-security, #digital-markets-act, #digital-rights, #doubleclick, #elizabeth-denham, #europe, #european-commission, #european-court-of-justice, #european-union, #facebook, #federal-trade-commission, #financial-services, #fitbit, #france, #general-data-protection-regulation, #germany, #human-rights, #margrethe-vestager, #policy, #privacy, #uk-government, #united-kingdom, #united-states, #yale-university

UK’s CMA opens market study into Apple, Google’s mobile “duopoly”

The UK’s competition watchdog will take a deep dive look into Apple and Google’s dominance of the mobile ecosystem, it said today — announcing a market study which will examine the pair’s respective smartphone platforms (iOS and Android); their app stores (App Store and Play Store); and web browsers (Safari and Chrome). 

The Competition and Markets Authority (CMA) is concerned that the mobile platform giants’ “effective duopoly” in those areas  might be harming consumers, it added.

The study will be wide ranging, with the watchdog concerns about the nested gateways that are created as a result of the pair’s dominance of mobile ecosystem — intermediating how consumers can access a variety of products, content and services (such as music, TV and video streaming; fitness tracking, shopping and banking, to cite some of the examples provided by the CMA).

“These products also include other technology and devices such as smart speakers, smart watches, home security and lighting (which mobiles can connect to and control),” it went on, adding that it’s looking into whether their dominance of these pipes is “stifling competition across a range of digital markets”, saying too that it’s “concerned this could lead to reduced innovation across the sector and consumers paying higher prices for devices and apps, or for other goods and services due to higher advertising prices”.

The CMA further confirmed the deep dive will examine “any effects” of the pair’s market power over other businesses — giving the example of app developers who rely on Apple or Google to market their products to customers via their smart devices.

The watchdog already has an open investigation into Apple’s App Store, following a number of antitrust complaints by developers.

It is investigating Google’s planned depreciation of third party tracking cookies too, after complaints by adtech companies and publishers that the move could harm competition. (And just last week the CMA said it was minded to accept a series of concessions offered by Google that would enable the regulator to stop it turning off support for cookies entirely if it believes the move will harm competition.)

The CMA said both those existing investigations are examining issues that fall within the scope of the new mobile ecosystem market study but that its work on the latter will be “much broader”.

It added that it will adopt a joined-up approach across all related cases — “to ensure the best outcomes for consumers and other businesses”.

It’s giving itself a full year to examine Gapple’s mobile ecosystems.

It is also soliciting feedback on any of the issues raised in its statement of scope — calling for responses by 26 July. The CMA added that it’s also keen to hear from app developers, via its questionnaire, by the same date.

Taking on tech giants

The watchdog has previously scrutinized the digital advertising market — and found plenty to be concerned about vis-a-vis Google’s dominance there.

That earlier market study has been feeding the UK government’s plan to reform competition rules to take account of the market-deforming power of digital giants. And the CMA suggested the new market study, examining ‘Gapple’s’ mobile muscle, could similarly help shape UK-wide competition law reforms.

Last year the UK announced its plan to set up a “pro-competition” regime for regulating Internet platforms — including by establishing a dedicated Digital Markets Unit within the CMA (which got going earlier this year).

The legislation for the reform has not yet been put before parliament but the government has said it wants the competition regulator to be able to “proactively shape platforms’ behavior” to avoid harmful behavior before it happens” — saying too that it supports enabling ex ante interventions once a platform has been identified to have so-called “strategic market status”.

Germany already adopted similar reforms to its competition law (early this year), which enable proactive interventions to tackle large digital platforms with what is described as “paramount significance for competition across markets”. And its Federal Cartel Office has, in recent months, wasted no time in opening a number of proceedings to determine whether Amazon, Google and Facebook have such a status.

The CMA also sounds keen to get going to tackle Internet gatekeepers.

Commenting in a statement, CEO Andrea Coscelli said:

“Apple and Google control the major gateways through which people download apps or browse the web on their mobiles – whether they want to shop, play games, stream music or watch TV. We’re looking into whether this could be creating problems for consumers and the businesses that want to reach people through their phones.

“Our ongoing work into big tech has already uncovered some worrying trends and we know consumers and businesses could be harmed if they go unchecked. That’s why we’re pressing on with launching this study now, while we are setting up the new Digital Markets Unit, so we can hit the ground running by using the results of this work to shape future plans.”

The European Union also unveiled its own proposals for clipping the wings of big tech last year — presenting its Digital Markets Act plan in December which will apply a single set of operational rules to so-called “gatekeeper” platforms operating across the EU.

The clear trend in Europe on digital competition is toward increasing oversight and regulation of the largest platforms — in the hopes that antitrust authorities can impose measures that will help smaller players thrive.

Critics might say that’s just playing into the tech giants’ hands, though — because it’s fiddling around the edges when more radical intervention (break ups) are what’s really needed to reboot captured markets.

Apple and Google were contacted for comment on the CMA’s market study.

A Google spokesperson said: “Android provides people with more choice than any other mobile platform in deciding which apps they use, and enables thousands of developers and manufacturers to build successful businesses. We welcome the CMA’s efforts to understand the details and differences between platforms before designing new rules.”

According to Google, the Android App Economy generated £2.8BN in revenue for UK developers last year, which it claims supported 240,000 jobs across the country — citing a Public First report that it commissioned.

The tech giant also pointed to operational changes it has already made in Europe, following antitrust interventions by the European Commission — such as adding a choice screen to Android where users can pick from a list of alternative search engines.

Earlier this month it agreed to shift the format underlying that choice screen from an unpopular auction model to free participation.

#amazon, #android, #app-store, #apple, #apple-inc, #big-tech, #cma, #competition-and-markets-authority, #competition-law, #digital-markets-act, #digital-markets-unit, #duopoly, #europe, #european-commission, #european-union, #germany, #google, #ios, #mobile, #policy, #smartphone, #smartphones, #uk-government, #united-kingdom, #web-browsers

Europe needs to back browser-level controls to fix cookie consent nightmares, says privacy group

European privacy group noyb, which recently kicked off a major campaign targeting rampant abuse of the region’s cookie consent rules, has followed up by publishing a technical proposal for an automated browser-level signal it believes could go even further to tackle the friction generated by endless ‘your data choices’ pop-ups.

Its proposal is for an automated signal layer that would enable users to configure advanced consent choices — such as only being asked to allow cookies if they frequently visit a website; or being able to whitelist lists of sites for consent (if, for example, they want to support quality journalism by allowing their data to be used for ads in those specific cases).

The approach would offer a route to circumvent the user experience nightmare flowing from all the dark pattern design that’s made cookie consent collection so cynical, confusing and tedious — by simply automating the yeses and noes, thereby keeping interruptions to a user-defined minimum.

In the European Union cookie consent banners mushroomed in the wake of a 2018 update to the bloc’s privacy rules (GDPR) — especially on websites that rely on targeted advertising to generate revenue. And in recent years it has not been unusual to find cookie pop-ups that contain a labyrinthine hell of opacity — culminating (if you don’t just click ‘agree’) — to vast menus of ‘trusted partners’ all after your data. Some of which are pre-set to share information and require the user to individually toggle each and every one off.

Such stuff is a mockery of compliance, rather than the truly simple choice envisage by the law. So noyb’s earlier campaign is focused on filing scores of complaints against sites it believes aren’t complying with requirements to provide users with a clear and free choice to say no to their data being used for ads (and it’s applying a little automation tech there too to help scale up the number of complaint it can file).

Its follow-up here — showing how an advanced control layer that signals user choices in the background could work — shares the same basic approach as the ‘Do Not Track’ proposals originally proposed for baking into web browsers all the way back in 2009 but which failed to get industry buy-in. There has also been a more recent US-based push to revive the idea of browser-level privacy control — buoyed by California’s California Consumer Privacy Act (CCPA), which took effect at the start of last year, and includes a requirement that businesses respect user opt-out preferences via a signal from their browser.

However noyb’s version of browser-level privacy control seeks to go further by enabling more granular controls — which it says it necessary to better mesh with the EU’s nuanced legal framework around data protection.

It points out that Article 21(5) of the GDPR already allows for automatic signals from the browser to inform websites in the background whether a user is consenting to data processing or not.

The ePrivacy Regulation proposal, a much delayed reform of the bloc’s rules around electronic privacy has also included such a provision.

However noyb says development to establish such a signal hasn’t happened yet — suggesting that cynically manipulative consent management platforms may well have been hampering privacy-focused innovation.

But it also sees a chance for the necessary momentum to build behind the idea.

For example, it points to how Apple has recently been dialling up the notification and control it offers users of its mobile platform, iOS, to allow people to both know which third party apps want to track them and allow or deny access to their data — including giving users a super simple ‘deny all third party tracking’ option backed into iOS’ settings.

So, well, why should Internet users who happen to be browsing on a desktop device not have a set of similarly advanced privacy controls too?

EU lawmakers are also still debating the ePrivacy Regulation reform — which deals centrally with cookies — so the campaign group wants to demonstrate how automated control tech could be a key piece of the answer to so-called ‘cookie consent fatigue’; by giving users a modern toolset to shrink consent friction without compromising their ability to control what happens with their data.

In order to work as intended automated signals would need to be legally binding (to prevent adtech companies just ignoring them) — and having a clear legal basis set out in the ePrivacy Regulation is one way that could happen within fairly short order.

The chance at least is there.

There have been concerns that the ePrivacy reform — which was stalled for years — could end up weakening the EU’s data protection framework in the face of massive adtech industry lobbying. And the negotiation process to reach a final text remains ongoing. So it’s still not clear where it’s going to end up.

But, earlier this year, the European Council agreed its negotiating mandate with the other EU institutions. And, on cookies, the Council said they want companies to find ways to reduce ‘cookie consent fatigue’ among users — such as by whitelisting types of cookies/providers in their browser settings. So there is at least a potential path to legislate for an effective browser-level control layer in Europe.

For now, noyb has published a prototype and a technology specification for what it’s calling the ADPC (aka Advanced Data Protection Control). The work on the framework has been carried out by noyb working with the Sustainable Computing Lab at the Vienna University of Economics and Business.

The proposal envisages web pages sending privacy requests in a machine-readable way and the ADPC allowing the response to be transmitted using header signals or via Java Script. noyb likens the intelligent management of queries and automatic responses such a system could support to an email spam filter.

Commenting in a statement, chairman Max Schrems said: “For Europe, we need more than just an ‘opt-out’ so that it fits into our legal framework. That’s why we call the prototype ‘Advanced’ Data Protection Control, because it’s much more flexible and specific than previous approaches.

“ADPC allows intelligent management of privacy requests. A user could say, for example, ‘please ask me only after I’ve been to the site several times’ or ‘ask me again after 3 months.’ It is also possible to answer similar requests centrally. ADPC thus allows the flood of data requests to be managed in a meaningful way.”

“With ADPC, we also want to show the European legislator that such a signal is feasible and brings advantages for all sides,” he added. “We hope that the negotiators of the member states and the European Parliament will ensure a solid legal basis here, which could be applicable law in a short time. What California has done already, the EU should be able to do as well.”

The Commission has been contacted for comment on noyb’s ADPC.

While there are wider industry shifts afoot to depreciate tracking cookies altogether — with Google proposing to replace current adtech infrastructure supported by Chrome with an alternative stack of (it claims) more privacy respecting alternatives (aka its Privacy Sandbox) — there’s still plenty of uncertainty over what will ultimately happen to third party cookies.

Google’s move to end support for tracking cookies is being closely scrutinized by regional antitrust regulators. And just last week the UK’s Competition and Markets Authority (CMA), which is investigating a number of complaints about the plan, said it’s minded to accept concessions from Google that would mean the regulator could order it not to switch off tracking cookies.

Moreover, even if tracking cookies do finally crumble there is still the question of what exactly they get replaced with — and how alternative adtech infrastructure could impact user privacy?

Google’s so-called ‘Privacy Sandbox’ proposal to target ads at cohorts of users (based on bucketed ‘interests’ its technology will assign them via on-device analysis of their browsing habits) has raised fresh concerns about the risks of exploitative and predatory advertising. So it may be no less important for users to have meaningful browser-level controls over their privacy choices in the future — even if the tracking cookie itself goes away.

A browser-level signal could offer a way for a web user to say ‘no’ to being stuck in an ‘interest bucket’ for ad targeting purposes, for example — signalling that they prefer to see only contextual ads instead, say.

tl;dr: The issue of consent does not only affect cookies — and it’s telling that Google has avoided running the first trials of its replacement tech for tracking cookies (FLoCs, or federated learning of cohorts) in Europe.

 

#advertising-tech, #competition-and-markets-authority, #data-processing, #data-protection, #do-not-track, #eprivacy-regulation, #europe, #european-parliament, #european-union, #max-schrems, #noyb, #privacy, #tc, #web-browsers

Google won’t end support for tracking cookies unless UK’s competition watchdog agrees

Well this is big. The UK’s competition regulator looks set to get an emergency brake that will allow it to stop Google ending support for third party cookies, a technology that’s currently used for targeting online ads, if it believes competition would be harmed by the depreciation going ahead.

The development follows an investigation opened by the Competition and Markets Authority (CMA) into Google’s self-styled ‘Privacy Sandbox’ earlier this year.

The regulator will have the power to order a standstill of at least 60 days on any move by Google to remove support for cookies from Chrome if it accepts a set of legally binding commitments the latter has offered — and which the regulator has today issued a notification of intention to accept.

The CMA could also reopen a fuller investigation if it’s not happy with how things are looking at the point it orders any standstill to stop Google crushing tracking cookies.

It follows that the watchdog could also block Google’s wider ‘Privacy Sandbox’ technology transition entirely — if it decides the shift cannot be done in a way that doesn’t harm competition. However the CMA said today it takes the “provisional” view that the set of commitments Google has offered will address competition concerns related to its proposals.

It’s now opened a consultation to see if the industry agrees — with the feedback line open until July 8.

Commenting in a statement, Andrea Coscelli, the CMA’s chief executive, said:

“The emergence of tech giants such as Google has presented competition authorities around the world with new challenges that require a new approach.

“That’s why the CMA is taking a leading role in setting out how we can work with the most powerful tech firms to shape their behaviour and protect competition to the benefit of consumers.

“If accepted, the commitments we have obtained from Google become legally binding, promoting competition in digital markets, helping to protect the ability of online publishers to raise money through advertising and safeguarding users’ privacy.”

In a blog post sketching what it’s pledged — under three broad headlines of ‘Consultation and collaboration’; ‘No data advertising advantage for Google products’; and ‘No self-preferencing’ — Google writes that if the CMA accepts its commitments it will “apply them globally”, making the UK’s intervention potentially hugely significant.

It’s perhaps one slightly unexpected twist of Brexit that it’s put the UK in a position to be taking key decisions about the rules for global digital advertising. (The European Union is also working on new rules for how platform giants can operate but the CMA’s intervention on Privacy Sandbox does not yet have a direct equivalent in Brussels.)

That Google is choosing to offer to turn a UK competition intervention into a global commitment is itself very interesting. It may be there in part as an added sweetener — nudging the CMA to accept the offer so it can feel like a global standard setter.

At the same time, businesses do love operational certainty. So if Google can hash out a set of rules that are accepted by one (fairly) major market, because they’ve been co-designed with national oversight bodies, and then scale those rules everywhere it may create a shortcut path to avoiding any more regulator-enforced bumps in the future.

So Google may see this as a smoother path toward the sought for transition for its adtech business to a post-cookie future. Of course it also wants to avoid being ordered to stop entirely.

More broadly, engaging with the fast-paced UK regulator could be a strategy for Google to try to surf over the political deadlocks and risks which can characterize discussions on digital regulation in other markets (especially its home turf of the U.S. — where there has been a growing drumbeat of calls to break up tech giants; and where Google specifically now faces a number of antitrust investigations).

The outcome it may be hoping for is being able to point to regulator-stamped ‘compliance’ — in order that it can claim it as evidence there’s no need for its ad empire to be broken up.

Google’s offering of commitments also signifies that regulators who move fastest to tackle the power of tech giants will be the ones helping to define and set the standards and conditions that apply for web users everywhere. At least unless or until any more radical interventions rain down on big tech.

What is Privacy Sandbox?

Privacy Sandbox is a complex stack of interlocking technology proposals for replacing current ad tracking methods (which are widely seen as horrible for user privacy) with alternative infrastructure that Google claims will be better for individual privacy and also still allow the adtech and publishing industries to generate (it claims much the same) revenue by targeting ads at cohorts of web users — who will be put into ‘interest buckets’ based on what they look at online.

The full details of the proposals (which include components like FLoCs, aka Google’s proposed new ad ID based on federated learning of cohorts; and Fledge/Turtledove, Google’s suggested new ad delivery technology) have not yet been set in stone.

Nonetheless, Google announced in January 2020 that it intended to end support for third party cookies within two years — so that rather nippy timeframe has likely concentrated opposition, with pushback coming from the adtech industry and (some) publishers who are concerned it will have a major impact on their ad revenues when individual-level ad targeting goes away.

The CMA began to look into Google’s planned depreciating of tracking cookies after complaints that the transition to a new infrastructure of Google’s devising will merely increase Google’s market power — by locking down third parties’ ability to track Internet users for ad targeting while leaving Google with a high dimension view of what people get up to online as a result of its expansive access to first party data (gleaned through its dominance for consumer web services).

The executive summary of today’s CMA notice lists its concerns that, without proper regulatory oversight, Privacy Sandbox might:

  • distort competition in the market for the supply of ad inventory and in the market for the supply of ad tech services, by restricting the functionality associated with user tracking for third parties while retaining this functionality for Google;
  • distort competition by the self-preferencing of Google’s own advertising products and services and owned and operated ad inventory; and
  • allow Google to exploit its apparent dominant position by denying Chrome web users substantial choice in terms of whether and how their personal data is used for the purpose of targeting and delivering advertising to them.

At the same time, privacy concerns around the ad tracking and targeting of Internet users are undoubtedly putting pressure on Google to retool Chrome (which ofc dominates web browser marketshare) — given that other web browsers have been stepping up efforts to protect their users from online surveillance by doing stuff like blocking trackers for years.

Web users hate creepy ads — which is why they’ve been turning to ad blockers in droves. Numerous major data scandals have also increased awareness of privacy and security. And — in Europe and elsewhere — digital privacy regulations have been toughened up or introduced in recent years. So the line of ‘what’s acceptable’ for ad businesses to do online has been shifting.

But the key issue here is how privacy and competition regulation interacts — and potentially conflicts — with the very salient risk that ill-thought through and overly blunt competition interventions could essentially lock in privacy abuses of web users (as a result of a legacy of weak enforcement around online privacy, which allowed for rampant, consent-less ad tracking and targeting of Internet users to develop and thrive in the first place).

Poor privacy enforcement coupled with banhammer-wielding competition regulators does not look like a good recipe for protecting web users’ rights.

However there is cautious reason for optimism here.

Last month the CMA and the UK’s Information Commissioner’s Office (ICO) issued a joint statement in which they discussed the importance of having competition and data protection in digital markets — citing the CMA’s Google Privacy Sandbox probe as a good example of a case that requires nuanced joint working.

Or, as they put it then: “The CMA and the ICO are working collaboratively in their engagement with Google and other market participants to build a common understanding of Google’s proposals, and to ensure that both privacy and competition concerns can be addressed as the proposals are developed in more detail.”

Although the ICO’s record on enforcement against rights-trampling adtech is, well, non-existent. So its preference for regulatory inaction in the face of adtech industry lobbying should off-set any quantum of optimism derived from the bald fact of the UK’s privacy and competition regulators’ ‘joint working’.

(The CMA, by contrast, has been very active in the digital space since gaining, post-Brexit, wider powers to pursue investigations. And in recent years took a deep dive look at competition in the digital ad market, so it’s armed with plenty of knowledge. It is also in the process of configuring a new unit that will oversee a pro-competition regime which the UK explicitly wants to clip the wings of big tech.)

What has Google committed to?

The CMA writes that Google has made “substantial and wide-ranging” commitments vis-a-vis Privacy Sandbox — which it says include:

  • A commitment to develop and implement the proposals in a way that avoids distortions to competition and the imposition of unfair terms on Chrome users. This includes a commitment to involve the CMA and the ICO in the development of the Proposals to ensure this objective is met.
  • Increased transparency from Google on how and when the proposals will be taken forward and on what basis they will be assessed. This includes a commitment to publicly disclose the results of tests of the effectiveness of alternative technologies.
  • Substantial limits on how Google will use and combine individual user data for the purposes of digital advertising after the removal of third-party cookies.
  • A commitment that Google will not discriminate against its rivals in favour of its own advertising and ad-tech businesses when designing or operating the alternatives to third-party cookies.
  • A standstill period of at least 60 days before Google proceeds with the removal of third party cookies giving the CMA the opportunity, if any outstanding concerns cannot be resolved with Google, to reopen its investigation and, if necessary, impose any interim measures necessary to avoid harm to competition.

Google also writes that: “Throughout this process, we will engage the CMA and the industry in an open, constructive and continuous dialogue. This includes proactively informing both the CMA and the wider ecosystem of timelines, changes and tests during the development of the Privacy Sandbox proposals, building on our transparent approach to date.”

“We will work with the CMA to resolve concerns and develop agreed parameters for the testing of new proposals, while the CMA will be getting direct input from the ICO,” it adds.

Google’s commitments cover a number of areas directly related to competition — such as self-preferencing, non-discrimination, and stipulations that it will not combine user data from specific sources that might give it an advantage vs third parties.

However privacy is also being explicitly baked into the competition consideration, here, per the CMA — which writes that the commitments will [emphasis ours]:

Establish the criteria that must be taken into account in designing, implementing and evaluating Google’s Proposals. These include the impact of the Privacy Sandbox Proposals on: privacy outcomes and compliance with data protection principles; competition in digital advertising and in particular the risk of distortion to competition between Google and other market participants; the ability of publishers to generate revenue from ad inventory; and user experience and control over the use of their data.

An ICO spokeswoman was also keen to point out that one of the first commitments obtained from Google under the CMA’s intervention “focuses on privacy and data protection”.

In a statement, the data watchdog added:

“The commitments obtained mark a significant moment in the assessment of the Privacy Sandbox proposals. They demonstrate that consumer rights in digital markets are best protected when competition and privacy are considered together.

“As we outlined in our recent joint statement with the CMA, we believe consumers benefit when their data is used lawfully and responsibly, and digital innovation and competition are supported. We are continuing to build upon our positive and close relationship with the CMA, to ensure that consumer interests are protected as we assess the proposals.”

This development in the CMA’s investigation raises plenty of questions, large and small — most pressingly over the future of key web infrastructure and what the changes being hashed out here between Google and UK regulators might mean for Internet users everywhere.

The really big issue is whether ‘co-design’ with oversight bodies is the best way to fix the market power imbalance flowing from a single tech giant being able to combine massive dominance in consumer digital services with duopoly dominance in adtech.

Others would say that breaking up Google’s consumer tech and Google’s adtech is the only way to fix the abuse — and eveything else is just fiddling while Rome burns.

Google, for instance, is still in charge of proposing the changes itself — regardless of how much pre-implementation consultation and tweaking goes on. It’s still steering the ship and there are plenty of people who believe that’s not an acceptable governance model for the open web.

But, for now at least, the CMA wants to try to fiddle.

It should be noted that, in parallel, the UK government and CMA are speccing out a wider pro-competition regime that could result in deeper interventions into how Google and other platform giants operate in the future. So more interventions are all but guaranteed.

For now, though, Google is probably feeling pretty happy for the opportunity to work with UK regulators. If it can pull oversight bodies deep down in the detail of the changes it wants to make that’s likely a far more comfortable spot for Mountain View vs being served with an order to break its business up — something the CMA has previously taken feedback on.

Google has been contacted with questions on its Privacy Sandbox commitments.

#ad-blocking, #advertising-tech, #competition-and-markets-authority, #digital-advertising, #europe, #google, #information-commissioners-office, #marketing, #online-advertising, #online-privacy, #policy, #privacy, #privacy-sandbox, #tc, #uk-government, #united-kingdom, #united-states, #web-browsers, #web-infrastructure

Facebook’s use of ad data triggers antitrust probes in UK and EU

Facebook is facing a fresh pair of antitrust probes in Europe.

The UK’s Competition and Markets Authority (CMA) and the EU’s Competition Commission both announced formal investigations into the social media giant’s operations today — with what’s likely to have been co-ordinated timing.

The competition regulators will scrutinize how Facebook uses data from advertising customers and users of its single sign-on tool — specifically looking at whether it uses this data as an unfair lever against competitors in markets such as classified ads.

The pair also said they will seek to work closely together as their independent investigations progress.

With the UK outside the European trading bloc (post-Brexit), the national competition watchdog has a freer rein to pursue investigations that may be similar to or overlap with antitrust probes the EU is also undertaking.

And the two Facebook investigations do appear similar on the surface — with both broadly focused on how Facebook uses advertising data. (Though outcomes could of course differ.)

The danger for Facebook, here, is that a higher dimension of scrutiny will be applied to its business as a result of dual regulatory action — with the opportunity for joint working and cross-referencing of its responses (not to mention a little investigative competition between the UK and the EU’s agencies).

The CMA said it’s looking at whether Facebook has gained an unfair advantage over competitors in providing services for online classified ads and online dating through how it gathers and uses certain data.

Specifically, the UK’s regulator said it’s concerned that Facebook might have gained an unfair advantage over competitors providing services for online classified ads and online dating.

Facebook plays in both spaces of course, via Facebook Marketplace and Facebook Dating respectively.

In a statement on its action, CMA CEO, Andrea Coscelli, said: “We intend to thoroughly investigate Facebook’s use of data to assess whether its business practices are giving it an unfair advantage in the online dating and classified ad sectors. Any such advantage can make it harder for competing firms to succeed, including new and smaller businesses, and may reduce customer choice.”

The European Commission’s investigation will — similarly — focus on whether Facebook violated the EU’s competition rules by using advertising data gathered from advertisers in order to compete with them in markets where it is active.

Although it only cites classified ads as its example of the neighbouring market of particular concern for its probe.

The EU’s probe has another element, though, as it said it’s also looking at whether Facebook ties its online classified ads service to its social network in breach of the bloc’s competition rules.

In a separate (national) action, Germany’s competition authority opened a similar probe into Facebook tying Oculus to use of a Facebook account at the end of last year. So Facebook now has multiple antitrust probes on its plate in Europe, adding to its woes from the massive states antitrust lawsuit filed against it on home turf also back in December 2020.

“When advertising their services on Facebook, companies, which also compete directly with Facebook, may provide it commercially valuable data. Facebook might then use this data in order to compete against the companies which provided it,” the Commission noted in a press release.

“This applies in particular to online classified ads providers, the platforms on which many European consumers buy and sell products. Online classified ads providers advertise their services on Facebook’s social network. At the same time, they compete with Facebook’s own online classified ads service, ‘Facebook Marketplace’.”

The Commission added that a preliminary investigation it already undertook has raised concerns Facebook is distorting the market for online classified ads services. It will now take an in-depth look in order to make a full judgement on whether the social media behemoth is breaking EU competition rules.

Commenting in a statement, EVP Margrethe Vestager, who also heads up competition policy for the bloc, added: “Facebook is used by almost 3 billion people on a monthly basis and almost 7 million firms advertise on Facebook in total. Facebook collects vast troves of data on the activities of users of its social network and beyond, enabling it to target specific customer groups. We will look in detail at whether this data gives Facebook an undue competitive advantage in particular on the online classified ads sector, where people buy and sell goods every day, and where Facebook also competes with companies from which it collects data. In today’s digital economy, data should not be used in ways that distort competition.”

Reached for comment on the latest European antitrust probes, Facebook sent us this statement:

“We are always developing new and better services to meet evolving demand from people who use Facebook. Marketplace and Dating offer people more choices and both products operate in a highly competitive environment with many large incumbents. We will continue to cooperate fully with the investigations to demonstrate that they are without merit.”

Up til now, Facebook has been a bit of a blind spot for the Commission’s competition authority — with multiple investigations and enforcements chalked up by the bloc against other tech giants, such as (most notably) Google and Amazon.

But Vestager’s Facebook ‘dry patch’ has now formally come to an end.

The CMA, meanwhile, is working on wider pro-competition regulatory reforms aimed squarely at tech giants like Facebook and Google under a UK plan to clip the wings of the adtech duopoly.

 

#advertising-data, #amazon, #antitrust, #big-tech, #cma, #competition-and-markets-authority, #europe, #european-commission, #european-union, #facebook, #germany, #google, #margrethe-vestager, #policy, #social, #social-media, #social-network, #united-kingdom

Amazon’s market power to be tested in Germany in push for “early action” over antitrust risks

Germany’s Federal Cartel Office (FCO) is seeking to make swift use of a new competition tool to target big tech — announcing today that it’s opened a proceeding against ecommerce giant Amazon.

If the FCO confirms that Amazon is of “paramount significance for competition across markets” — as defined by an amendment to the German Competition Act which came into force in January (aka, the GWB Digitalisation Act) — the authority will have greater powers to proactively impose conditions on how it can operate in order to control the risk of market abuse.

Section 19a of the GWB enables the FCO to intervene earlier, and the idea is more effectively, against the practices of large digital companies.

The provision gives the authority the power to prohibit digital giants from engaging in anti-competitive practices like self-preferencing; or using tying or bundling strategies intended to penetrate new markets “by way of non-performance based anti-competitive means”; or creating or raising barriers to market entry by processing data relevant for competition.

The FCO already has two other proceedings ongoing against Amazon — one looking at the extent to which Amazon is influencing the pricing of sellers on Amazon Marketplace by means of price control mechanisms and algorithms; and a second examining to agreements between Amazon and brand manufacturers to check whether exclusions placed on third-party sellers on Amazon Marketplace constitute a violation of competition rules — but a finding of “paramount significance” would enable the authority to “take early action against and prohibit possible anti-competitive practices by Amazon”, as it puts it.

Amazon has been contacted for comment on the FCO’s latest proceeding. Update: An Amazon spokesperson said:

“We cannot comment on ongoing proceedings and will fully cooperate with the FCO. Amazon employs 23,000 people in Germany, has invested €28 billion in the country since 2010 and is working closely with local research. We continue to focus on innovating for both our customers and the businesses in Germany that sell in our store.”

It’s the second such application by the Bundeskartellamt to determine whether it can apply the new law to a tech giant.

In January the authority sought to extend the scope of an existing abuse proceeding, opened against Facebook in December — related to Facebook tying Oculus use to Facebook accounts — saying it would look at whether the social media giant is subject to the GWB’s “paramount significance” rules, and whether, therefore, its linking of Oculus use to a Facebook account should be assessed on that basis.

Commenting on its latest move against Amazon in a statement, FCO president Andreas Mundt said: “In the past few years we have had to deal with Amazon on several occasions and also obtained far-reaching improvements for sellers on Amazon Marketplace. Two other proceedings are still ongoing. Parallel to these proceedings we are now also applying our extended competences in abuse control.”

“In this particular case we are first of all examining whether Amazon is of paramount significance for competition across markets. An ecosystem which extends across various markets and thus constitutes an almost unchallengeable position of economic power is particularly characteristic in this respect,” he added. “This could apply to Amazon with its online marketplaces and many other, above all digital offers. If we find that the company does have such a market position, we could take early action against and prohibit possible anti-competitive practices by Amazon.”

In January Mundt made stronger comments vis-a-vis Facebook — describing its social networking ecosystem as “particularly characteristic” of the bar set by the new digital law for proactive interventions, and adding that: “In view of Facebook’s strong market presence with the eponymous social network, WhatsApp and Instagram such a position may be deemed to exist.”

The FCO proceeding to confirm whether or not Facebook falls under the law remains ongoing. (It also has a pioneering case against Facebook’s ‘superprofiling’ of users that’s headed for Europe’s top court — which could result in an order to Facebook to stop combining EU users’ data without consent, if judges agreed with its approach linking privacy and competition.)

Zooming out, the Bundeskartellamt’s moves to acquire more proactive powers at the national level to tackle big tech foreshadow planned updates to pan-European Union competition law. And specifically the ex ante regime which is set to apply to so-called “digital gatekeepers” in future — under the Digital Markets Act (DMA).

The DMA will mean that Internet intermediaries with major market power must comply with behavioural ‘dos and don’ts’ set by Brussels, risking major penalties if they don’t play by the rules.

In recent years lawmakers across Europe have been looking at how to update competition powers so regulators can respond effectively to digital markets — which are prone to anti-competitive phenomena such as networking effects and tipping — while continuing to pursue antitrust investigations against big tech. (The Commission laid out a first set of charges against Amazon in November, for example, relating to its use of third party merchant data.)

The problem is the painstaking pace of competition investigations into digital business vs the blistering speed of these players (and the massive market power they’ve amassed) — hence the push to tool up with more proactive antitrust powers.

Earlier, EU lawmakers also toyed with the idea of a new competition tool for digital markets but quietly dropped the idea — going on propose their ex ante regime for gatekeeper platforms, under the DMA, at the end of last year. However the proposal is in the process of being debated by the other EU institutions under the bloc’s co-legislative approach — which means it’s still likely years away from being adopted and applied as pan-EU law.

That in turn means German’s FCO could have an outsized role in clipping big tech’s wings in the meanwhile.

In the UK, now outside the bloc — where it too may have an influential role in reforming regional competition rules to rebalance digital market power — the government is also working on a pro-competition regime aimed at big tech.

This year it set up a dedicated unit, the DMU, within the national Competition and Markets Authority which will be tasked with overseeing a regime that will apply to platforms which are identified as having “strategic market status” (akin to the German approach of “paramount significance for competition across markets”). And while the UK is taking a similar tack to the EU’s DMA, it has said the domestic regime will not sum to a single set of rules for all gatekeeper-style platforms — but rather there will be bespoke provisions per platform deemed to fall under the ex ante regulations.

 

#amazon, #andreas-mundt, #big-tech, #brussels, #competition, #competition-and-markets-authority, #competition-law, #digital-markets-act, #e-commerce, #ecommerce, #europe, #european-union, #facebook, #online-marketplaces, #policy, #united-kingdom

The UK’s plan to tackle big tech won’t be one-size fits all

The director of a new unit set up this month inside the UK’s competition watchdog — with a dedicated focus on tech giants’ impacts on digital markets — has been giving a hint of how it could operate, once it’s on a statutory footing and imbued with powers to sanction problem platforms and potentially even order some forms of structural separation.

The government announced its intention to regulate big tech in November last year — saying it would establish a “pro-competition” regime to tackle concerns associated with digital markets, such as ‘winner takes all’ network-effect dynamics.

It’s not clear when exactly that will happen — the government has only said it will do so as soon as parliamentary time allows.

The UK is devising its own approach to digital regulation now that the country is outside the European Union — where lawmakers recently proposed a major new set of pan-EU rules to apply to digital services (the Digital Services Act) and ex ante requirements for the largest tech giants (the Digital Markets Act).

EU lawmakers have also proposed draft rules for high risk applications of AI, while the UK has an Online Safety bill in the pipeline (a legislative proposal is due this year) — so there are a lot of new digital rules being written right now, and the potential for confusing and counterproductive regulatory overlap if lawmakers don’t end up on the same page.

Continued divergence of approach between the UK and the EU is, nonetheless, to be expected, even as UK lawmakers say they want to engage with the international community as they work on drafting rules to ensure a British digital rulebook aligns in spirit (if not letter) with requirements being shaped for Internet platforms elsewhere.

The UK’s Digital Markets Unit (DMU) launched earlier this month, to help support the government as it drafts legislation to put it on a statutory footing and ahead of the unit being able to function as big tech’s British overseer.

Speaking at a conference on Friday the head of the DMU, Catherine Batchelor, detailed the approach she wants the unit to take, and some of the powers it has advised the government it needs to deliver on ministers’ goal of fostering competition in tipping-prone digital markets.

Giving an overview of the issues, she said a new approach is needed to regulating digital markets owing to changed dynamics — noting that companies “who were once garage startups or started from campuses in universities [and] are now the most powerful firms across the world” — and saying tech giants have been able to accrue so much market power as a result of digital market characteristics like access to data; network effects and economies of scale associated with platform business; and the ecosystems firms have been able to build around their core businesses — leveraging those interlocking benefits of data, scale and network effects to also acquire rivals to (further) grow and consolidate a powerful position.

“You might say well what’s the danger of that? But I think we see the danger of that on a day to day basis. Firms can use this position to exploit the consumers and businesses that rely on them,” she explained. “From a business perspective that might be the price you’re paying to sell your goods and services on the marketplace or the price you’re paying to list your app in an app store or the price you’re paying to advertise your products and services.

For consumers she pointed out they may be ‘paying’ for free digital goods and services with their attention or data, highlighting concerns over whether the amount of data being provided by users is a “fair exchange” for what they’re getting in return.

On the business side, Batchelor pointed to ‘self preferencing’ as one of the problematic “exclusionary” tactics tech giants indulge in that the unit will be seeking to tackle. “The overarching impact of that is a less vibrant digital economy,” she said. “You don’t have these new tech firms coming through, able to grow in the way the ones of old were.”

The problem with trying to tackle unfair (digital) market behaviors with existing competition law is that it can’t be “proactive and preventative”, she said — hence DMU has recommended setting rules that prevent firms from engaging in such conduct in the first place.

But she also said the unit is keen to avoid the risk of over-regulating. So unlike the EU’s DMA proposal it hasn’t supported having a set list of ‘dos and don’ts’ to apply universally to all platforms which fall under scope of the regulation.

Instead she said it wants more flexibility to target requirements at specific platforms — to take account of unique characteristics and any variations in market or operation.

On the question of who would fall under scope of the incoming pro-competition regime, the unit has recommended an “evidence-based assessment” to define whether or not a firm has ‘strategic market status’ (SMS) — meaning they are “in a position which is unlikely to be transitory”, as she put it.

“Our recommendations were that to come within scope of this regime the DMU should have to assess whether a firm has substantial, entrenched market power and that that market power provides the firm with a strategic position,” she went on. “We’ll be looking at the factors which might lead to that entrenched position — so things like barriers to entry and expansion.”

“The addition of strategic position is probably the more novel or more new element,” she added. “What we are getting at with that is whether the effects of the firm’s market power are particularly widespread or significant.”

Batchelor also gave a few examples of what strategic position might boil down to. Such as the sheer size of the business (which makes its impact particularly significant or widespread); or that the firm acts as an important access point to businesses trying to reach customers (along the lines of the ‘gatekeeper’ designation EU lawmakers have used in the DMA); or its ability to leverage or extend its market power from a core operational market into neighbouring markets.

The recommendation is for the SMS test to be carried out by the regulator, which would consult and take views during the process of arriving at a designation — a period which she suggested could take as long as a year.

It has also recommended that the SMS designation — once arrived at — is fixed for a set period. (Batchelor said they’d recommended five years.)

Firms that meet the SMS test will be subject to the full sweep of the pro-competition regime. The DMU wants this to include a preventative code of conduct — specific to the firm but with general objectives set out in legislation (such as “fair trading, open choices and trust and transparency”). And the government appears to have accepted that approach.

Also speaking at the conference was Harry Lund, who works on digital policy at the Department of Digital, Media, Culture and Sport, as deputy director for digital regulation and markets, as it draws up the new competition approach.

“At the centre of this regime will be an enforceable code of conduct to provide firms with substantial and endearing market power — so ‘SMS’ status — with clear expectations over what’s acceptable and what’s not acceptable behavior,” he said, adding: “The government has also accepted the case in principle for pro-competition interventions — which would address the underlying sources of market power, noting that these are potentially very major market interventions.”

Lund added that the overarching aim for the regime will be for regulators “to proactively shape platforms’ behaviour to avoid harmful behavior before it happens”, while when harmful behavior does happen the goal is to be able to address it more quickly then currently happens under existing competition law.

“The DMU would be able to set the code itself, very much targeted at the evidence of harms and problematic conduct that was identified through the SMS designation,” Batchelor went on.

“One of the key factors that we highlighted in our advice is the ability for these codes to differ between the activities of different SMS firms. So we are not necessarily recommending there is one code that is uniform across different SMS firms and activities but that there should be the discretion to be able to target those codes depending on the particular activity that is of concern, or the particular business model of the firm for example,” she went on, flagging that as a distinguishing feature from the European Commission’s approach — and part of the DMU’s philosophy of trying to avoid “over or under regulation”.

The idea is therefore “the ability to go further when you feel that it warrants it, but equally the ability to row back and take away regulation where you feel it’s not needed for a particular firm”, she also said, adding that the unit feels that’s “very important”.

Batchelor said the DMU has suggested each code be developed alongside an SMS designation — so that a consultation on a firm’s SMS status would happen in parallel to a consultation on a draft code of conduct for the same firm.

On top of the code, the DMU has proposed pro-competition interventions — which she said are intended to address the reason why a firm has a powerful position in the first place. The aim will be for interventions to try and promote “greater contestability, greater competition” in the markets where a given firm operates, she added.

“These are vital interventions if what you want to do is not just deal with the consequences of the firm having this powerful position — but actually try and change it for the future,” she emphasized.

The unit has suggested a range of pro-competitive interventions to be able to do the job — including data-related interventions, such as personal data mobility (so consumers can seamlessly move their data from platform to platform); interoperability; access to data (by competitors or third parties); common standards; and separation remedies — “not necessarily going so far as full ownership separation”, but perhaps separation of different business divisions within a firm, for example.

“We recognize that these are very significant interventions and would not be undertaken lightly. The idea around the pro-competitive interventions is that the DMU would have to go through… and evidence-based process to firstly identify what is the particular problem that is causing a lack of competition in the market but also then to satisfy itself that the remedy it’s proposing… is a rational, proportionate and effective way of dealing with that problem,” she added.

“We would expect significant consultation to go into the development of these remedies, and, for example, to undergo testing to ensure that they were effective and they were going to have the intended outcome. So we recognize the significance of these remedies but we also recognize how powerful they could be and we think they’re a very important part of the regulator’s toolkit.”

The DMU has also proposed a bespoke merger regime for firms with SMS — including an obligation to make the Competition and Markets Authority (CMA) aware of all intended transactions and mandatory notifications for some transactions that meet particular thresholds.

“This is in contrast to the CMA’s existing regime which is a voluntary regime,” Batchelor noted, saying the intent is to make sure the watchdog is in a position to consider the market impacts of proposed transactions.

Significantly, she said the DMU has proposed using “a more caution standard of proof” in relation to mergers — which could mean it will become much, much harder for tech giants to gain regulatory approval for acquisitions in the UK (assuming the government decides to take this particular piece of the DMU’s advice).

“What we’re saying is that with this mergers, quite often there is a small likelihood of a very, very significant impact on competition, with the likelihood for significant harm, and with these tech mergers where you have these firms in such significant positions perhaps having to say that on the balance of probabilities this merger is likely to lead to a significant lessening of competition is too high a bar,” said Batchelor, adding: “We think that [having a more cautious standard of proof is] really important so we can effectively scrutinize the mergers and acquisitions that these firms are undertaking.”

On the enforcement front, she notes that it’s important the DMU is able to take action if firms breach codes of conduct or pro-competition interventions.

Though she said it has suggested a “participatory” approach to tackling compliance issues in the first instance — “working with the firm in a relatively informal way”, i.e. to try and address the problem without regulatory sanction.

If that fails she said it’s recommended the DMU has the power to order firms to change behaviors to comply with requirements. And for those tech giants that act negligently or intentionally breach requirements the DMU wants to have the power to issue “very significant” penalties — of up to 10% of a firm’s global annual turnover.

Lund said the government has a number of priorities as it works on developing and implementing the new regime — which includes instructing the DMU to look at how the code of conduct could work in practice for specific sectors of the economy — such as content creators and news publishers (“where we know from the CMA’s market study and other work that there’s a particular competition issue”).

It is also seeking to shape international debate on digital competition — such as at the G7. “The international dimension of this is really important. The UK is not operating in a vacuum so we’re looking to build consensus, foster dialogue and increase co-operation with international partners as they seek to develop their own approaches.”

He confirmed that a consultation will be launched later this year to set out the government’s vision on digital competition and its specific proposals for the regime — fed by the expert advice from the DMU (which Lund said DCMS is now working through, as well as taking advice from other sources).

The final details of the regime — including key elements such as penalties for breaches — will be set out in a legislative proposal from DCMS once it’s concluded the consultation process.

The latter is slated to take place in the first half of this year, but there’s no timeframe from government on when it will introduce legislation. But the soonest would logically be the second half of this year — so there’s no realistic prospect of legislation being introduced before 2022.

During a Q&A discussion at the conference, Lund gave an example of a potential pro-competition remedy the DMU may be able to apply — albeit at what he couched as “the more radical end of the spectrum” — as ordering changes to default settings which affect how people’s data is collected, such as requiring an active opt in from consumers to gather their data, rather than consumers having to actively opt out.

It won’t be “one-size fits all”, he emphasized, saying “the tailored nature of the pro-competition interventions is that if that’s the issue then that’s where the remedy can be targeted”.

He added that the work reconfiguring competition policy for an era of digital giants is “complex and far-reaching”, adding: “A new competition regime will be a major change to the regulatory landscape so it’s really important we get it right.”

#big-tech, #cma, #competition, #competition-and-markets-authority, #competition-law, #digital-markets-act, #digital-markets-unit, #europe, #european-commission, #european-union, #g7, #online-safety-bill, #platform-regulation, #policy, #united-kingdom

UK gov’t triggers national security scrutiny of Nvidia-Arm deal

The UK government has intervened to trigger public interest scrutiny of chipmaker’s Nvidia’s planned to buy Arm Holdings.

The secretary of state for digital issues, Oliver Dowden, said today that the government wants to ensure that any national security implications of the semiconductor deal are explored.

Nvidia’s $40BN acquisition of UK-based Arm was announced last September but remains to be cleared by regulators.

The UK’s Competition and Markets Authority (CMA) began to solicit views on the proposed deal in January.

Domestic opposition to Nvidia’s plan has been swift, with one of the original Arm co-founders kicking off a campaign to ‘save Arm’ last year. Hermann Hauser warned that Arm’s acquisition by a U.S. entity would end its position as a company independent of U.S. interests — risking the U.K.’s economic sovereignty by surrendering its most powerful trade weapon.

The intervention by Department of Digital, Media, Culture and Sport (DCMS) — using statutory powers set out in the Enterprise Act 2002 — means the competition regulator has been instructed to begin a phase 1 investigation.

The CMA has a deadline of July 30 to submit its report to the secretary of state.

Commenting in a statement, Dowden said: “Following careful consideration of the proposed takeover of ARM, I have today issued an intervention notice on national security grounds. As a next step and to help me gather the relevant information, the UK’s independent competition authority will now prepare a report on the implications of the transaction, which will help inform any further decisions.”

“We want to support our thriving UK tech industry and welcome foreign investment but it is appropriate that we properly consider the national security implications of a transaction like this,” he added.

At the completion of the CMA’s phase 1 investigation Dowden will have an option to clear the deal, i.e. if no national security or competition concerns have been identified; or to clear it with remedies to address any identified concerns.

He could also refer the transaction for further scrutiny by instructing the CMA to carry out an in-depth phase 2 investigation.

After the phase 1 report has been submitted there is no set period when the secretary of state must make a decision on next steps — but DCMS notes that a decision should be made as soon as “reasonably practicable” to reduce uncertainty.

While Dowden’s intervention has been made on national security grounds, additional concerns have been raised about impact of an Nvidia take-over of Arm — specifically on U.K. jobs and on Arm’s open licensing model.

Nvidia sought to address those concerns last year, claiming it’s committed to Arm’s licensing model and pledging to expand the Cambridge, UK offices of Arm — saying it would create “a new global center of excellence in AI research” at the UK campus.

However it’s hard to see what commercial concessions could be offered to assuage concern over the ramifications of an Nvidia-owed Arm on the UK’s economic sovereignty. That’s because it’s a political risk, which would require a political solution to allay, such as at a treaty level — something which isn’t in Nvidia’s gift (alone) to give.

National security concerns are a rising operational risk for tech companies involved in the supply of cutting edge infrastructure, such as semiconductor design and next-gen networks — where a relative paucity of competitors not only limits market choice but amps up the political calculations.

Proposed mergers are one key flash point as market consolidation takes on an acute politico-economic dimension.

However tech companies’ operations are being more widely squeezed in the name of national security — such as, in recent years, the U.S. government’s attacks on China-based 5G infrastructure suppliers like Huawei, with former president Trump seeking to have the company barred from supplying next-gen networks not only within the U.S. but to national networks of Western allies.

Nor has (geo)political pressure been applied purely over key infrastructure companies in recent years; with Trump claiming a national security justification to try and shake down the Chinese-owned social networking company, TikTok — in another example that speaks to how tech tools are being coopted into wider geopolitical power-plays, fuelled by countries’ economic and political self-interest.

#arm-holdings, #artificial-intelligence, #cambridge, #cma, #competition-and-markets-authority, #computer-security, #europe, #huawei, #ma, #national-security, #nvidia, #oliver-dowden, #security, #semiconductor, #tiktok, #trump, #u-s-government, #uk-government, #united-kingdom, #united-states

Facebook takes down 16,000 groups trading fake reviews after another poke by UK’s CMA

Facebook has removed 16,000 groups that were trading fake reviews on its platform after another intervention by the UK’s Competition and Markets Authority (CMA), the regulator said today.

The CMA has been leaning on tech giants to prevent their platforms being used as thriving marketplaces for selling fake reviews since it began investigating the issue in 2018 — pressuring both eBay and Facebook to act against fake review sellers back in 2019.

The two companies pledged to do more to tackle the insidious trade last year, after coming under further pressure from the regulator — which found that Facebook-owned Instagram was also a thriving hub of fake review trades.

The latest intervention by the CMA looks considerably more substantial than last year’s action — when Facebook removed a mere 188 groups and disabled 24 user accounts. Although it’s not clear how many accounts the tech giant has banned and/or suspended this time it has removed orders of magnitude more groups. (We’ve asked.)

Facebook was contacted with questions but it did not answer what we asked directly, sending us this statement instead:

“We have engaged extensively with the CMA to address this issue. Fraudulent and deceptive activity is not allowed on our platforms, including offering or trading fake reviews. Our safety and security teams are continually working to help prevent these practices.”

Since the CMA has been raising the issue of fake review trading, Facebook has been repeatedly criticised for not doing enough to clean up its platforms, plural.

Today the regulator said the social media giant has made further changes to the systems it uses for “identifying, removing and preventing the trading of fake and/or misleading reviews on its platforms to ensure it is fulfilling its previous commitments”.

It’s not clear why it’s taken Facebook well over a year — and a number of high profile interventions — to dial up action against the trade in fake reviews. But the company suggested that the resources it has available to tackle the problem had been strained as a result of the COVID-19 pandemic and associated impacts, such as home working. (Facebook’s full year revenue increased in 2020 but so too did its expenses.)

According to the CMA changes Facebook has made to its system for combating traders of fake reviews include:

  • suspending or banning users who are repeatedly creating Facebook groups and Instagram profiles that promote, encourage or facilitate fake and misleading reviews
  • introducing new automated processes that will improve the detection and removal of this content
  • making it harder for people to use Facebook’s search tools to find fake and misleading review groups and profiles on Facebook and Instagram
  • putting in place dedicated processes to make sure that these changes continue to work effectively and stop the problems from reappearing

Again it’s not clear why Facebook would not have already been suspending or banning repeat offenders — at least, not if it was actually taking good faith action to genuinely quash the problem, rather than seeing if it could get away with doing the bare minimum.

Commenting in a statement, Andrea Coscelli, chief executive of the CMA, essentially makes that point, saying: “Facebook has a duty to do all it can to stop the trading of such content on its platforms. After we intervened again, the company made significant changes — but it is disappointing it has taken them over a year to fix these issues.”

“We will continue to keep a close eye on Facebook, including its Instagram business. Should we find it is failing to honour its commitments, we will not hesitate to take further action,” Coscelli added.

A quick search on Facebook’s platform for UK groups trading in fake reviews appears to return fewer obviously dubious results than when we’ve checked in on this problem in 2019 and 2020. Although the results that were returned included a number of private groups so it was not immediately possible to verify what content is being solicited from members.

We did also find a number of Facebook groups offering Amazon reviews intended for other European markets, such as France and Spain (and in one public group aimed at Amazon Spain we found someone offering a “fee” via PayPal for a review; see below screengrab) — suggesting Facebook isn’t applying the same level of attention to tackling fake reviews that are being traded by users in markets where it’s faced fewer regulatory pokes than it has in the UK.

Screengrab: TechCrunch

#competition-and-markets-authority, #europe, #facebook, #fake-reviews, #instagram, #policy, #social, #social-media, #united-kingdom

UK’s Digital Markets Unit starts work on pro-competition reforms

A new UK public body that will be tasked with helping regulate the most powerful companies in the digital sector to ensure competition thrives online and consumers of digital services have more choice and control over their data has launched today.

The Digital Markets Unit (DMU), which was announced in November last year — following a number of market reviews and studies examining concerns about the concentration of digital market power — does not yet have statutory powers itself but the government has said it will consult on the design of the new “pro-competition regime” this year and legislate to put the DMU on a statutory footing as soon as parliamentary time allows.

Concerns about the market power of adtech giants Facebook and Google are key drivers for the regulatory development.

As a first job, the unit will look at how codes of conduct could work to govern the relationship between digital platforms and third parties such as small businesses which rely on them to advertise or use their services to reach customers — to feed into future digital legislation.

The role of powerful intermediary online gatekeepers is also being targeted by lawmakers in the European Union who proposed legislation at the end of last year which similarly aims to create a regulatory framework that can ensure fair dealing between platform giants and the smaller entities which do business under their terms.

The UK government said today that the DMU will take a sector neutral approach in examining the role of platforms across a range of digital markets, with a view to promoting competition.

The unit has been asked to work with the comms watchdog Ofcom, which the government named last year as its pick for regulating social media platforms under planned legislation due to be introduced this year (aka, the Online Safety Bill as it’s now called).

While that forthcoming legislation is intended to regulate a very wide range of online harms which may affect consumers — from bullying and hate speech to child sexual exploitation and other speech-related issues (raising plenty of controversy, and specific concerns about associated implications for privacy and security) — the focus for the DMU is on business impacts and consumer controls which may also have implications for competition in digital markets.

As part of its first work program, the government said the secretary of state for digital has asked the DMU to work with Ofcom to look specifically at how a code would govern the relationships between platforms and content providers such as news publishers — “including to ensure they are as fair and reasonable as possible”, as its press release puts it.

This suggests the DMU will be taking a considered look at recent legislation passed in Australia — which makes it mandatory for platforms to negotiate with news publishers to pay for reuse of their content.

Earlier this year, the head of the UK’s Competition and Markets Authority (CMA), which the DMU will sit within, told the BBC that Australia’s approach of having a backstop of mandatory arbitration if commercial negotiations between tech giants and publishers fail is a “sensible” approach.

The DMU will also work closely with the CMA’s enforcement division — which currently has a number of open investigations into tech giants, including considering complaints against Apple and Google; and an in-depth probe of Facebook’s Giphy acquisition.

Other UK regulators the government says the DMU will work closely with include the data protection watchdog (the ICO) and the Financial Conduct Authority.

It also said the unit will also coordinate with international partners, given digital competition is an issue that’s naturally globally in nature — adding that it’s already discussing its approach through bilateral engagement and as part of its G7 presidency.

“The Digital Secretary will host a meeting of digital and tech ministers in April as he seeks to build consensus for coordination on better information sharing and joining up regulatory and policy approaches,” it added.

The DMU will be led by Will Hayter, who takes up an interim head post in early May following a stint at the Cabinet Office working on Brexit transition policy. Prior to that he worked for several years at the CMU and also Ofcom, among other roles in regulatory policy.

 

#apple, #australia, #big-tech, #competition-and-markets-authority, #digital-markets-unit, #europe, #european-union, #facebook, #financial-conduct-authority, #g7, #google, #ofcom, #online-harms, #online-safety-bill, #policy, #social-media-platforms, #uk-government, #united-kingdom

UK’s antitrust watchdog takes a closer look at Facebook-Giphy

Potential threats to the free flow of GIFs continue to trouble the UK’s competition watchdog.

Facebook’s $400M purchase of Giphy, announced last year, is now facing an in-depth probe by the CMA after the regulator found the acquisition raises competition concerns related to digital advertising. It now has until September 15 to investigate and report.

The watchdog took a first look at the deal last summer. It kept on looking into 2021. And then last week the CMA laid out its concerns — saying the (already completed) Facebook-Giphy acquisition could further reduce competition in the digital advertising market where the former is already a kingpin player (with over 50% share of the display advertising market).

The regulator said it had found evidence that, prior to the acquisition, Giphy had planned to expand its own digital advertising partnerships to other countries, including the UK.

“If Giphy and Facebook remain merged, Giphy could have less incentive to expand its digital advertising, leading to a loss of potential competition in this market,” it wrote a week ago.

The CMA also said it was worried a Facebook-owned Giphy could harm social media rivals were the tech giant were to squeeze the supply of animated pixels to others — or require rivals to sign up to worse terms (such as forcing them to hand over user data which it might then use to further fuel its ad targeting engines, gaining yet more market power).

On March 25 the companies were given five days by the regulator to address its concerns — by offering legally binding proposals intended to allay concerns.

An in-depth ‘phase 2’ investigation could have been avoided if concessions were offered which were acceptable to the regulator but that is evidently not the case as the CMA has announced the phase 2 referral today. And given the announcement has come just five working days after the last notification it appears no concessions were offered.

We’ve reached out to Facebook and the CMA for comment.

A Facebook spokesperson said: “We will continue to fully cooperate with the CMA’s investigation. This merger is good for competition and in the interests of everyone in the UK who uses Giphy and our services — from developers to service providers to content creators.”

While Facebook has already completed its acquisition of Giphy, the CMA’s investigation continues to put a freeze on its ability to integrate Giphy more deeply into its wider business empire.

Albeit, given Facebook’s dominant position in the digital advertising space, its business need to move fast via product innovation is a lot less pressing than years past — when it was building its market dominance free from regulatory intervention.

In recent years, the CMA has been paying close mind to the digital ad market. Back in 2019 it reported report substantial concerns over the power of the adtech duopoly, Google and Facebook. Although in its final report it said it would wait for the government to legislate, rather than make an intervention to address market power imbalances itself.

The UK is now in the process of setting up a pro-competition regulator with a dedicated focus on big tech — in response to concerns about the ‘winner takes all’ dynamics seen in digital markets. This incoming Digital Market Unit will oversee a “pro-competition” regime for Internet platforms that will see fresh compliance requirements in the coming years.

In the meanwhile, the CMA continues to scrutinize tech deals and strategic changes — including recently opening a probe of Google’s plan to depreciate support for third party cookies in Chrome after complaints from other industry players.

In January it also announced it was taking a look at Uber’s plan to acquire Autocab. However on Monday it cleared that deal, finding only “limited indirect” competition between the pair, and not finding evidence to indicate Autocab was likely to become a significant and more direct competitor to Uber in the future.

The regulator also considered whether Autocab and Uber could seek to put Autocab’s taxi company customers that compete against Uber at a disadvantage by reducing the quality of the booking and dispatch software sold to them, or by forcing them to pass data to Uber. But its phase 1 probe found other credible software suppliers and referral networks that the CMA said these taxi companies could switch to if Uber were to act in such a way — leading to it to clear the deal.

#advertising-tech, #antitrust, #competition-and-markets-authority, #digital-advertising, #europe, #facebook, #giphy, #privacy, #social, #united-kingdom

JustEat Takeaway $7.6B merger approved, pair pick up $756M in new funding

On the heels of Amazon getting approval from the competition authority to proceed with an investment leading a $575 million round for food delivery startup Deliveroo in the UK, two of Deliveroo’s biggest rivals got their own £6.2 billion merger approved, and they have subsequently picked up an extra $756 million to come out fighting.

Today, the competition watchdog in the UK officially gave a nod to the merger, originally valued at $10 billion but more currently valued at £6.2 billion, between UK’s JustEat and the Netherlands’ Takeaway.com. And along with that, the merged company announced that it had raised €700 million ($756 million) in new outside funding in the form of new shares and convertible bonds.

JustEat and Takeaway had already been respectively trading on the London and Netherlands stock exchanges — on LSE as ‘JET’ and on AMS as ‘TKWY’ — and they said they would use the capital and convertible bond issue to pay down debts, business development and other corporate purposes and potential acquisitions in what remains a very fragmented and crowded market for food delivery in Europe and elsewhere, despite the rapid scaling we’re seeing among some of the biggest players.

Specifically the pair said in their announcement that they would use the money to “partially pay down revolving credit facilities currently utilised by both Just Eat and Takeaway.com, for general corporate purposes as well as to provide the Company with financial flexibility to act on strategic opportunities which may arise.”

The two also noted that the placement is conditional on the two getting successfully admitted to trade as a merged company. They’ve made the application for this and it is expected to become effective on April 27.

The Competition and Markets Authority, meanwhile, noted that its decision was influenced by the fact that Takeaway.com had not been active in the UK market and “we are satisfied that there are no competition concerns.”

“Millions of people in the UK use online food platforms for takeaways and, where a merger could raise competition concerns, we have a duty to rigorously investigate whether customers could lose out. In this case, we carefully considered whether Takeaway.com could have re-entered the UK market in future, giving people more choice,” it said. “It was important we investigated this properly, but after gathering additional evidence which indicates this deal will not reduce competition, it is also the right decision to now clear the merger.”

The moves cap of a turbulent nine months for the two companies, which announced their intention to merge last year to bulk up against pricey competition from Uber Eats, Deliveroo (which itself was getting a huge cash injection and support from the mighty Amazon) and more. After the two announced their intentions to come together, Prosus (the tech holdings of Naspers) also made a protracted, hostile bid for JustEat.

Online food delivery services have been a popular business in the world of tech: three-sided marketplaces bring together restaurants, consumers who would rather stay home but still want to eat restaurant food, and an army of delivery people who largely work as contractors to shuttle between the other two — but their growth has come at high costs.

Heavy competition between a number of firms, and the overall unit economics of on-demand services, have meant that all of them need large sums of cash to grow and often survive while they slowly inch towards profitability. (And those that cannot raise that cash often fall by the wayside or are swallowed up in larger consolidation plays for economy of scale.)

The big question is how the current climate is going to affect that general model. Stay-at-home orders have been a huge boost for businesses that cater to people making transactions virtually, or staying at home; and food delivery services check both of those boxes.

At least in the short term, that has spelled major opportunity for all of them, and the most optimistic believe that even if that outsized surge abates when some of our COVID-19 restrictions get relaxed, it will leave in its place a permanent shift among consumer and business behaviour.

For its part, the CMA noted that “millions” of people in the UK are using take-out services and that it is trying to be more flexible and efficient during COVID-19 to enable more services to people.

“During the COVID-19 outbreak, the CMA is working with businesses where it can to be flexible – for example, by recognising that there may be delays in providing the information it needs to conduct investigations,” it said. “However, it is also trying to complete investigations efficiently at this time, wherever possible, to provide businesses with certainty. In this case, the CMA was able to publish its final decision 26 days ahead of the statutory deadline.”

 

#amazon, #collaborative-consumption, #companies, #competition-and-markets-authority, #deliveroo, #ecommerce, #europe, #food, #food-and-drink, #food-delivery, #just-eat, #justeat, #london, #naspers, #netherlands, #on-demand-services, #online-food-ordering, #take-out, #takeaway-com, #tc, #tcuk, #uber, #united-kingdom, #websites