Inquiry into non-search online advertising: significant market position of Alphabet/Google, insufficient transparency in programmatic advertising

Today the Bundeskartellamt has published the final report on its sector inquiry into non-search online advertising.

Andreas Mundt, President of the Bundeskartellamt: “For numerous online services providers in the internet economy, non-search online advertising is a key source of funding. Our sector inquiry plays an important part in clarifying the facts and providing information on the highly complex system of automated trading in online advertising space and its significance for competition.”

The sector inquiry focuses on the market conditions and functioning mechanisms in the non-search online advertising sector. Adverts displayed in response to search engine queries (search advertising) are, however, not part of the investigation.

The technical design of non-search online advertising makes possible highly complex automated trading in advertising space and the subsequent display and verification of adverts (programmatic advertising). Alphabet, in particular, has a significant position in this overall system. The company is present at almost all levels of the value chain of non-search online advertising and has an extraordinarily strong market position with regard to practically all relevant services. As Alphabet also has a significant position in the search online advertising market based on the Google Search engine, it holds a prominent position in the online advertising sector as a whole.

The sector inquiry also found that programmatic advertising is not sufficiently transparent. Numerous market players have complained that it is not possible to observe and assess the extent to which their adverts are successful because they do not obtain any information on the effectiveness of their advertising measures.

The situation is also intransparent from the users’ perspective. Their data form the most important basis for programmatic advertising. However, it is hardly possible for users to assess what happens to their data, who receives them and how they are used. Several legal policy proposals have been made for restricting data collection and the use of data for advertising purposes. The Bundeskartellamt has looked into this issue from a competition law perspective.

Andreas Mundt: “We should seriously ask ourselves whether we want to have virtually ‘transparent’ internet users only because we are supposed to buy certain products or services. What appears to be particularly problematic from a competition point of view is that only a very small number of companies have access to large amounts of a variety of current, first-hand user data. This imbalance must always be taken into account in the case of potential interventions. The sector inquiry has provided valuable insights which will be used in the Bundeskartellamt’s current and future proceedings. There will be a particular focus on the large digital companies which play a key role in the online advertising sector. Among other aspects, we are currently examining whether Apple’s App Tracking Transparency initiative and Alphabet’s data combination practices are compatible with the rules of extended abuse control pursuant to Section 19a of the German Competition Act (GWB).”

The final report published today follows on from the report for public discussion published in August 2022 (see press release of 29 August 2022). It summarises essential insights gained from the Bundeskartellamt’s sector inquiry and the comments received on the report for public discussion. The final report also discusses selected new developments in the non-search online advertising sector. The report for public discussion and the final report are available on the Bundeskartellamt’s website (in German only; an executive summary of the report for public discussion is available in English, see below).