ACCC’s upcoming report set to further squeeze Google on market power
With the value of digital advertising continuing to increase, The Australian Competition and Consumer Commission (ACCC) has raised the issue of market power within the search engine sector within its Digital Platform Services Inquiry – September 2021 Interim report. As part of its analysis, the ACCC concluded that “customer inertia” and the effect of default settings is a barrier to expansion for smaller search engines.
Google along with Microsoft (Bing), DuckDuckGo and others, have submitted responses to the findings by the ACCC, ahead of its submission of the report to the Australian Government Treasurer on 30 September.
In response to the inquiry, Google said that the concern raised by the ACCC is “flawed” for several reasons.
“Google’s popularity reflects its quality, not default or preinstallation agreements. Google’s popularity does not reflect a market failure caused by defaults or preinstallation. On the contrary, it reflects Google’s quality and the fact it is Australians’ preferred search service. In a user survey, 89% of Australians identify Google as their favourite search service. Data from rater tests, natural experiments, academic studies, and statements from the ACCC all corroborate Google’s quality,” the statement read.
Google added: “Defaults and preinstallation do not restrict users from reaching alternative services. Evidence consistently shows that users can and do override defaults and pre installations. One example is Google’s share on Microsoft Windows desktops in Australia. Microsoft pre-installed its Edge browser that defaults to Bing on Windows. But Google’s share of search on Windows is 91%, while Bing’s is 7.5%. Australians override Microsoft’s defaults and choose their preferred alternative: Google.”
In short, Google explained that Australians use Google because they choose to, not because they have to. There is therefore no need for intervention in Australia, especially in the absence of any rigorous legal and economic assessment of market failure and consumer harm, or contravention of Australian competition law. Google also stated that Google’s popularity reflects its quality, not default and preinstallation arrangements.
As the ACCC observed last year in its Digital Platform Services Final Report “approximately 95% of general searches in Australia are performed through Google” and it is “largely insulated from dynamic competition”.
Microsoft responded that Google has become a “powerful gatekeeper” to the internet; businesses – whether as advertisers or retailers – and content creators and publishers must go through Google to reach their customers and consumers online.
“As the ACCC understands well, the lack of competition in search and digital advertising has troubling and important consequences for the economy, for society, and even democracy. These considerations have been the subject of significant analysis across the globe, including within the United Kingdom, United States, and European Union. So, it is important that the ACCC address them now. And, because web browsers are closely intertwined with search services as a critical entry point into those services, it is appropriate that inquiry extend to competition for browsers.”
According to Microsoft, Google’s commanding intermediary position has enabled Google to capture a lion’s share of digital advertising revenue. According to recent IAB data for the June 2021 quarter, the Australian online advertising market reached $3.271 billion, representing a 60.5% increase.
Google’s newest competitor DuckDuckGo said governments need to ensure a truly competitive market actually exists .
“Search engines are gateways to the web and essential to an open Internet. Yet, competitive market conditions are non-existent, a victim of high barriers to entry, constraints inherent in syndication, and Google’s monopoly power across core access points to the Internet. Governments can and should take swift, high-leverage actions to tackle Google’s exclusionary practices, such as by mandating well designed preference menus.
“While privacy-protective businesses are coming from market innovators, governments need to ensure a truly competitive market actually exists. Today, such businesses cannot effectively reach users because of gatekeepers.”
In addition, DuckDuckGo, said that search ads benefit from network effects because ad pricing is based on an auction model. To maximise bidders and therefore revenue, search ad suppliers are driven to merge, which has happened gradually over time. “Of the two remaining competitive search ad services (Google and Microsoft), Google has a larger advertiser base, and so is able to generate greater advertising revenue per search.”
The ACCC has also been looking closely at digital platform markets since 2017. It completed its original 18-month Digital Platforms Inquiry in July 2019, making 23 recommendations to address the dominance of the leading digital platforms and their impact in Australia. Nearly all of these recommendations were accepted by the Australian Government, including the News Media and Digital Platforms Mandatory Bargaining Code which was passed in February by the Australian Parliament.
The ACCC is not alone in its examination of digital platforms globally. On 20 October 2020, the United States Department of Justice and eleven state Attorneys General filed a civil antitrust lawsuit against Google for allegedly unlawfully maintaining monopolies through anticompetitive and exclusionary practices in the search and search advertising markets.
These practices include, entering into exclusivity agreements that forbid pre-installation of any competing search service, entering into tying and other arrangements that force pre-installation of its search applications in prime locations on mobile devices and make them un-deletable, regardless of consumer preference entering into long-term agreements with Apple that require Google to be the default, and de facto exclusive, general search engine on Apple’s popular Safari browser and other Apple search tools.
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topics
ACCC
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consumer privacy
DuckDuckGo
Google
Inc.
market power
Microsoft
Monopoly
Privacy Act
The Australian Competition and Consumer Commission
