An inquiry has been launched into the markets for the supply of digital advertising services in Australia. Shane Barber and Megan Edwards discuss the facts leading up to the launch, the scope of the inquiry and what this means for the digital advertising services industry.

On 10 February 2020  an inquiry was launched into the markets for the supply of digital advertising services in Australia.  The Competition and Consumer (Price Inquiry  – Digital Advertising Services) Direction 2020 (Direction), made pursuant to the government’s powers under the Competition and Consumer Act 2010 (Cth) (“CCA”), was issued to the Australian Competition and Consumer Commission (“ACCC”) by the Treasurer, directing the ACCC to give the Treasurer an interim report on its findings by no later than 31 December 2020.   The ACCC will publish an issues paper for the inquiry in March 2020, providing further detail of the scope of its inquiry.  The Direction requires the final report be given to the Treasurer by no later than 31 August 2021.

What has led to the issuing of this Direction?

In 2017 the ACCC was issued with a direction to consider the impact of digital platforms such as online search engines, social media and digital content aggregators on competition in the media and advertising services markets. On 26 July 2019, following a period of public and industry consultation, the Digital Platforms Inquiry Report was published. In the Digital Platforms Inquiry Report the ACCC proposed the creation of a branch within the ACCC to focus on digital platforms, and subsequently the Digital Platforms Branch of the ACCC was born in December 2019.   As a result of its consideration of the issues that arise for advertisers on digital platforms, the Digital Platforms Inquiry Report made further recommendations, including that Digital Platforms Branch:

• be empowered to hold an extended public inquiry over a period of five years to proactively monitor and investigate potentially anti-competitive and harmful conduct engaged in by digital platforms, as well as take action to enforce the competition and consumer laws (Recommendation 4); and
• be directed to hold an inquiry into the relevant markets and competition for the supply of ad tech and online advertising services by advertising and media agencies  (Recommendation 5).   The Direction gives effect to Recommendation 5 noted above.

The Direction runs concurrently with a broader Digital Platform Services Inquiry being undertaken by the Australian Competition and Consumer Commission, in line with the Recommendation 4.  On 10 February 2020 the Australian Government also directed the ACCC to conduct a broader, and ongoing, inquiry into the markets for the supply of digital platforms services.  The Digital Platform Services Inquiry will issue interim reports on its findings every six months, with a final report to be provided to the Treasurer on 31 March 2025.  The Digital Platforms Services Inquiry will consider:

• competition in the markets for the supply of digital platform services, particularly considering the concentration of market power, the behaviours of participants, barriers to entry and an analysis of the services offered by suppliers;
• consumer harm that is derived from the practices of suppliers of digital platform services; and
• local and overseas digital platform market developments.

What is the Scope of the Digital Advertising Services Inquiry?

Overall, the Direction tasks the ACCC to conduct an inquiry and prepare a report considering the markets for the supply of digital advertising services in Australia.  The  Direction restricts the markets to be considered to those in relation to the supply of the following goods and services:

• digital display advertising services –  being the supply of advertising space online. Examples given in the Direction include banner advertising, advertising in mobile apps, or advertising in conjunction with social media content.  This excludes classified advertisements, or AdWords advertising;
• digital advertising technology services –  being services that assist with the automated buying, selling or delivery of online advertising; and
• digital advertising agency services –  being services suppled to advertisers in relation to the negotiation, acquisition or management of online advertising.

The ACCC has been directed to consider the following matters in its Digital Advertising Services Inquiry;

• the strength of competition in the digital advertising technology  and agency services’ markets (together the “Markets”), with particular regard to:
  • how the level of competition in the Markets impacts competition in the digital display advertising services market;
  • the availability of market information for participants in the Markets;
  • revenue and share of expenditure of each of the suppliers of services in the Markets;
  • the concentration of power in the Markets;
  • auction and bidding processes for digital display advertising services;
  • mergers and acquisitions in the Markets; and
  • the behaviour of suppliers in the Markets with reference to the types of services, pricing and terms and conditions they offer;
• the relationships between suppliers and customers in the digital display advertising services, the digital advertising technology  and agency services’ markets.  The inquiry into these relationships is to consider whether the existing market framework, including corporate structures and contractual arrangements, has a negative effect on competition or the ability of participants to make informed decisions; and
• whether digital display advertising services, the digital advertising technology  and agency services’ are delivered to the satisfaction of participants in the relevant markets.

There are exclusions to the scope of the Digital Advertising Services Inquiry noted in the Direction, including that the inquiry is not to consider the supply of goods or services to a state or territory, review the operation of any laws other than the CCA, review the operation of any Commonwealth funded program nor consider the supply of creative input for advertising.

What does this mean for the digital advertising services industry?

In short, the issuing of the Direction in conjunction with the Digital Platforms Services Inquiry means the microscope will remain over the digital advertising services for the foreseeable future.  The issues paper, to be issued by the ACCC next month, will give participants in the industry an ability to further consider what issues are on the ACCC’s radar, and the potential risks of their current business practices.