In the Digital Platforms Inquiry (DPI) Final Report, the ACCC devotes significant attention to the operation of the ad tech supply chain. Its recommendations will have ramifications for all organisations involved in programmatic advertising, including advertisers, media agencies, ad tech platforms and publishers.
A key focus of the Final Report is the interaction of digital platforms, online advertising and ad tech services. ‘Ad tech’ is defined in the Final Report as including any ‘intermediary services involved in the automatic buying, selling and serving of some types of display advertising’.
The ACCC expresses concerns about the efficiency of the ad tech supply chain and the complexity and opacity of the services offered by suppliers involved in this ecosystem. Interestingly, while the DPI terms of reference require an assessment of the impact of digital platforms on competition in media and advertising markets, this was not a key aspect of the DPI Preliminary Report. It’s clear that the detailed analysis and broad recommendations have caught participants across the ad tech stack by surprise.
The recommendations will not only impact platforms such as Google and Facebook, but all businesses involved in programmatic (i.e. automated online advertising) services, including advertisers, media agencies, publishers and suppliers in the middle (and often opaque) layers of the ad tech stack including Supply side platforms, Demand side platforms, Data management platforms and Ad exchanges. They will also impact any entities that rely on consumer data-driven business models (e.g., in the sale of segment data for targeted advertising purposes).
The ACCC has recommended that there be a further inquiry into ad tech services and advertising agencies. The findings of this inquiry could potentially transform the operation of the ad tech supply chain. In the meantime, the recommendations that are likely to have the greatest impact on the industry are those relating to consumer rights and the use of personal information and other consumer data.
In this article, we consider the ACCC’s rationale for its focus on the ad tech supply chain, the main concerns it highlights and the impact that its recommendations may have on the organisations across the ad tech stack.
The ACCC’s rationale and concerns
The ACCC outlines a number of concerns and reasons for increased focus on online advertising:
- Growing market. Online advertising makes up an increasing proportion of the total advertising spend in Australia, with Google and Facebook capturing more than 80 percent of growth in online advertising in the past three years.
- Potential leveraging behaviour. Digital platforms with substantial market power may have the ability and incentive to engage in ‘leveraging’ behaviour (that is, favouring their own business interests in the operation of ad tech services). The ACCC also identifies concerns that bundling of advertising inventory and advertising, advertising demand management, and ad-tech services may lessen competition.
- Lack of transparency. There is a lack of transparency in the pricing of programmatic online display advertising, engendering a lack of ‘trust’ in the ad tech supply chain and leading participants to question its efficiency. The ACCC considers that this may distort competition and allow digital platforms to mislead potential customers as to the value of their offering. The ACCC specifically references advertising and media agencies, suggesting that there may be an incentive for these agencies to act in ways that benefit their own interests to the detriment of advertisers.
- Lack of ability to negotiate. Advertisers may have limited ability to negotiate with the major digital platforms, and limited access to effective dispute resolution processes to challenge platform decisions. Interestingly, the Australian Association of National Advertisers submitted that major advertisers are ‘increasingly taking ownership of the relationships they enter into, are challenging existing commercial arrangements, building in-house models and seeking third party involvement in measurement and audits’. This suggests that market driven mechanisms are currently being implemented to address this concern in some circumstances.
- Misleading consumers. The ACCC suggests that the opacity of online advertising markets may result in consumers and businesses making uninformed and inaccurate choices, or being misled in their dealings with major digital platforms. The ACCC does not elaborate on this concern other than to emphasise the ability and incentive for digital platforms to engage in such conduct in the future in Australia (a conclusion based, in part, on international jurisprudence). Arguably, this may be overstating the risk of anti-competitive and misleading conduct (particularly given the lack of substantial findings provided by the ACCC in this respect). However, it is clear that the ACCC is keenly interested in the activities of overseas regulators and their investigations of digital platforms in this space, and appears to be setting the scene for increased application of competition and consumer laws to address issues relating to lack of transparency.
The ACCC’s key advertising-specific recommendations
The ACCC has made two key recommendations affecting the online advertising sector and the ad tech supply chain:
1. Proactive investigation, monitoring and enforcement powers for specialised digital platforms branch. The ACCC proposes the establishment of a branch within the ACCC to focus on digital platforms generally (including their ad tech services), which would also have the power to hold extended public inquiries and compel the production of information.
The ACCC proposes that this apply to ‘all digital platforms’, which in the context of the DPI is limited to digital search engines, social media platforms and digital content aggregation platforms. However, given the proliferation of businesses participating in the ad tech supply chain, there is a real possibility that the ACCC’s inquiries will extend to a broader range of businesses, including suppliers of advertising services and businesses that otherwise may not fall within the definition of a ‘digital platform’ but participate in the online advertising ecosystem. Further, the ACCC specifically indicates that it will be seeking to gather certain information from platforms that do not hold substantial market power (e.g. for the purposes of comparison).
2. Inquiry into the supply of ad tech services and media agencies. The ACCC recommends that a specific inquiry into ad tech services and advertising and media agencies be held to consider ‘the extent of competition and inefficiency issues, and the nature and extent of intervention needed’ (notably pre-judging that at least some concerns exist and some intervention is warranted). The ACCC suggests that this inquiry should focus on issues of price, complexity and opacity of the services offered by suppliers involved in the ad tech supply chain, and should also extend to look ‘more broadly at the industry, and each supplier involved, as a whole’. The ACCC recommends that this inquiry be run by the new digital platforms branch, described above.
The recommendations flowing from the proposed inquiry have the potential to significantly reshape the ad tech supply chain, and potentially undermine the existing operating model of many suppliers in the ad tech stack (in particular, those suppliers in the middle layers like SSPs, DSPs, DMPs and Ad exchanges which have not traditionally been subject to close scrutiny). If, for example, the inquiry were to recommend some form of systemic programmatic receipting, or publication of expenditure retained by each level of the supply chain, this could require major technological transformation to effectively implement.
The relatively minimal level of participation in the DPI process by suppliers in the ad tech supply chain was surprising given the potential impacts of the recommendations to the industry. Participants at all levels of the ad tech stack could be compelled to provide detailed information about their operating models to the ACCC in the context of the proposed inquiry, and major reform to the supply chain seems inevitable. Irrespective of whether they are compelled to do so, it will be in the interests of most participants in the ad tech supply chain to make submissions to the new inquiry to ensure that the specific technical and commercial limitations which exist within the supply chain are fully appreciated and accounted for. One clear issue that will need to be carefully navigated as part of the new inquiry is the extent to which participants have the technical ability to implement changes that are specific to the Australian market when their offering is often fully integrated on a global basis (and whether the prospect of “quarantining” Australian operations may detrimentally impact consumers in the Australian market given current technical limitations in relation to the way in which services are provided by ad tech platforms).
While the two recommendations outlined above are clearly significant for participants across the ad tech stack, in the immediate term, the privacy and consumer welfare recommendations in the Final Report will have substantial impacts on current programmatic advertising practices.
The impact of privacy reform on online advertising and ad tech services
Our thoughts on the privacy recommendations in the Final Report are available in an earlier article in our series Unpacking the ACCC Digital Platforms Inquiry Final Report here.
The ACCC has also recommended that valid consent must be clear, affirmative (i.e. default settings should not allow collection and processing), specific (i.e. consents should not be bundled), unambiguous and informed.
In effect, this means that entities may be required to obtain opt-in consent for the use of personal information for targeted advertising purposes, with no GDPR-style exception for use or disclosure for ‘legitimate interests’, which may otherwise have been relied on in this context.
When coupled with a broader definition of ‘Personal Information’ (to encompass technical data such as location data and IP addresses), as well as a move to reduce cookie tracking capabilities within internet browsers more generally across online platforms, the ability of organisations to rely on concepts of ‘anonymity’ as the basis for behavioural advertising activities will potentially be undermined.
This requires organisations that rely on programmatic means to target advertising (e.g. advertisers and media agencies) or to make ad inventory available (e.g. publishers) to have a clear understanding of:
- how data assets were collected;
- how data assets are used (including how they might be combined with other data sets); and
- the extent to which any ‘de-identified’ information can in fact be ‘re-identified’ within the ad tech supply chain.
Suppliers in the middle layers of the ad tech stack that are able to proactively demonstrate the transparency of their systems (through both technical and contractual means) will have a clear competitive advantage. This transparency is something that is likely to be demanded by advertisers, media agencies and publishers (as well as regulators and consumers) moving forward.
ACCC taking the lead from other regulators in this space
While the ACCC is not the only regulator to be considering privacy and consumer issues arising from online display advertising in the ‘programmatic age’, the proposed ad tech inquiry and its focus on competition in the supply of ad tech services appears to be the first of its kind internationally.
From a privacy perspective, the UK’s Information Commissioner’s Office (ICO) recently released its report on ‘real-time bidding’ in advertising, which raises similar concerns to those outlined by the ACCC in relation to the use of personal information for targeted advertising purposes. The ICO has taken a privacy-focused approach, recommending that entities be required to obtain individual consent and provide ‘clear and comprehensive’ notifications about the use of information for targeted adverting purposes. The ICO also raised concerns that data enrichment activities such as ‘data matching’ and the creation of ‘very detailed profiles’ are ‘disproportionate, intrusive and unfair’.
We expect that the ACCC’s recommended inquiry into ad tech services and advertising and media agencies will address many of the same privacy issues addressed by similar investigations of overseas regulators.
The pricing and competition issues that have been considered in the Final Report (and which will be the subject of the proposed ad tech inquiry, amongst other things) are unique and are likely to attract significant global attention given the potentially transformative impact on the ad tech supply chain in Australia – and the flow on this would have internationally for participants across the ad tech stack.