Germany’s highest civil court signs off on the business model behind AdBlock Plus
The popular adblocking software AdBlock Plus, and the underlying business model of Eyeo GmbH, do not fall foul of German unfair competition rules. On 19 April, the German Federal Supreme Court (BGH) handed down its landmark ruling on the legality of adblocking (BGH, file number I ZR 154/16). Given that AdBlock Plus is highly popular throughout the world, the decision will have repercussions for online advertising and for publishers of online content far beyond the borders of Germany.
If you missed our previous blog posts on the adblocking battles raging in Germany since 2015, you can catch up here.
Online advertising vs adblocking
Both digital advertising and its counterpart, adblocking, have been on the rise for years. Revenue from digital advertising has been forecast to grow by some 12 percent annually, to nearly 240 billion USD in 2019, according to PWC. And the flip side of the equation: According to the 2017 PageFair Report, 11% of the global internet population is blocking ads, and those numbers are increasing. Researchers expect that even if content publishers took all available countermeasures, adblocking would still cost them 16 billion USD globally by 2020. Should they take no action, these losses could increase to as much as 78 billion USD, says Ovum, the research arm of Informa Group.
In our digitally driven economy, the business stakes are clearly high. Just as publishers and advertisers vye for the attention of internet users, adblockers meet conflicting demands to be spared from overly intrusive and annoying ad content. Today, adblocking features are available for all major browsers – either inbuilt or available as add-ons, such as Adblock Plus. By and large, users are increasingly unhappy about the ways that advertising can affect their online experience; and by activating adblocking, they take action to change that.
The German position: Free and fair competition
The German Federal Supreme Court has now joined several lower German courts in finding that adblocking, as offered through AdBlock Plus, is just another brainchild of permissible online competition. What is surprising about the decision, which so far has only been summarized in an official press release, is the decided endorsement of adblocking regardless of the monetary scheme behind it. It is one thing to say that an adblocking feature per se is part of free online competition: A user does not want to see advertising content when browsing the web. There is a technical solution available to block such content. This solution does not interfere with the technical setup of the website in question. The user, by her own free choice, installs or activates the adblocker to improve her personal internet experience. So far, so good.
But should the legal outcome change if, like AdBlock Plus, the adblocker makes a whitelisting feature available to content publishers and advertisers against payment? So if a content publisher or advertiser wants its ads to penetrate the adblocking barrier, a payment can pave the way to preferable treatment. And the adblocker becomes commercially biased. This is certainly not in the best interest of users, whose freedom of choice is strongly put in the spotlight in the ongoing adblocking debate.
According to the German Supreme Court, the commercial scope of AdBlock Plus does not make its business practices unfair: The defendant Eyeo is said to have no intention of obstructing the publishers’ business. Eyeo merely seeks to further its own legitimate commercial goals, without overcoming any technical barriers the plaintiff publishing house, Axel Springer, had put in place to protect its content. The decision to use the adblocker is an autonomous user choice. The court refers Axel Springer and the other publishers to counter-measures, such as paywalls for users accessing their sites with an activated adblocker. Finally, the Supreme Court disagrees with the previous instance, the Higher Regional Court of Cologne: In June 2016, the Cologne court had found that Eyeo engaged in unfair competition by inducing other market players to make business decisions they would otherwise not have made. Such aggressive commercial practices are sanctioned under § 4 a of the German Unfair Competition Act if they result from an abuse of commercial power. Unlike the Cologne court, the Supreme Court finds that Eyeo has not unduly influenced the advertisers which want to do business on Axel Springer’s websites. On what basis the court has formed this opinion is yet in the dark – the press release does not elaborate further.
For now, Germany’s highest court has given leave to AdBlock Plus to continue cashing in on adblocking. We can expect content publishers and advertisers to react by focusing increasingly on commercial counter-measures to adblocking: New, less intrusive advertising formats, improved page-load speed, paywalls, and denying access to users with activated adblockers. And with in-app blocking, the next big trend is on the horizon. At the moment, the technical hurdles for blocking ads within apps are too burdensome for it to be a lucrative business model. But the next generation of adblockers may be closer to launch than you think.