Delivering a mandatory consumer nudge is an increasingly important element in the remedies toolkit for competition agencies in sectors as diverse as banking, consumer insurance and big tech.
On 1 July 2020 the UK Competition and Markets Authority released its final report on online platforms and digital advertising after a 1 year market study involving intensive evidence gathering. The report spans some 437 pages and we have summarised its findings here. The CMA makes a series of important findings but one with read across to sectors beyond digital advertising are its findings in relation to consumer behaviour and the power of default settings in entrenching the market power of digital platforms.
The CMA concludes that default behaviour by consumers has profoundly shaped competition in both search and social media and that default settings and the way in which "choices" are presented to consumers have a strong influence on the ability of platforms - particularly social media platforms- to collect data; and for the ability of users to control their personal data.
One of the most striking findings in the CMA's report is the scale of payments made to mobile manufacturers by tech players such as Google for default search positions. In 2019 Google paid around £1.2 billion in return for default positions in the UK alone, the substantial majority being paid to Apple for being the default search engine on Safari. The CMA has concluded that this acts as a substantial barrier to expansion for other search engines. Similar theories of harm are being considered by the European Commission in one of its investigations into Apple Pay and the default settings on merchants' apps to Apple Pay.
The Australian Competition and Consumer Commission (ACCC) has made similar findings that Google Search is effectively the pre-installed default search engine for over 95% of Australian mobile devices regardless of browser or device platform.
So if consumer apathy is the cause, what's the cure? Both the CMA and the ACCC have recommended that Google (and other platforms with "strategic market status") provide users with the ability to choose their default search engine and default internet browser from a number of options to address barriers to entry and expansion presented by consumer default bias. The CMA has recommended this be given teeth via primary legislation, an enforceable code of conduct and a dedicated regulatory enforcer (the Digital Markets Unit).
Google has implemented similar measures in Europe and Russia. Consumer choice screens have proved to be effective in some previous investigations at driving consumer choice and competition. For example, Microsoft offered European consumers a similar browser choice screen from 2009-2014 to address competition concerns. During this period 84 million alternative browsers were chosen and Microsoft’s market share was estimated to have fallen from 90% in 2009 to around 17% in 2014.
The services provided by Facebook and Google are highly valued by consumers and help many small businesses to reach new customers. However, the CMA is now concerned that they have developed such unassailable market positions that rivals can no longer compete on equal terms. Both use default settings to nudge people into using their services and giving up their data (for example, Google being the default search provider on mobile devices and browsers in the UK, while Facebook requires people to accept personalised advertising).