Over the recent years, Google being investigated over abusive practices stemming from its dominant position almost comes as no surprise. However, a decision made this summer by the French competition authority, Autorité de la Concurrence,  has directly tackled the issue of abuse of dominance in online advertising.

Google was fined €220 million for having abused its dominant position in the market for ad servers for publishers of websites and mobile apps, in violation of Articles L.420-2 of the Code de Commerce and 102 TFEU. This decision is a world first in two respects:

  • No decision regarding abuse of dominant position in online advertisement has been made before
  • It was the first time that Google proposed commitments itself to correct the unlawful practices.

The role of AdTech

Online advertising tools and technologies, referred to as ‘AdTech’, have now been in use for nearly 20 years, constantly reinventing themselves to be more competitive and efficient while becoming ever more complex. Long gone is the contextual advertising paradigm, where advertisements were matched to relevant context (for example, a car ad in a magazine on cars). 

Nowadays, the norm is programmatic targeted display advertisement with in real-time bidding auctions. Therefore, the value no longer relies with the content creators but rather with the possibility to have access to data and being able to target the right consumers quickly and efficiently.

Online advertising is an important source of income for publishers which offer digital advertising space on their websites and apps to announcers. Each ad space, called an “impression”, is in real time personalised to the user’s (known) preferences, compelling announcers to compete and bid in real-time to win the advertising space. But how exactly does this bidding process work?

The role of intermediary platforms

The goal is for each publisher to find the best announcer, which is usually the highest bidder. To find that bidder, three types of intermediary platforms are used:

  1. First comes the ad server which is a tool managing the sale of digital advertising sales. When an advertising space becomes available, the ad server opens a programmatic sale on multiple platforms which organise auctions;
  2. These platforms are called Supply Side Platforms (“SSP”) and are “marketplaces” where buyers of advertising space and publishers wishing to sell impressions come together. However, it is not the final buyers who are on that platform. Actually, the SSP creates another auction for yet another type of platforms;
  3. These last platforms, which are directly in contact with the final buyers, are called Demand Supply Platforms (“DSP”). Those DSP organise auctions amongst announcers and choose the best one.

Google is active at those three levels of such multi-sided market. However, the French decision only considers the publishers’ side as it results from an investigation into Google’s ad server (called DoubleClick for Publishers also known as DFP) practices.

The abusive practices

The Autorité de la concurrence identified a double preferencing practice that was detrimental to competing SSPs and to the publishers themselves. Such double preferencing is explained by the fact that the DFP ad server favoured Google’s AdX SSP and conversely, AdX SSP favoured the DFP ad server. More precisely, the ad server favoured the AdX bidding platform by indicating the price offered by competing SSP platforms which enabled AdX to optimise its bidding process, by varying the commission charged on impressions sold. 

Also, the use of AdX by other non-Google ad servers was subject to technical and contractual limitations. These practices penalised both third-party SSPs and publisher clients while benefitting Google. The consequences arising from this situation were enhanced by the large market shares that Google held among the ad servers as it offers lower prices (without being predatory) and a preferential, almost exclusive, access to AdX.

Google's response

Following the conclusion of abuse of dominant position, Google proposed key commitments, to end the unlawful practices:

  • Third-party SSPs would be given a way to interoperate with the DFP ad server, allowing competition on the merits between AdX and other SSPs for buying available advertising spaces from publishers using DFP; and
  • Publishers using third-party ad servers would be able to access AdX demand in real time.

These are interesting commitments - and a first for Google - but it is still too early to assess how effective these commitments will be in practice in restoring healthy competition.

 A first decision paving the way to a global trend 

Interestingly, this decision forms part of a broader trend where several Competition authorities have also started investigating Google’s practices in the AdTech sector. In the US, Texas and 9 other states have filed an antitrust lawsuit against Google’s advertising business and the process is still ongoing while other similar cases about neighbouring rights and news aggregation occurred in France, Australia or Spain. Our global tech sector team will be following these developments with interest.