In the context of its sector inquiry into non-search online advertising the Bundeskartellamt has today published a report for public discussion.

Online advertising is not a uniform product. In the past few years, competition law enforcement has shown that different competition issues arise in each of the various areas. The present investigation focuses on the market conditions and functioning mechanisms in the non-search online advertising sector, in particular on the various technical services (so-called ad tech) operating in the background. Adverts displayed in response to search engine queries (search advertising) are, however, not part of the investigation since in this context other competition issues relating to the great market significance of the Google search engine arise.

Andreas Mundt, President of the Bundeskartellamt: “Over the past 25 years, online advertising has experienced a remarkable rise – it has grown from nothing into an industry worth billions. In all areas of online advertising important competition issues arise especially due to the enormous significance of the large internet platforms. In addition to search advertising and the advertising inventory of Meta or Google, for example, other non-search online advertising is also of immense economic importance. It is not least this form of advertising which co-finances a large number of media offers and services beyond the offers provided by large digital corporations. Non-search advertising is based on a highly complex system of automated trading in online advertising space which many people find quite opaque. With our investigation we intend to shed some light into this black box. Also in this technical subsegment of online advertising Google holds a strong market position on almost all levels of the value chain. Many competition questions arise not least for this reason.”

According to the most recent estimates, the entire online advertising sector in Germany has reached a volume of ten to eleven billion euros, of which four to five billion euros are attributable to search advertising. Other advertising inventory, such as advertising banners of any kind and video advertising, which is not search-based accounts for sales within the same range. In addition, the turnover generated with online classified ads – in a broader sense also a form of online advertising – amounts to over 1 billion euros.

Ad tech, the “engine room” of non-search online advertising so to speak, is the very thing that makes today’s highly complex and highly automated trading in advertising space and the subsequent, equally automated display and verification of adverts possible in the first place. A network of various services on the buyers’ and the sellers’ side grouped around digital market places for advertising space (ad exchanges) is at the core of this. In its entirety, this network is also referred to as programmatic advertising (PA). In addition, there are various integrated systems which are used by large providers of advertising space in particular to market their own advertising inventory and all technical services necessary in this context themselves. Some of these systems are, however, also offered to third parties for the marketing of their advertising inventory and in some aspects overlap with the PA system.

In the context of the investigation the assumption that individual market players – especially Google – have considerable influence on the overall PA system has been confirmed. Google is represented on almost all levels of the value chain and with regard to practically all relevant services; in most cases, the company holds a very strong market position. Google controls important parts of the software infrastructure on the user side, such as the Chrome browser and the Android mobile operating system, which ultimately also determine the technical options available for realising non-search online advertising. Combined with the finding that for outside observers it is difficult to discern how the system specifically works, Google thus has significant power to set rules.

The system’s insufficient level of transparency plays a role in several respects. This applies to both the publishers marketing advertising space via the system and the advertisers buying advertising space. In addition, this also applies to many smaller providers offering individual technical services within the PA system. Many market players describe the system as a “black box” in which many parameters relevant to market success are unknown.

Users, who are the data subjects and advertising recipients, are mostly not able to assess the scope and any possible consequences of the data collection which ultimately, as things stand today, forms the very foundation of non-search online advertising. The dangers associated with the current data processing practices have contributed to the fact that for some years now there has been an increasingly intense legal policy discussion about restricting the collection and use of data for advertising purposes. The report therefore examines the consequences such measures could have from a competition point of view and how such consequences could be dealt with.

Andreas Mundt: “Traditionally, competition law addresses individual practices of companies to solve competition problems. With Section 19a of the German Competition Act (GWB) and the DMA introduced at a European level competition authorities have been given new promising instruments, which we should put to good use. With regard to the online advertising sector investigated in our sector inquiry, we may also have to think about more fundamental approaches in the future. Google’s prominent position combined with the system’s lack of transparency due to the use of complex technology leaves the company with an unusually large scope for shaping the competitive process in its favour.”

The Bundeskartellamt invites market participants and interested parties to comment on the now published report until 28 October 2022.

The report (in German) as well as an executive summary of the report (in English) are available on the Bundeskartellamt’s website