In the United States (“U.S.”), Google’s advertising technology business is currently facing a major antitrust trial. The Department of Justice (“DoJ”) accuses its parent company, Alphabet, of monopolising the digital advertising market in violation of sections 1 and 2 of the US Sherman Act 1890, suggesting that both behavioural as well as structural remedies should be imposed, with a decision expected by August 2025. Central to the case are claims that Google’s dominance has stifled competition. While Google defends its market position by pointing to the effectiveness of its services and competition from other tech giants, such as Apple and Amazon, the DoJ argues that Google’s acquisition of rivals and exclusionary practices have left advertisers with little choice but to rely on its services—often at inflated prices.
In the European Union (“EU”) the Court of Justice of the EU (“CJEU”) has recently confirmed a record fine of 2.42 billion Euros imposed on Alphabet (Google’s parent company) by the European Commission for favouring its own price comparison service over that used by other companies (Google Shopping, C-48/22 P). Another dominant digital platform, Meta, has recently been fined €797.72 million by the European Commission for tying its online classified ads service Facebook Marketplace to its personal social network Facebook as well as unilaterally imposing unfair trading conditions on other online classified ads service providers who advertise on Meta’s platforms (case number AT.40684).
Competition authorities have relied on antitrust/competition provisions to tackle the monopolisation or abuse of dominance by digital firms. However, digital firms have characteristics that set them apart from brick-and-mortar companies presenting particular challenges for competition authorities. Their ability to achieve extreme economies of scale, network effects, lock-in effects, a lack of multi-homing for the same purpose by end users, data-driven advantages and vertical integration all lead towards a high level of concentration on digital markets. Legislators in the EU and various other jurisdictions have been developing a legal framework that is more adept to deal with ‘BigTech’ – the largest technology companies that dominate the digital industry – in an effort to create fairer and more competitive digital markets.
Enter the Digital Markets Act
The EU’s efforts at creating a more adept legal framework to ensure fairness and contestability on digital markets resulted in the enactment of the Digital Markets Act (“DMA”) on 14th September 2022. This was introduced as a complementary tool to existing competition rules, aiming to address the dominance of large digital conglomerates, referred to as “gatekeepers” by setting out obligations with which they must comply and requiring them to report on such compliance to the European Commission. Currently, seven gatekeepers have been designated under the DMA: Alphabet, Amazon, Apple, ByteDance, Microsoft, Meta and Booking. Each gatekeeper has been designated with respect to one or more Core Platform Service, currently covering a total of 24 Core Platform Services (“CPS”). These CPSs include, amongst others, Alphabet’s online advertising service, Meta Ads and Amazon Advertising.
While the DMA is primarily targeted at gatekeeper companies, it also actively empowers businesses who contract with the CPS of gatekeepers, including advertisers. By challenging unfair practices and imposing transparency obligations, the DMA has the potential to significantly transform the digital advertising market for those operating within it.
Ensuring fair and contestable online advertising services markets
Ensuring fair practices by vertically integrated gatekeepers is essential for there to be a level-playing field for those providing online advertising services to advertisers. The conduct of digital firms with significant market power may be (and has been) addressed under EU competition provisions and is now also being addressed under the DMA. This includes the prohibition of self-preferencing (article 6(5) DMA) by the gatekeeper of its own products/services in downstream markets (as seen in the Google Shopping case where the self-preferencing by Google was found to be an abuse of a dominant position under Article 102 TFEU – the European Commission investigation, and decision, here pre-dated the DMA). Similarly, where a gatekeeper attempts to tie its services (or products) to other services (or products) it provides to business users or end users of its CPS this is capable of being addressed as an abuse of dominance under Article 102 TFEU (as happened in the case of Meta, case number AT.40684, referred to above) but can now also be tackled – with respect to the designated CPS of a gatekeeper – under article 5(7) DMA (in the context of services provided by business users on the CPS), or article 5(8) DMA (where the tied product is another CPS).
Unlike competition provisions, which are only applicable ex post, the DMA takes an ex ante approach, requiring gatekeepers to proactively report on their compliance with the provisions of the DMA. This approach aims to allow competitive products and services a chance to compete with those products and services that are vertically integrated in Big Tech firms before the harm is done, ultimately allowing advertisers more choice when it comes to online advertising services.
Empowering advertisers with the information they need to make informed choices
In ensuring fairness on digital markets, the DMA introduces several new provisions aimed at safeguarding advertisers’ interests through transparency requirements about the conditions of the online advertising services they purchase and visibility of data regarding the performance of advertisements. Understanding these gatekeeper obligations and the rights they afford is key to paving the way to a fairer and more transparent advertising market.
Transparency obligations on prices and fees under Article 5(9)(a) DMA
One of the major challenges advertisers face is the lack of transparency regarding the full cost breakdown of their advertising spend. Article 5(9)(a) of the DMA addresses this issue by requiring gatekeepers to provide advertisers, upon request, with daily, free-of-charge information on the pricing and fees associated with each advertisement placed. This includes details about any deductions, surcharges, or additional fees applied to online advertising services provided by the gatekeeper. By requiring gatekeepers to provide clear, daily reports at no cost to advertisers, the DMA gives businesses greater visibility and control over their advertising expenses, which is crucial for campaign planning and optimisation.
For example, Google Ads operates with a so-called “black box” model where advertisers are charged primarily based on cost per click (“CPC”) but they lack insight into the detailed cost breakdown, including any markups added by Google. As a result, advertisers cannot see the exact fees or surcharges that contribute to the final cost of their ads. Article 5(9)(a) of the DMA addresses this problem by obliging gatekeepers like Google to provide comprehensive daily reports on all costs, enabling advertisers to better understand their expenditures and make more informed decisions regarding their advertising strategy.
Transparency on publisher remuneration under Article 5(9)(b) DMA
The distribution of ad spending and the amount that reaches publishers are often unclear to advertisers. Article 5(9)(b) of the DMA addresses this by requiring gatekeepers to disclose exactly how much publishers are paid for displaying ads. This provision tackles the lack of transparency in the advertising supply chain, where intermediaries, such as ad tech platforms, take a portion of the ad spend for their services, often without providing full visibility to advertisers or publishers about the breakdown.
Understanding how ad spending is distributed throughout the supply chain enables advertisers to assess the efficiency of intermediaries and better evaluate their return on investment. Article 5(9)(b) promotes more informed decision-making among advertisers, potential cost reductions, and increased competition among intermediaries, ultimately benefiting both advertisers and publishers.
Clarity on cost calculation metrics under Article 5(9)(c) DMA
The methodology used to calculate advertising expenditures has often been unclear to advertisers. Article 5(9)(c) of the DMA addresses this by requiring gatekeepers to disclose the metrics used to calculate the prices, fees, and remuneration for digital advertising. This transparency allows advertisers to understand how their costs are determined and measure the efficiency and performance of their campaigns with greater accuracy. Rather than relying solely on platforms for determining budget allocation, Article 5(9)(c) gives advertisers the data needed to optimise their campaigns. This enables them to compare the cost-effectiveness of different strategies and make data-informed decisions to maximise return on investment.
Access to independent ad verification and performance tools under Article 6(8) DMA
Advertisers often face the challenge of being unable to independently verify the performance of their advertisements. Article 6(8) of the DMA addresses this issue by requiring gatekeepers to provide access to performance measurement tools and the data necessary for independent ad verification. The provision enables advertisers to assess whether their ads are being displayed in the intended locations, to the right audience, and in the appropriate context. By independently verifying ad placements, advertisers can protect their brand’s reputation, improve audience targeting, and avoid wasteful ad spending.
The importance of advertisers engaging with the DMA
The DMA is not just a set of legal rules; it is a strategic framework which has the potential to create a fairer and more competitive digital advertising market. By increasing transparency around costs, providing greater control over expenditures, and offering better tools for performance measurement, the DMA directly addresses many of the challenges faced by advertisers today.
Given the complexity of the DMA, some gatekeepers may struggle to meet its requirements within the stipulated time frame. In such cases, it is crucial for business users, including advertisers, to take action to ensure proper implementation of these regulations. If an advertiser or any other business user encounters potential non-compliance by a gatekeeper, there are three options available to safeguard their rights.
First, an advertiser can lodge a complaint with the European Commission (“EC”) through the DMA Whistleblower Tool, which may prompt the EC to address the concerns with the gatekeeper and, if necessary, initiate proceedings to enforce compliance. Second, if an advertiser believes a gatekeeper’s practice violates the DMA, a complaint can also be filed with national competent authorities. Finally, rights can be enforced directly in national courts, as the DMA has direct effect.
By utilising these mechanisms and knowing their rights under the DMA and – more broadly – national and EU competition provisions, advertisers can play an active role in ensuring that gatekeepers adhere to their obligations towards business users, thereby promoting a more competitive and fair digital market. As the digital landscape continues to evolve, staying informed about regulations like the DMA is essential. These new rules empower advertisers to make more informed decisions, optimise their ad expenditures, and ensure that their campaigns are both cost-effective and impactful.
If you need advice regarding the EU’s Digital Markets Act and how this impacts your business contact us here.
Co-authored by Adriana Brincat (Consultant) and Carmen Pennanen (Trainee)
