Competition Law Practices in the Online Advertising Market
Introduction
Online advertising has become an important source for businesses for promoting products and services and meeting consumers, as a result of the rapid development of information technologies and increase in the use of internet. Delivering targeted messages to consumers at the right time through the digital footprints that users leave on the internet, such as user history and likes, plays an important role in the increasing prevalence of online advertising. In addition, detailed user targeting by advertisers, the measurable nature of the efficiency obtained from advertising, and the ability to take many actions such as data collection and sales orientation render online advertising indispensable. On the other hand, online advertising, which is an important marketing component in bringing products and services to consumers, has created some changes in competitive inputs for market players as well. Accordingly, it is observed that the Competition Authority (the Authority) has recently focused on competition law practices in the online advertising market through conducting market inquiries and investigations against undertakings.
Investigations in the Online Advertising Market
Online advertisements can be displayed on various parts of the user screen at various times when users make search queries or visit the internet. Although they can be classified according to individual criteria, the most common types of online advertising are search-based advertising, display advertising and listing advertising. Search-based advertising corresponds to text ads that are listed by the search engine at the top of the search page (above the organic results) for the relevant search with the phrase "paid sponsored advertisement" in return for the search query made by users on search engines such as Google, Yandex and Bing, provided that advertisers are brand-bidding various keywords. Display advertising is the display of ads in text, in the image or video format on a publisher's website or app.
It is observed that the investigations conducted by competition authorities in the online advertising market are mostly directed against undertakings with significant market power, such as Facebook and Google, which as of today, are in a position to access large amounts of user data and uphold data dominance as a result of intensive data processing activities. The Bundeskartellamt's decision on data aggregation in the context of competition law is one of the most important decisions on Facebook.[1] According to the decision, the collection and processing of data is critical for the social networking market, as it allows undertakings to target their advertisement. Furthermore, Facebook's ability to offer more attractive offers for targeted advertising, that stems from its illegal data processing policies, has resulted with a strong transfer of market power to the online advertising market.[2]
Google, on the other hand, was investigated by various competition authorities for abusing its dominant position in online advertising activities and was condemned large amounts of administrative fines.[3] The Competition Board (the Board) found that Google complicated the activities of its competitors in the market, by abusing its dominant position through algorithm updates to increase its profitability for general search services and Google Adwords (Google Ads) advertisements.[4] It was also concluded that Google has complicated the activities of organic results that do not generate advertising revenue in the content services market, by placing text ads at the top of the general search results, which are ambiguous in nature and densely accumulated on the search page.
As a result of the investigations conducted agianst Google, it is expressesed in the Online Advertising Market Preliminary Report (Report) that, Google may transfer its power in ad technology services or in ad inventory procrument to other ad technology services. The Report also stated that Google uses auction rules to favor its own services and that the complexity of the auction system makes advertisers dependent on buying and selling inventory to advertising technology providers.[5] It is emphasized that there are significant transparency problems for players operating in the advertising market on issues such as the scope of advertising services received from advertisers, pricing principles, the functioning of bidding processes, and the criteria for measuring the performance of the advertisers. Regarding these transparency issues, the Report envisages a Draft Law Proposal on Amendments to Law No. 4054.[6]
Decision Regarding the Implemantatiton of Measures to Google
In the above-mentioned decision of the Board, in which the Board found that Google's placement of text ads in a position and intensity that excludes organic results from the market leads to anti-competitive market closure and reduced consumer welfare to the detriment of organic results, the Board also imposed an obligation on Google to provide text ads in a quality, scale and/or position that does not exclude organic results and to provide compliance measures.[7]
The compliance measures offered by Google are:
- Reducing the maximum number of ads at the top of the page from four to three,
- Changing the label for text ads to “Paid sponsored ad”, which currently appears as “advertisement”,
- Reducing the scale of text ads by cutting down the volume of text ads on the results page in Turkey, thereby reducing the overall scale of ads by showing fewer ads.
The Board found that it is necessary to monitor for a certain period of time whether the proposed measures that Google has submitted and plans to implement in due time meet the obligations set out in the investigation decision in a way that "Google's presentation of text ads in a quality, scale and/or position that does not exclude organic results" and "displaying a certain number or proportion of organic results in the content that can be seen without scrolling on the general search results page (above the fold)", and therefore, the compliance measures in question may be reviewed if deemed necessary within the 5-year period of monitoring.
The Board's Perpective on Restricting Agreements in Online Advertising
The Authority has not limited its investigations to giant technology companies and has also scrutinized undertakings carrying out promotional activities on search engines with the concern that competitors are restricting the visibility of their brands, thus the choices of consumers. The Board first set forth its approach in restricting agreements in online advertising in its Moda Nisa decision[8] and evaluated the possible restrictive effects of these agreements on competition by considering the relationship between trademark law and competition law. Pursuant to the mentioned decision, agreements made among advertisers not to choose the registered trademark names of rival undertakings in the keywords to be advertised on search engines (narrow non-brand bidding agreements) were evaluated within the scope of Article 7 of the Intellectual Property Law No. 6769 (IPL), which is granted to trademark right holders that prevents the unauthorized use of trademark names on the internet. On the other hand, agreements in which advertisers agree not to bid on another advertiser's brand and brand related keywords (wide non-brand bidding agreements) are considered outside the scope of trademark protection on the grounds that all searches containing such word combinations will be limited. However, agreements where an advertiser agrees to include the brand name of a competitor as a “negative keyword ” in its Google Adwords panel which prevents the advertiser's advertisement from being displayed when users make a query with the search term of the relevant brand (negative matching agreements), are also considered to directly prevent the visibility of undertakings and such restrictions are considered as customer/market sharing among competitors.
In cases where the trademark owner, who does not want unauthorized advertisement of its trademark, requests other undertakings to include its trademark name in their negative keyword list in order to prevent unothorized brand bidding, as it cannot tell whether the advertiser is actively bidding on its trademark. This is because some undertakings may advertise on the brand names of other undertakings in order to attract the attention of consumers and increase their visibility. On the other hand, negative matching is used by trademark holders in order to prevent free-riding that may arise from the unauthorized use of registered trademark names on the internet and to prevent the increase in the unit costs to be paid by advertisers per each click on the sponsored link. In this context, it is argued by advertisers that negative matching agreements are necessary not only to protect the legitimate interests of trademark holders, but also to effectively direct consumers to the results they want to reach.
In the current situtation, the Board initiated an investigation for the first time, regarding restricting agreements in online advertising against undertakings engaged in the sale and purchase of used cars through online platforms.[9] The investigation is still ongoing and its outcome is expected to have an impact on many undertakings carrying out promotional activities on digital platforms.
Conclusion
Online advertising has become indispensable in making the products and services of businesses visible and convey them to the consumers. However, since online advertising is an important parameter in the marketing activities and competitiveness of undertakings, competition authorities have focused on competition enforcement in the online advertising sector, especially in recent years. In this context, large technology undertakings that enable add targeting by intensive data aggregation and data processing activities along with online advertising platforms that offer advertising services are under scrutiny. Within the scope of market inquiry reports drawn up by the Authority, it is stated that lack of transparency is the main anti-competitive concern in the online advertising market which also calls for a change. On the other hand, it is not yet possible to draw definitive conclusions regarding advertising restriction agreements that are in the crossfire of trademark law and competition law in terms of undertakings carrying out promotional activities on digital platforms. Considering all, there is a greater need for legislative change and introduction of secondary legislation in the online advertising market that is more than ever before.
- Bundeskartellamt, Decision B6-22/16.
- Reflections of Digital Transformation on Competition Law (Dijital Dönüşümün Rekabet Hukukuna Yansımaları), Turkish Competition Authority, April 2023, para.139
- Google AdSense Decision of the European Commission dated 20.3.2019 and numbered AT. 40411, Google Local Search Decision of the Board dated 08.04.2021 and numbered 21-20/248-105, Google Algorithm and Adwords Decision of the Board dated 12.11.2020 and numbered 20-49/675-295
- Google Algorithm and Adwords decision of the Board dated 12.11.2020 and numbered 20-49/675-295
- Online Advertising Market Preliminary Report, p.787-790
- Report, para 790
- Google Algorithm and Adwords decision of the Board dated 12.11.2020 and numbered 20-49/675-295
- Board's Moda Nisa decision dated 25.11.2021 and numbered 21-57/789-389
- Board decision dated 21.07.2022 and numbered 22-33/528-M. For the announcement, see https://www.rekabet.gov.tr/tr/Guncel/arabam-com-internet-ve-bilgi-hizmetleri--bb562332e316ed11a2280050568595ba
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