UK Competition Watchdog Probes Google’s Strategic Market Status

Google’s potential strategic market status under scrutiny by UK Competition and Markets Authority

The United Kingdom’s Competition and Markets Authority (CMA) has launched a public consultation as part of its investigation into Google’s general search and search advertising services.

This consultation, open until 3 February 2025, marks a crucial step in assessing whether Google should be designated as having Strategic Market Status (SMS) under the Digital Markets, Competition and Consumers Act 2024.

Such a designation could pave the way for pro-competition measures and stringent oversight of Google’s practices in the UK.

SMS investigation into Google’s general search and search advertising services

The Competition and Markets Authority (CMA) is investigating whether to designate Google as having strategic market status (SMS) in respect of its provision of general search and search advertising services.

GOV.UKCompetition and Markets Authority

Strategic Market Status and Its Implications

Strategic Market Status is a legal designation introduced under the Digital Markets, Competition and Consumers Act 2024.

It applies to companies deemed to hold substantial and entrenched power in digital markets, granting them the ability to act independently of competitive pressures.

Google, a dominant player in both general search and search advertising, is the latest subject of scrutiny under this framework.

If the CMA finds that Google meets the criteria for SMS, the company could face tailored conduct requirements. These might include obligations to provide more transparent reporting on advertising practices, prevent self-preferencing in search results, and ensure fair treatment for advertisers using its platform.

Additionally, the CMA could impose pro-competition measures aimed at fostering a level playing field for smaller competitors.

The Scope of the CMA’s Investigation

The CMA’s investigation focuses on Google’s dominance in search and advertising markets, two areas critical to its revenue model.

General search accounts for a significant share of web traffic, giving Google unparalleled access to user data.

This data fuels its advertising services, where businesses pay for targeted placements that often depend on Google’s proprietary algorithms.

Concerns have been raised about the potential for anti-competitive practices. For example, Google’s ability to favour its own services, such as shopping or mapping results, over competitors has sparked debate about fairness.

Moreover, advertisers have long criticised the lack of transparency around ad pricing and placement, which are dictated by Google’s algorithms.

The consultation seeks input on these and other key issues, aiming to refine the investigation’s scope.

Stakeholders, including advertisers, competitors, and consumer groups, are encouraged to submit evidence and suggest areas for further inquiry.

Designing Pro-Competition Measures

While the investigation is ongoing, the CMA has outlined potential interventions that could arise from an SMS designation. These measures aim to reduce barriers to entry for new market participants and enhance consumer choice.

Examples include requiring Google to offer interoperability with competing services or mandating clearer disclosures about how search rankings are determined.

One potential remedy could involve changes to how Google handles advertising auctions. Currently, advertisers compete for placement through real-time bidding processes that favour those willing to pay the most.

Critics argue this model prioritises revenue over relevance, leading to inflated costs for advertisers and diminished user experience. Pro-competition measures could address these concerns by increasing transparency and ensuring a more equitable system.

Another focus area could be data portability. Allowing users to transfer their data between platforms might weaken Google’s grip on personalised advertising, enabling smaller firms to compete more effectively.

The CMA’s consultation will explore whether such measures are feasible and how they might impact innovation and market dynamics.

CMA to investigate Google’s search services

Investigation to determine if Google has strategic market status in search and search advertising activities and whether these services are delivering good outcomes for people and businesses in the UK.

GOV.UKCompetition and Markets Authority