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Facebook and Google could push up prices for consumers, says competition watchdog

Paloma Kubiak
Written By:
Paloma Kubiak

Consumers could be paying more for goods and services bought online due to the dominance of Facebook and Google, the competition watchdog has warned.

A study of major online platforms like Facebook and Google, along with digital advertising, revealed that due to their market share, users may be forking out more money when it comes to buying flights, electronics and insurance.

The Competition and Markets Authority (CMA), said that while these sites appear to be free, consumers pay for them indirectly by offering up their personal data which platforms use to sell digital advertising. This sector is now worth around £13bn.

Last year, Google accounted for more than 90% of all revenues earned from search advertising in the UK, with revenues of around £6bn. Facebook accounted for almost half of all display advertising revenues in the UK, reaching more than £2bn.

The CMA said these platforms have bought innovative and valuable products and services to the market, but because of their size, consumers may have limited choice. Advertisers also face higher costs which are then passed on to consumers in the form of higher prices for goods and services bought online.

It is also concerned about privacy settings of these online behemoths, stating that control is low which means most consumers follow default settings which may mean they give up more personal data than they would like.

CMA chief executive, Andrea Coscelli, said: “Most of us visit social media sites and search on the internet every day, but how these firms work can be a mystery.

“Digital advertising fuels big businesses like Google and Facebook and we have been building a picture of how this complex new market works. We’ve looked especially at how these firms collect and use people’s data, how they monetise it and what this means for rival companies who want to compete, as well as the people and businesses using these services every day.”

The CMA said it will present its findings to the new government which will decide whether and how to regulate this sector.

A Facebook spokesperson, said: “We are fully committed to engaging in the consultation process around the CMA’s preliminary report, and continuing to deliver the benefits of technology and relevant advertising to the millions of people and small businesses in the UK who use our services.

“We agree with the CMA that people should have control over their data and transparency around how it is used. In fact, for every ad we show, we give people the option to find out why they are seeing that ad and an option to turn off ads from that advertiser entirely.  We also provide industry-leading tools to help people control their data, like ‘Off Facebook Activity’, and to transfer it to other services through our Data Transfer tools.  We look forward to further engagement with the CMA on these topics.”

Ronan Harris, VP, Google UK and Ireland, said: “The digital advertising industry helps British businesses of all sizes find customers in the UK and across the world, and supports the websites that people know and love with revenue and reach. We’ve built easy-to-use controls that enable people to manage their data in Google’s services – such as the ability to turn off personalised advertising and to automatically delete their search history. We’ll continue to work constructively with the CMA and the government on these important areas so that everyone can make the most of the web.”