Google’s Italian antitrust probe will test European approach to data

Google’s online advertising business and the importance of data for competition have been at the forefront of Europe’s antitrust debate for the last half-decade. How that debate plays out in practice will be tested by Italy’s antitrust authority in its new case against Google.

Yesterday, the Autorità Garante della Concorrenza e del Mercato said it had raided Google’s offices and was opening an antitrust probe into the company’s “discriminatory” use of data for “display advertising,” which covers the banners, videos and rich media adverts appearing on websites.

The probe will have to dive deep into the highly technical and multi-layered process that allows, for example, Nike to target an advert at a user who days earlier was browsing for sneakers online.

There will be difficult questions about the interplay between competition law, which may favor sharing data as widely as possible, and privacy law, which opposes it. Google has claimed its practices stem from changes triggered by Europe’s new privacy laws.

And the regulator will likely need to address thorny questions over whether dominant firms are obliged to share data they collect and use with rivals to ensure a level playing field. The jury in Europe is still very much out.

The agency announced a deadline of Nov. 30, 2021, although that could slip.

The move by the AGCM could be the first of many seeking to prosecute Google for antitrust breaches in its lucrative adtech business. Other authorities have variously studied and reviewed Google’s online advertising clout, and have proposed their own solutions. Some legislatures have even moved to regulate.

Other European regulators will therefore be keeping a close eye on the Italian authority and the outcome of its probe.

Complaint

The inquiry stems from a complaint filed by the country’s main trade association in the digital-ads sector, the Interactive Advertising Bureau Italia.

According to a note published by the watchdog, IAB Italia argues that Google used a set of unfair practices to exclude competitors from that market, with the ultimate effect of “depriving advertisers and publishers of the possibility to choose their commercial interlocutors and contractual counterparts.”

In particular, the complaint homes in on the matter of user profiling, namely the collection of data regarding the behavior and tastes of potential customers in order to better define targets to be reached with ads.

IAB alleges that over the last years, Google has put in place three specific practices — “all part of a single and complex exclusionary strategy” — to undermine its competitors’ targeting ability.

First, it blocked other companies from selling advertising spaces on its video-sharing platform YouTube as of August 2015.

Second, Google stopped giving advertisers and other players in the online advertising ecosystem access to user ID decryption keys in May 2018, limiting their ability to match the user with his or her ID outside of Google.

Third, it started blocking third-party operators’ trackers, such as cookies or pixels, on YouTube, again as of May 2018.

Google said in a statement: “Digital advertising helps Italian businesses find customers and supports the websites and content creators that people know and love. The changes highlighted in the investigation were in part to protect user privacy and respond to GDPR requirements.”

“We’ll continue to work constructively with the Italian authorities on these important areas so that everyone can make the most of the web,” a company spokesperson said.

Google ID

Google has a wealth of data at its disposition — a matter not lost on the Italian authority. It said the company has “multiple tools that allow it to reconstruct in a detailed way the profile of the subjects to whom the advertising messages are addressed.”

It pointed to the Android mobile operating system, the Chrome mobile device browser, the Chrome personal computer browser, Google Maps/Waze mapping and navigation services and all other services provided through Google ID, including Gmail, Drive, Docs, Sheets and YouTube.

And it’s the Google ID, the AGCM notes, that connects a user to all those services.

The AGCM also lays out Google’s market power through the online advertising ecosystem, or ad-stack. Google, it provisionally concludes, is an “indispensable interlocutor” for website publishers.

“The majority of adverts cannot be placed on publishers’ websites without Google’s intermediation,” it says.

Theory of harm

“Google’s internal services — by collecting data via multiple services — can know whether a user has seen a given advert, and so can improve their ability to track,” the authority notes in its opening decision.

The quality of targeting is key to success in the industry, enforcers note.

But supply-side platforms, demand-side platforms and ad servers, which may be just as efficient as Google, are unable to optimize their services in the same way without access to the Google IDs or the use of cookies.

“This is discriminatory conduct between internal services, on the one hand, and competitors, on the other, consisting of the combination of information of users collected via services and products over which Google is dominant, and the parallel refusal to provide competitors with the instruments (ID and cookies) that could allow them ... to compete.”

Circling the issue

Europe’s antitrust enforcers have been circling the issues of online advertising and data for several years.

The European Commission fined Google 1.5 billion euros in 2019 ($1.8 billion today) for restricting websites using its search advertising business from contracting with rival services.

France’s antitrust agency sanctioned Google 150 million euros last year for mistreating customers using its AdWords services. Google’s incoherent and ultimately discriminatory application of its rules amounted to an abuse of a dominant position.

The same year, Germany’s competition authority declared that Facebook was breaching privacy laws, abusing a dominant position and harming competition by tracking its users around the Internet.

But the question of whether Google — or Facebook, for that matter — could be forced to give rivals access to their valuable data remains open. Italy’s enforcers have set out to answer it.