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Deep Dive 4 Oct 2021 - 12 min read

Cheat’s guide to the ACCC’s digital ad services report: How sweeping new powers will hit marketers, agencies, media, tech – and Google – and what’s next

By Paul McIntyre & Brendan Coyne

Kristiaan Kroon, Dan Stinton, Peter Leonard and Gai Le Roy: Australia's digital ad industry has been served notice of what it needs to fix – or have it fixed for them.

The ACCC’s final ad tech report focuses firepower on Google’s almost total dominance of Australia’s digital ad market infrastructure. But the regulator’s grab for greater powers has much broader implications for brands, publishers and the advertising supply chain. Peter Leonard, Professor of Practice at UNSW Business School; Dan Stinton, Managing Director at The Guardian Australia; Gai Le Roy, CEO at the IAB and Kristiaan Kroon, Chief Investment Officer at OMG, break down what anyone involved in Australia’s digital ad industry needs to know. 

What you need to know:

  • Australia's competition regulator wants new powers to curb Google's might. But the broader ad supply chain – and marketers – may find they are caught up in the sweep.
  • Six key recommendations to Treasury are interrelated. First the ACCC wants Google to set in stone how it uses data from its portfolio of services for its data and ad business. Law expert Peter Leonard thinks that could end up being a ticket to litigation against non-tech sectors.
  • The rest of the recommendations call for greater powers to intervene around supply chain and real time bidding auction transparency; stopping Google and any other players – which could include banks and retailers building data-driven media businesses – self-preferencing their own products; forcing disclosure of ad tech fees; and stopping big players from furthering anti-competitive data advantages.
  • The ACCC in some cases said it will give industry the chance to sort its own problems – but the threat of regulation should concentrate minds. IAB CEO Gai Le Roy urged industry to stop dragging its feet on transparency standards – or risk getting probed.

I think it is pretty clear… what the ACCC is seeking to do is effectively force more information about how consumer data is being used in order to then potentially say there is misleading and deceptive conduct going on.

Peter Leonard

The ACCC’s report focuses almost squarely on Google. But the regulator's quest for new powers could have much wider implications for the media supply chain and brands that interface with it – including retailers, banks and others building out data-fuelled media businesses.

While requesting greater legal firepower, the ACCC has also served notice to industry to address its own longstanding transparency problems – or really get regulated.

Anything this side of the federal election is unlikely. But the digital ad industry now has all the impetus it needs to solve longstanding problems – or risk ceding control over sensitive parts of their businesses. Meanwhile, the Attorney-General’s draft privacy review is set to follow, bringing with it a raft of new challenges around disclosure, compliance and governance.

2022 looks busy already.

The lawyer’s verdict

ACCC chair Rod Sims last week told Mi3 the reason it wants Canberra to grant sweeping new powers is because the current legislative set-up is too cumbersome. By the time it can take a case to court, the market has moved on and the profits taken. A retrospective fine, he argued, is insufficient deterrent.

Peter Leonard, however, suggests regulators attempting to tool-up is par for the course. But he warns handing the ACCC a bigger stick to wield as it sees fit will have lasting consequences.

“I’ve never met a regulator that says they have enough powers,” says the Professor of Practice at UNSW Business School, advisor at law firm Gilbert + Tobin and Principal at Data Strategies.

“Litigation is slow, painful and expensive, and regulators don’t like to litigate as a result. But we need to think very hard about whether we give regulators powers to reshape markets absent proof of illegal conduct.”

The IAB’s take

IAB chief executive Gai Le Roy welcomed the ACCC’s concentration of the industry’s collective mind by issuing specific areas to solve – primarily transparency and ad tech pricing – or face regulation.

“There is a lot of good stuff in there that helps motivate a range of different companies to adopt new standards, best practice and be more transparent in their behaviour,” she says.

The IAB has developed those standards. But Le Roy admits parts of the industry have been slower to adopt them. Now they have greater imperative.

Overall, Le Roy expressed surprise at how Google-focused the report ended up, but thinks some of its conflict of interest recommendations have broader implications for those building out significant data and media businesses, such as banks and retailers. She thinks powers to prevent self-preferencing may go beyond Google.

“There is a whole blurring of lines, different types of business that are coming together,” says Le Roy. “They need to think about how they are going to operate with their different roles in the market.”

'Sector specific' within advertising technology – that applies to every industry in the country that is using something that relates back to advertising. Whether that be on your banking app, whether online shopping, whether paying your energy bill, they will all potentially be using some form of ad tech ... That is why I would really like to understand where this recommendation would start and stop, to see whether it is a positive, or potentially an overreach.

Kristiaan Kroon

The agency view

Broadly supportive of most recommendations, Omnicom Chief Investment Officer Kristiaan Kroon fears the ACCC’s call for ‘sector specific’ powers to address competition issues – its third recommendation – could open a very large can of worms.

“I am not sure we are with the ACCC [on its third recommendation], I’m not quite sure where it leads,” says Kroon. “’Sector specific’ within advertising technology – that applies to every industry in the country.”

The publisher’s read

The Guardian Managing Director Dan Stinton backed the ACCC’s data separation arguments and plans to limit “the ability for large players to collect consumer data in one area and then apply that for a competitive advantage in a completely separate area”.

He also welcomed any improvements to transparency that enable “publishers to know for certain whether they are getting a fair price for their inventory, and for advertisers to make sure that all of their spend is going to the places that it should and being as effective as it should – without high fees.”

Stinton found the report “more targeted to Google than I was expecting … but it is hard to view in isolation of the [Attorney-General’s] privacy review, because that will have massive implications for this market,” said Stinton. “We need to see that really soon so we can do these things in concert.”

Which in fairness is what Google has consistently stated in submissions to the ACCC.

Either way, Google and the digital ad industry have been served notice of how the regulator intends to proceed.

There hasn’t been wholesale adoption [of transparency standards]. Making sure that we do adopt these standards is going to be a much more efficient, automated way of doing things than if we get to the [regulatory] stick level – and potentially really clunky compulsory audits that are slow and manual.

Gai Le Roy

The recommendations – and what they actually mean

The ACCC’s six key recommendations are interrelated and detailed across 200 pages of the report. Mi3’s expert panel breaks down the key aspects of each recommendation below.


Recommendation one: Google should amend its public material so that it clearly describes how Google uses first-party data to provide ad tech services.

Lawyer Peter Leonard and the Guardian’s Dan Stinton usually agree on most things, reckons Stinton. But not on this one.

“This recommendation really surprised me, because if I was going to give Google a gold star, I would give it to them for their consumer facing explanations in their new privacy centre around how they use first party data,” says Leonard.

“I would say that Google does that better than most other players in the digital advertising sector. It’s a separate issue about the [data] advantages that Google enjoys, but in terms of how it explains to consumers what it does, Google does it a lot better frankly than many other players.”

Stinton thinks otherwise. Google’s privacy policy and terms of services, he suggests, “are still too ambiguous, there is room for improvement”.

“Google has made submissions to the ACCC that state they do not use the data they collect from Android or search, or any of their other services to give their DSP an advantage over others in the market with regards to targeted advertising. The problem is… Google’s privacy policy and terms of service are vague enough where they are still technically able to do that,” says Stinton.

“Google claims they don’t do that. Therefore it should be straightforward for them to make crystal clear in their terms of services and privacy policy that they don’t,” he adds.

“Ultimately that is a good thing for consumers, because we need to stop this data arms race. We need to stop trying to collect consumer data at every opportunity for the purposed of selling targeted advertising.

“And it also gives smaller players – including publishers – an opportunity to compete with [Google’s] DSP and have a chance at winning some business.”

Rod Sims has stated on record that he is looking for a test case potentially against Google, but that common law would then to apply to other large Australian businesses. So he has been very clear on his signalling. A lot of our clients are very much working in this area ... and I think it is a biggie.

Kristiaan Kroon

“It’s a biggie – for everyone”

Omnicom’s Kristiaan Kroon thinks Google has made some improvements to disclosures, “but there is still an awful lot of grey.”

“Is there work to do for Google in this area? I think the answer is yes. Because we are told unequivocally that everything is fine. And then there will be a court case in the US, or in Europe, or there will be a disclosure and we realise there was an awful lot of grey,” he says.

“This is a way of bringing everything out into the light so that from a true, informed consumer consent perspective, people know across the length and breadth of Google’s services, whether they are connected, or not.”

Kroon thinks the recommendation has broader implications for industry around data collection purposes and disclosure – because what is applied to Google will ultimately apply to all.

“Rod Sims has stated on record that he is looking for a test case potentially against Google, but that common law would then to apply to other large Australian businesses. So he has been very clear on his signalling.  A lot of our clients are very much working in this area. So I think it is resonating – and I think it is a biggie.”

Seeking another ‘Oh Shit’ moment?

Peter Leonard thinks the ACCC’s overall plan with recommendation one is to give Google enough rope.

“I think it is pretty clear… what the ACCC is seeking to do is effectively force more information about how consumer data is being used in order to then potentially say there is misleading and deceptive conduct going on around the gap between what is said in consumer facing disclosure, and what the organisation is doing,” says Leonard.

He says that was the basis for what is now widely known as the “Oh Shit” litigation, where the Federal Court ruled that Google had misled users about how their data was collected on Android mobile devices between January 2017 and December 2018, with the ACCC now pursuing penalties.

“So that is a nice end run for a regulator, in a world where you have data privacy law which requires fulsome disclosure expressed in terms that consumers of less than average literacy can understand,” adds Leonard.

“If you have to make disclosures that meet that criteria in relation to something as complex as digital advertising and ad tech, you really are setting yourself up to fail, in terms of the possibility of there being something misleading, something not said that should have been said, in those disclosures.

“So I think this recommendation is really about the ACCC getting the ability to bring litigation using existing laws by effectively forcing greater transparency onto Google in order to potentially discover another ‘Oh Shit’ moment out there,” suggests Leonard.

“But I think that is possibly a bit unfair, because many other players in this sector are not making adequate and fully transparent disclosures.”


Recommendation two: The ACCC should be given powers to develop sector specific rules to address conflicts of interest and competition issues in the ad tech supply chain.

Recommendation two is all about the ACCC getting the power to set ‘ex ante’ rules – i.e. to act before the event and to use those powers to force competition. “Traditionally in Australia we have been reticent to give regulators those types of powers,” says Peter Leonard, though examples exist in telco, energy and shipping.

“In each case [government] tried to give regulators reserve powers while giving industry the chance to sort it out first in the knowledge that the regulator might [otherwise] use those powers,” said Leonard. He thinks the ad tech industry should also be given the chance to self-regulate.

But the Guardian’s Dan Stinton thinks there is good reason for the ACCC to seek those powers, given Google controls 90-100 per cent of advertising inventory, and 80-90 per cent of the demand.

“The problem is, there is both an incentive and ability for one large player, namely Google, to be able to preference their own demand sources over others. The ACCC is seeking systematic powers to prevent that from happening in the future – and we support that, we think that is needed.”

Self-preferencing: Stop Google, stop everyone else

Kristiaan Kroon thinks additional powers will soon be needed to prevent self-preferencing by other emerging ad behemoths.

“While Google is the focus of this report, Amazon is running into self-preferencing issues in the EU … and we can see a number of large businesses globally that this would also potentially be applicable to in the future,” says Kroon.

“It is good to have guide rails on these kind of issues. There are an awful lot of businesses and business collectives looking at Google’s position and using that as their reason for their own behaviour.”

IAB’s Gai Le Roy agrees: “I think this is definitely a flag for other players.”

Peter Leonard thinks the ACCC may ultimately need the powers it seeks in order to force industry to self-regulate.

“Industry may not be able to do it today, because the regulator does not have the reserve powers to create the incentive that brings the parties to the negotiating table. But in my view, industry should be the ones to sort it out first,” said Leonard.


Recommendation three: The power to introduce sector specific rules should allow the ACCC to address competition issues caused by an ad tech provider’s data advantage.

Linked to recommendation two, the ACCC is seeking more powers to stop the data haves from taking further advantage over the data have nots.

It specifically flags data separation measures – e.g. stopping an ad tech provider from using data it has collected from consumer-facing services, i.e. first party data, to provide ad tech services on other people’s sites and apps.

The regulator also wants powers to enforce data access, e.g. requiring a provider to give other ad tech firms access to its first-party data.

Those powers would apply to the whole sector – and that makes Omnicom’s Kristiaan Kroon uncomfortable.

“I am not sure we are with the ACCC [on its third recommendation], I’m not quite sure where it leads,” says Kroon.

“’Sector specific’ within advertising technology – that applies to every industry in the country that is using something that relates back to advertising. Whether that be on your banking app, whether online shopping, whether paying your energy bill, they will all potentially be using some form of ad tech. It could be Google, it could be Facebook, it could be Salesforce, Adobe, the list goes on and on,” he said.

“That is why I would really like to understand where this would start and stop, to see whether it is a positive, or potentially an overreach.”

Peter Leonard cautions that Australia “should not go it alone”.

“There is a lot of action in the UK around this space and I think the CMA [the UK competition regulator] is probably the most advanced in its thinking about what might be necessary and appropriate.  So I’m not sure we want the ACCC to try and change the world on this – but there is a real issue here, and it does need to be solved.”


Recommendation four: Industry should establish standards to require ad tech providers to publish average fees and take rates for ad tech services, and to enable full, independent verification of demand side platform services.

The ACCC wants ad tech players to disclose their fees and open up their supply chain so people can follow the money end-to-end. The 2020 UK report by PwC and ISBA showed just how hard an undertaking that can be: only 12 per cent of ads could be fully tracked, and that was at the premium end of town.

As such, Omnicom’s Kristiaan Kroon says the regulator’s fourth recommendation “is a good one”. While he thinks industry could solve the problem, “I think there is a level of frustration from advertisers and agencies and they will push for market change”.

Adopt transparency standards – or else

Gai Le Roy thinks the ACCC’s push should provide fresh industry impetus to fully adopt the transparency standards the IAB has developed.

“There hasn’t been wholesale adoption,” says Le Roy. “We’ve seen really strong adoption on the publisher side … The buy-side transparency standards are newer, and that has been a little slower. So joining those two pieces together will definitely help.”

As such, she suggests the ACCC’s threat of regulatory action provides “a call out” to IAB members.

“Making sure that we do adopt these standards is going to be a much more efficient, automated way of doing things than if we get to the [regulatory] stick level – and potentially really clunky compulsory audits that are slow and manual,” says Le Roy.

“We’ve seen our industries come together before [with MFA and AANA initiatives] but this needs all three sides of the industry to come together and show that we have a timeline and we are acting.

“Transparency won’t solve everything, but it gives you the data to work out what’s going on and over time the market will correct to where it should be.”


 

We really struggle to understand the dynamics of the auctions on our inventory and we really struggle to understand why any player – not just Google – is winning a particular bid. And the reason is it’s just too opaque.

Dan Stinton

Recommendation five: Google should provide publishers with additional information about the operation and outcomes of its publisher ad server auctions.

This is the ACCC’s attempt to make real time bidding (RTB) less murky. Per the ACCC, Google should provide publishers with sufficient information to compare bids received from different supply-side platforms (SSPs). Specifically, through Google’s SSP (Google Ad Exchange) and Open Bidding, to bids received through header bidding. They should also be able to match bid information to the price an impression is sold for, states the report.

The Guardian “strongly supports” the recommendation.

We really struggle to understand the dynamics of the auctions on our inventory and we really struggle to understand why any player – not just Google – is winning a particular bid. And the reason is it’s just too opaque,” says Dan Stinton.

“So if all of the players in the ad tech supply chain were obligated to be transparent, publishers would have a view of who is winning the auctions for their inventory and whether they were winning them fairly. And if not, then at least we would have the information to be able to solve that.”

Omnicom’s Kristiaan Kroon thinks urgent action is required.

“The ACCC needs to listen to legitimate concerns from publishers – and they need to fix this. Because if our media partners lose faith in the system, that is going to lead to worse outcomes for us. So lets have that conversation with a clear view on action – and not just be in the same place in 18 months time.”

London calling it

Peter Leonard reckons publishers won’t have to wait long – regardless of any action by the ACCC.

“The UK has been working on this issue for quite some time – they are way ahead of the ACCC’s thinking in how to make real time bidding more fair and transparent,” says Leonard. “So I think it is a bit irrelevant, because the UK will address this long before the ACCC will have [those] powers. I am looking at what happens in London, not holding my breath for what happens in Sydney or Canberra.”

He thinks UK regulators will address the situation within “probably months”.

“They were going to introduce some new rules around it early last year, but it all got a bit derailed with Covid,” says Leonard. “But I would expect that it is going to come back ... fairly quickly.”


Recommendation six: The ACCC should be given powers to develop and enforce rules to improve transparency of the price and performance of ad tech services. The rules would apply across the Australian ad tech supply chain.

If it gains the powers sought in recommendation six, the ACCC is keeping the option of a common transaction ID on the table. Omnicom’s Kristiaan Kroon thinks it’s a smart move.

A common transaction ID would be very helpful, not only for [tracking] campaign decisions, but all the way through to financial audits that we perform for clients very regularly. There is a lot here that would improve the general efficiency of an awful lot of processes that we follow today.”

The Guardian’s Dan Stinton agrees.

“The common transaction ID does have a lot of merit. It solves a lot of problems, and enables a full audit of the system in way that is really difficult now. So there is merit to that.”

But he hopes “industry can come together and clean up as much mess as they can before the ACCC comes in”.

IAB’s Gai Le Roy takes the same view.

“Recommendation six is about the ACCC having back-up power. I’m hoping we can do a lot of work within recommendation four, which is the voluntary industry solving part of it, so we don’t have to have quite so much government-driven regulation,” she says. “There’s definitely been some improvement since the ISBA report … but we’d like to see that verification layer [in place] across the board.”


The timing issue: Covid, Christmas and a Federal election

While government and regulator have shown significant appetite to intervene in Australia’s digital ad market and set out specific interventions, the question is now one of timing.

“Regardless of their appetite, their ability to swallow is severely constrained by a looming election,” says Peter Leonard. “The ACCC is saying it needs additional legislated powers … By definition that means passing amendments through parliament, Treasury has to take them to cabinet, get them agreed, get the legislation drafted, get it into the house – and then parliament is going to be prorogued … and all of the legislation that hasn’t been passed then lapses. Which means then you have to get it re-passed in the new parliament,” says Leonard.

“So I don’t think much is going to happen out of all of this [soon], because it is about to be overtaken by an election. It’s an interesting question potentially for Q2 2022. But whatever the government thinks today may be largely irrelevant, because they can’t do too much without new legislation.”

Dan Stinton, however, thinks change is ultimately coming.

“They have demonstrated an appetite to take on these reforms with the bargaining code – and most if not all of the publishers are supporting these reforms – so you probably have a similar dynamic this time around,” suggests Stinton.

“Practically though, you have us coming out of lockdown, then into the Christmas holidays and then into an election. So the chances of anything happening this side of the election are pretty slim.”

What if Labor were to win?

“I think Labor would be pretty supportive,” says Stinton. “I don’t think this is a partisan issue, I think this is a competition issue.”

Time will tell. But industry – and Google – now has a clearer grasp of what they may have to accept, fix or fight.

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