What you need to know:

• The ACCC's adtech interim report finds clear lack of transparency and competition.
• Google is under fire and likely to face regulatory measures to curb its power.
• However, ad agencies were also given their fair share of heat, with the inquiry finding a lack of transparency between ad agencies and advertisers.
• The ACCC says there is a particular risk of this where agencies are incentivised to purchase advertising impressions from publishers offering volume rebates and discounts.
• Despite this, agencies appear to be off the hook, with the ACCC determining there was no need for government intervention, putting the onus on advertisers to do their due diligence.
• The report also highlights clear self-preferencing, pointing to Google's refusal to enter into header bidding auctions run by publishers, instead forcing advertisers to use their own ad servers.
• The watchdog seeks feedback on antitrust measures, alongside boosting data portability and transparency.

Agencies cop heat

Australia's major holding groups and Google have been put on notice, as the ACCC narrows in on the key issues surrounding the sale, bidding and trading of digital advertising inventory as part of the ad tech supply chain.

As part of the watchdog's Digital advertising services inquiry, an interim report has found a lack of competition and transparency in the digital advertising technology supply chain.

The current interim report examines the digital display advertising supply chain in Australia, which manages $3.4 billion of digital display advertising on news, entertainment and other websites and apps each year.

However, the 222-page report suggests advertisers concerned about agency mark-ups educate themselves. In other words, there's a competitive market, so buyer beware.

Per the report:

"Conflicts of interests between ad agencies and their advertiser clients may materialise in some pricing and performance transparency issues relating to the disclosure of rebates, discounts and incentives, and the use of ad tech services that are owned by the agency or holding company. 

"However, the ACCC’s preliminary view is that regulatory intervention is not required in relation to the pricing and disclosure practices of ad agencies. 

"The ACCC’s preliminary conclusion is that potential issues relating to ad agency conduct may be mitigated through advertisers informing themselves about the impact of certain practice (e.g. rebates, discounts and incentives, agency-wide fee models, and whether the agency owns any ad tech services) and seeking protections in contracts to ensure their contracting agency acts in their best interests."

Meanwhile, adtech providers other than Google appear set to escape an enforceable code.

Antitrust 

The report highlights the extent of Google's market power, suggesting it has 100% dominance in some critical aspects of the ad ecosystem.

It comes less than a week after Google, Facebook and Australian publishers faced a senate inquiry regarding the new bargaining code designed to make Google and Facebook pay publishers for news and the data they harvest from publisher web pages.

Fearing regulation, both platforms have threatened to pull key aspects of their services, such as search and news.

ACCC Chair Rod Sims says there is a "real lack of competition, choice and transparency", with Google’s share of the revenue or ads traded in each of the required services in Australia ranges from 50-60 per cent to between 90-100 per cent, depending on the service.

He says this control will only increase the cost of advertising for businesses, which will ultimately impact the prices paid by consumers.

"Google’s significant presence across the whole ad tech supply chain, combined with its significant data advantage, means Google is likely to have the ability and the incentive to preference its own ad tech businesses in ways that affect competition,” Sims said.

“During this inquiry we have heard concerns from parties about potential conflicts of interest from Google’s various roles in this industry. This includes Google very often acting on behalf of both publishers and advertisers for the same ad sale across the ad tech supply chain, while also selling its own ad inventory.”

Self-preference was a key issue identified in the report, with Google's refusal to enter into header bidding auctions run by publishers and instead forcing advertisers to use their own ad servers subject to scrutiny.

This means publishers who wish to receive real-time bids from advertisers using Google’s ad tech services must use Google’s publisher ad server.

The ACCC has also heard concerns about the competitive effect of Google’s restrictions on rivals’ access to different types of data, for example its move to block access to the DoubleClick ID and its proposal to block third-party cookies on Chrome.

The ACCC’s preliminary report identifies a number of market interventions:

• Rules to manage conflicts of interest and prevent self-preferencing in the supply of ad tech services. The ACCC notes that the Competition and Markets Authority in the UK and the European Commission have both recently released proposals that relate to these issues, and seeks feedback on which aspects of those proposals could be appropriate in Australia.
• Proposals to enhance the ability of ad tech providers to assess the price and quality of services, including requiring demand-side platforms to allow independent verification and that the industry implement common transaction and user IDs.
• Promoting competition in the industry through boosting data portability (allowing a consumer’s data to be moved or shared at their request) and interoperability (allowing data to be shared between firms without a request from a consumer).
• Mandating the breaking up of datasets held by large incumbents, to make it easier for rival ad tech providers to enter and compete in the supply of ad tech services.

See the ACCC's full report here. It seeks industry input on its remedies by 26 February with a senate hearing set for August.