April 2023 – On 7 April 2023, the Turkish Competition Authority (“Authority”) published its Preliminary Report prepared within the scope of the “Online Advertising Sector Inquiry” (“Report”) that it initiated on 21 January 2021.
The Report states that online advertising in Turkey has surpassed all traditional advertising channels such as television, radio, and newspapers. Online advertising is now the platform that receives the highest share of advertising spending, having surpassed television advertising in 2021. The Report further highlights that online advertising, as an example of creative destruction, has become a tool that can determine the target audience more easily and is not tied to geographical borders, thus destroying traditional advertising taboos.
The Authority analysed the competition status of the types of online advertising in Turkey and examined the substitution relationship between these types as part of its sector inquiry. In this context, the Authority observed that the display advertising market has a concentrated structure dominated by Meta, and that the search-based advertising market has a concentrated structure dominated by Google. Furthermore, the Authority states that Google’s active presence in each category of advertising technology, which it achieves by offering multiple products, increases market concentration and in the long term hinders the competitive structure of the market by narrowing the operating areas of small undertakings. However, the Authority notes that Google’s strong position is due to reasons such as the high switching costs for advertisers and advertising publishers, the difficulty of learning/using different technologies, and the ease of managing advertising campaigns.
Moreover, the Authority notes that the conversion of user data collected by Google and Meta into services through targeted advertising provides benefits for stakeholders such as advertisers, advertising publishers and consumers. However, data collection raises privacy concerns for consumers. In this respect, the Authority has stated that establishing an optimal balance between the benefits and harms of targeted advertising is important for social welfare. The Authority has summarised the current and potential competitive concerns in the online advertising market under seven headings, as follows:
1. Conflict of interest arising from vertical integration in the advertising technology supply chain
The Authority states that this conflict of interest may occur in the following ways: (i) vertically integrated advertising technology providers (e.g., Google) being caught between their own service interests and their customers’ interests, and (ii) a vertically integrated advertising technology provider serving both advertisers and advertising publishers. Google’s power in the markets it operates in may lead to such conflicts of interest.
2. Concerns about Google’s tying and self-preferencing practices
The Authority points out that there is a concern that Google may transfer its power in advertising technology services or the provision of specific advertising inventory to other advertising technology services due to Google’s presence and strong position in each stage of the advertising supply chain.
3. Google’s stronger position compared to its competitors in terms of access to data due to offering many complementary services
The Authority states that there may be concerns that Google may use the advantage it gains by combining the data it accesses through different services against its competitors.
4. Transparency problem in the advertising technology supply chain
The Authority states that this problem could arise in three ways: (i) although advertisers and advertising publishers have sufficient knowledge and control over only part of the supply chain, the companies in the advertising supply chain are unaware of the price difference between the price paid by the advertiser and the amount received by the advertising publisher; (ii) the complexity of open bidding in the advertising technology supply chain forces advertisers and advertising publishers to buy and sell inventory from advertising technology providers; or (iii) the prevention of the independent measurement of the performance of companies’ services. For example, Google is an advertising technology provider that provides information to those who want to promote their product. Google’s position in the advertising technology supply chain, with its presence in almost every stage, raises competitive concerns.
5. Digital platforms have become inevitable business partners for news publishers due to the significant role they play in delivering news content to readers
The Authority has observed that this situation necessitates news publishers to unconditionally accept the conditions offered to them. As a result of these conditions, news publishers’ advertising revenues have decreased, and in some cases, these revenues have entirely shifted to digital platforms.
6. Google’s Privacy Sandbox
7. The issue of Apple and Google restricting third-party applications that operate on their operating systems from accessing user identities
The Authority states that user identities are a critical source of data for the profitability and sustainability of mobile online advertising activities. Apple restricts the access of third-party applications to user identities. Google also has policies that limit the sharing of user data with third parties. The Authority highlighted the potential anti-competitive concerns in the mobile online advertising and mobile application markets that may arise from these two issues.
By Bulut Girgin, Counsel, Head of Competition & Compliance, and Simru Tayfun, Associate