Italy’s competition authority has initiated an antitrust investigation concerning Google’s operations within the digital display advertising sector, representing another challenge to the technology company’s regulatory standing.

According to a statement released by the AGCM, the investigation centers on potential misuse of the extensive data gathered through Google’s diverse applications, which could hinder competitors and negatively impact consumers.

The inquiry was prompted by a formal complaint submitted by IAB Italy, a local advertising industry organization, as reported by Reuters, with a requested conclusion date of November 2021.

The AGCM specifically suspects Google of engaging in “internal/external discriminatory conduct” by withholding Google ID decryption keys from competitors and preventing the use of third-party tracking pixels.

Furthermore, the authority alleges that Google utilizes tracking technologies that enable its advertising services to achieve a level of targeting precision that equally capable competitors are unable to match.

We have contacted Google for a response to these claims. Update: A representative from the company has since provided the following statement:

This development occurs as Google faces a lawsuit in the United States filed by the Department of Justice (DoJ), which followed a 16-month investigation and asserts that Google “unlawfully maintains monopolies in the markets for general search services, search advertising, and general search text advertising in the United States.”

The Italian investigation is also noteworthy as Google has been attempting to steer the conversation regarding online ad targeting and user privacy, having launched the Privacy Sandbox initiative last year.

The initiative aims to develop open web standards that strike a balance between respecting Internet users’ privacy and the need for content creators to gather information for targeted advertising (along with, naturally, the company’s own data-driven monetization strategies as a leading adtech provider) – proposing a technique known as federated learning of cohorts (FloC), which it presents as a “privacy-preserving” method for enabling ad targeting without individual tracking.

However, as part of this standards effort, Google announced in January its acceleration of plans to discontinue support for third-party tracking cookies, now aiming to complete this transition within the next two years. This can be viewed as Google leveraging its market influence rather than a genuine evolution.

While other browser developers have also been restricting trackers, Google’s dominant position in the online advertising market raises competition concerns regarding its unilateral decision to eliminate third-party trackers while retaining exclusive access to Internet users’ data. This appears to be the core issue driving the Italian competition authority’s investigation.

The European Commission has previously determined that Google holds a dominant position in the search market, imposing conditions to prevent abuse of its market power in other areas.

The AGCM suggests that the practices under investigation could significantly affect competition within the digital advertising landscape, and also highlights potential repercussions for competitors and consumers.

“The lack of competition in the provision of digital advertising intermediation could reduce the resources available to website producers and publishers, thereby diminishing the quality of content offered to end users,” the authority states, also suggesting that a deficiency in “effective competition based on merit” could stifle the development of innovative, less intrusive adtech and advertising methods. 

In essence, Google’s control over the digital advertising space could be detrimental to both publishers and Internet users, and could impede the progress of genuinely privacy-focused adtech solutions.

Similar concerns regarding the market power of the adtech duopoly have been voiced in other contexts.

In a comprehensive report on the online ad market released this summer, the UK’s Competition and Markets Authority (CMA) concluded that the market power of Google and Facebook is now so substantial that a new regulatory framework—and a dedicated regulator—is necessary to address what it described as “extensive and mutually reinforcing” issues. 

“Insufficient competition in search and social media leads to reduced innovation and choice, and results in consumers surrendering more data than they would prefer. Weak competition in digital advertising increases the prices of goods and services throughout the economy and undermines the ability of newspapers and other media outlets to produce valuable content, to the detriment of society as a whole,” the CMA cautioned.

“Our concern is that these platforms have an incentive to interpret data protection regulations in a manner that reinforces their competitive advantage, including by denying third parties access to data essential for targeting, attribution, verification, and fee or price assessment, while preserving their own right to utilize this data within their closed ecosystems,” it added.

The report concluded that there is a “strong justification for the development of a pro-competition regulatory regime, implemented proactively, to oversee the activities of online platforms funded by digital advertising” – a measure Google has been actively lobbying the European Commission to avoid as regional lawmakers formulate new pan-EU regulations for gatekeeper platforms.

According to the AGCM, online advertising in Italy generated over €3.3 billion in revenue in 2019, accounting for 22% of the media sector’s resources – making it the second largest revenue stream within the sector.