Germany’s antitrust watchdog made some interesting comments vis-à-vis the programmatic advertising market yesterday — which question the appropriateness and sustainability of the (still dominant) tracking-and-profiling ad targeting business model.

In a statement accompanying publication of a sectoral report (the full report is here in German), the Federal Cartel Office’s (FCO) president, Andreas Mundt, wrote:

We should seriously ask ourselves whether we want to have virtually “transparent” internet users only because we are supposed to buy certain products or services. What appears to be particularly problematic from a competition point of view is that only a very small number of companies have access to large amounts of a variety of current, first-hand user data. This imbalance must always be taken into account in the case of potential interventions.

The FCO’s review of the programmatic (non-search) ad sector found insufficient transparency for market players other than Alphabet, the dominant force — which it observes is “present at almost all levels of the value chain of non-search online advertising and has an extraordinarily strong market position with regard to practically all relevant services.”

This is a more typical observation for an antitrust regulator to make (and something other competition watchdogs have previously called out in their own reviews of the online ad market, such as the U.K.’s CMA in its 2020 market study). Google’s ad business also remains under antitrust probe in a number of European markets.

But the FCO’s wider questioning of the programmatic industry’s surveillance of web users implies the German regulator is uneasy about the idea of imposing what might be viewed as a “classic” competition remedy to address the imbalance it’s identified around data access — say by boosting less dominant players’ visibility of web users info, such as by requiring Alphabet to share first-party data with rivals so they’re not at such a disadvantage versus its high dimension view (a step that would of course mean even more surveillance and even less privacy for web users).

The FCO’s review of programmatic advertising is also notable in calling out insufficient transparency for web users whose information is subject to ad surveillance:

The situation is also intransparent from the users’ perspective. Their data form the most important basis for programmatic advertising. However, it is hardly possible for users to assess what happens to their data, who receives them and how they are used. Several legal policy proposals have been made for restricting data collection and the use of data for advertising purposes. The Bundeskartellamt [FCO] has looked into this issue from a competition law perspective.

A line in the executive summary of the report goes on to posit that “from a competition point of view consideration can thus be given to the question as to whether, overall, it would seem advisable to move away from such a system of data-driven advertising” — on account of what the FCO finds to be systemic complexity, opacity and privacy hostility in the programmatic ad market (which it also points out hinges upon “highly detailed personal profiles [being] created, which include highly sensitive information, solely for the purpose of facilitating advertising”).

This nuanced view of a situation where competition and privacy might — through an overly simplistic lens — be perceived as being in tension (i.e., if greater privacy for users results in greater market power for the handful of giants that have amassed tons of first-party data) is not so surprising when you consider the FCO’s pioneering case against Facebook’s “superprofiling,” where the regulator has taken the view that the social network’s exploitative abuse of privacy is an antitrust abuse too. (That case is subject to a referral to the EU’s top court where a ruling remains pending.)

The FCO has also been investigating Google’s terms and conditions for processing user data since May 2021 — when it announced it would look into whether the adtech giant gives users sufficient choice over data processing or makes use of its services conditional on users agreeing to its processing of their information.

Earlier this year — in January — it issued a preliminary statement of objections on Google after finding it does not offer users sufficient choice. It also said it enjoys a strategic advantage over other ad businesses due to “established access to relevant data gathered from a large number of different services” — signaling it intends to require Google to offer users more choice over its processing.

Final enforcement of that case is still pending but the FCO’s review of the programmatic ad industry seems likely to bolster its preliminary take that Google dominates off the back of an unfair data advantage — and may lead it on to a conclusion that fixing that component might be the least harmful way to go about rebalancing a competitively skewed ad market that’s simultaneously and systematically exploiting consumer privacy.

What the FCO’s perspective on the programmatic ad industry’s problems might mean for other market interventions remains to be seen. But it writes of the insights gleaned from the sectoral inquiry: “There will be a particular focus on the large digital companies which play a key role in the online advertising sector.”

It also specifies that its review of the programmatic ad sector will inform “current and future proceedings” — which is relevant to the aforementioned Google/Alphabet data processing probe; and also to an open investigation of Apple’s app privacy framework (the latter has been accused by the ad industry of being anti-competitive yet clearly aligns with user privacy since it empowers iOS users to deny tracking requests from third party apps which Apple mandates must ask users if they want to be tracked).

Applying specific measures on Apple that demand it applies the same up-front request standard to its own tracking of iOS users might be one way to smooth competition concerns raised over its App Tracking Transparency without having to row back on privacy protections the feature delivers for users.

In Germany, both Google/Alphabet and Apple have been subject to a special abuse control regime since the FCO confirmed (in January 2022; and April 2023 respectively) they meet the requirement of having paramount significance across digital markets. This designation allows the competition regulator to intervene proactively on their businesses when it suspects anti-competitive behavior, rather than having to first investigate and establish a breach before being able to intervene.

Returning to the tangled issue of tracking, it’s also notable that the German antitrust regulator is zooming out for a big picture view: Its remarks highlight wider digital policy proposals that are bringing in new limits on use of data for tracking ads, such as the EU’s incoming Digital Markets Act and Digital Services Act — which suggests it’s holding out hope for regionally rebooted (joint) digital enforcement to achieve structural reform of the surveillance ad industry.

So far, no single regulator — of any stripe — has been able to unpick the tangled issue of tracking and its systemic toxicity. But maybe, just maybe, joint working that chips away at the industrial data complex from multiple angles will finally turn the tanker in a way that works for a competition agenda and web users too.