The UK's Competition and Markets Authority has announced an investigation into Google's search and ad businesses. It wants to find out if the search giant has a 'strategic market status' and whether the company's services are delivering good outcomes for people and businesses in the United Kingdom.
The strategic market status (SMS) designation is a new term that came in at the start of the year as part of the digital markets competition regime. Google has been unfortunate enough to become the first company to be investigated under these new rules due to its search dominance and prominent position in the online ads market.
If Google is found to qualify for SMS status, it'll mean that the CMA will start imposing conduct requirements on it and suggest so-called 'pro-competition' interventions. The CMA claims that effective competition in the sector is needed so that customers see a wide range of content and publishers are treated fairly.
It also said that more competition in the ads space could lower advertising costs, which could lower costs across the wider economy.
The CMA said its investigation will take nine months and will be proportionate and transparent. It'll gather evidence from stakeholders including advertising firms, news publishers, and user groups. A decision will be arrived at by October 2025.
While the Competition and Markets Authority may be trying to work in everyone's best interest, it could also result in some unintended consequences too. For example, if Google ends up having to reduce functionality, as we have seen before, it could lead to less innovation on Google's part with users losing out on genuinely useful features.
The slowdown in innovation from Google could also spill over to other firms as they no longer have to compete with the new feature, making the whole range of offerings worse for consumers. We could also see Google switching off features, and it could make other market participants more cautious about doing business in the UK for fear of being labeled as an SMS themselves.
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