Google first to face SMS designation investigation under new UK digital markets law

The Competition and Markets Authority (CMA) has announced that Google will become the first company to face a strategic market status (SMS) designation investigation under newly launched digital markets regulation.

The UK’s new Digital Markets, Consumer and Competition Act, which came into force on 1 January, gives the CMA power to designate firms with SMS in relation to a particular digital activity.

Once they have been designated, the regulator can impose conduct requirements or propose pro-competition interventions.

The investigation will assess Google’s position in search and search advertising services and how this impacts consumers and businesses including advertisers, news publishers, and rival search engines.

As part of the investigation, the UK competition watchdog is assessing whether Google is using its position to prevent innovation by others through barrier to entry.

The CMA said that, in particular, it is looking at whether Google is able to shape the development of new AI services and interfaces, including ‘answer engines’, in ways which limit the competitive constraint they impose on Google Search.

The Authority is also investigating whether the tech giant is using its position in the market to self-preference its own services, for example specialised search services covering shopping and travel.

Finally, the regulator said that it would investigate “potential exploitative conduct”, including the collection and use of large quantities of consumer data without informed consent and the use of publisher content without fair terms and condition.

Following the investigation, Google may be required to take certain measures, for example making the data it collects available to other businesses or giving publishers more control over how their data is used, including in Google’s AI services.

The CMA said that the probe will be completed within nine months, with a decision being made by October.

“Millions of people and businesses across the UK rely on Google’s search and advertising services – with 90 per cent of searches happening on their platform and more than 200,000 UK businesses advertising there,” said Sarah Cardell, chief executive, CMA. “That’s why it’s so important to ensure these services are delivering good outcomes for people and businesses and that there is a level playing field, especially as AI has the potential to transform search services.”

Last week the CMA was quizzed about its readiness to deploy new digital markets powers in an evidence session before the House of Lords Communications and Digital Committee.

In the Committee evidence session, Cardell said that the regulator will launch SMS designation probes in two digital business areas in January, while another investigation in a third area will be launched towards the beginning of summer.