Australian regulator aims to rein in Google's advertising power

SYDNEY (Reuters) - Australia's antitrust regulator said on Tuesday it needed more powers to combat significant competition concerns in advertising technology, a market dominated by Alphabet Inc unit Google.

The stance could set up another clash between policymakers and the U.S. search engine leader after the same regulator helped design reforms implemented this year to force tech giants to pay for media content displayed on their platforms.

WHAT IS AD TECH?

Advertising technology, or ad tech, refers to services that facilitate transactions to buy and sell online advertising space and that determine which ads are shown to consumers.

They involve the automated use of algorithms that result in an image or video - including banners and pop-ups - appearing with online content.

Businesses rely on those services to reach prospective customers while news publishers use ad tech to generate revenue and fund their online content.

MARKET DOMINANCE

The report found that Google has a dominant position in the ad tech supply chain in Australia and estimates that more than 90% of ad clicks passed through at least one Google service in 2020.

The ACCC also found that Google used its market position to preference its own services and protect them from competition.

For example, Google prevents rival ad tech services accessing ads on its popular video streaming service YouTube, the regulator said.

The inefficient industry is likely harming publishers, advertisers and consumers, the regulator said, via higher ad tech fees and, ultimately, higher costs to customers.

Google was not immediately available for comment on Tuesday. It recently said its ad tech supported more than 15,000 Australian jobs and contributed $2.45 billion a year to the country's economy annually.

TRANSPARENCY CONCERNS

The regulator said Google accesses large volumes of data through its customer-facing services, such as its search engine and map service. It said it was unclear the extent to which Google uses this data to help its ad tech businesses, creating a transparency issue.

The ACCC found that ad tech pricing was also unclear and it said the complexity of the supply chain made it difficult for advertisers and publishers to detect misconduct.

NEXT STEPS

The ACCC wants Google to make it clear how it uses its data to sell its services. It also recommends rules be considered to manage conflicts of interest, prevent self-preferencing, and ensure rival ad tech providers can compete.

It has recommended the industry publish average ad tech fees to help customers compare costs.

The Australian government said it would now consider the report's findings.

The mechanisms required to reform the sector, including potential new powers for the regulator, will be considered as part of a broader ACCC report due in Sept. 2022. Consultations with Google and others are set to start early next year.

The regulator said it was also in contact with its international counterparts. European and U.S. regulators are also scrutinising Google's advertising business.

(Reporting by Jonathan Barrett; Editing by Christopher Cushing)