Germany’s national competition regulator has announced it’s looking into market conditions in the online advertising sector, responding to concerns that a lack of transparency could be skewing market conditions. It could open up a full sector enquiry depending on results of its initial probe.

The antitrust office says it will start by looking into the effects of technical developments on the market structure and market opportunities of the various players involved. It also specifies it will investigate whether large ad platforms like Google and Facebook are operating as “walled gardens”, and consider their potential impact on competition.

Together the two tech giants accounted for more than 60 per cent of US online ad spending in 2017, according to eMarketer.

“Due to the great economic importance of this sector for advertisers and content providers active on the Internet and in view of discussions about the difficult competitive environment in this market, we have decided to examine this sector,” said Andreas Mundt, president of the Bundeskartellamt, in a statement.

“The issue of access to and the processing of data is also highly relevant from a competition point of view,” he added, saying “large single companies with considerable market relevance like Google or Facebook have emerged which, in the view of some market players, have been able to set up closed systems, so-called ‘walled gardens’”.

The global turnover of online advertising is estimated at more than $200BN last year, according to eMarketer data, cited by the Federal Cartel Office. Of that it says €5.5BN is generated in Germany — accounting for around 30 per cent of the overall ad spend in the country.

As a first step, the Bundeskartellamt says it intends to hold discussions with industry players to gather viewpoints and aim to narrow down the scope of its probe. Questionnaires will be sent out to market participants this spring.

After that it could move on to conduct a full sector inquiry — saying this could be triggered “if specific circumstances suggest the competition in a sector may be restricted or distorted”.

We’ve reached out to Google and Facebook for comment. At the time of writing neither company has responded. Update: A Facebook spokesperson has now emailed this statement: “We will co-operate fully with the Bundeskartellamt on this sector inquiry and welcome the opportunity to share our insights on the dynamic and competitive nature of the advertising industry.”

The Bundeskartellamt has also published a paper on online advertising, which sets out some of the issues of concern and contention. Among the concerns it lists is how Google’s launch of accelerated mobile pages (AMP) — ostensibly for supporting faster load speeds of mobile web pages — could “lead to advertisers being tied to Google” on account of AMP-enabled delivery of sites being via Google’s servers.

Google expanded the AMP project by adding an AMP for Ads program, in July 2016, encouraging marketers to create similarly optimized ads. (Facebook, meanwhile, has its own mobile accelerated format, called Instant Articles, though it also added support for Google’s AMP format in May last year.)

The antitrust office points out that improved load times for AMP-enabled sites also means they will end up with a better Google ranking, and critically flags “the fact that AMP also impacts SEO”, before discussing other technical developments which Google is driving that could also impact a site’s Google’s ranking.

“Google is also currently rolling out a new mobile-first index,” it writes. “In future, preferentially the content of the mobile version of a website, rather than that of the desktop version, will be added to databases used to generate search results. This development, which will directly affect Google searches, could have a considerable impact on SEO and thus on a key aspect of online advertising, critics claim.”

The report also discusses the advertiser criticism of big ad platforms for operating as walled gardens — saying the complaint is that a lack transparency makes it more difficult for advertisers to independently measure coverage or impact.

Walled garden platforms are also accused of prioritising their own inventory on their own platforms — a claim the report points out is “hard to make out given that the platforms are closed to third parties”.

A lack of transparency is also cited as a potential contributing factor for fueling ad fraud — combined with the growth in programmatic advertising (the latter is also flagged as a brand safety issue, as a result of programmatic systems automatically placing ads — something which caused problems for YouTube last year).

On the issue of access to data, the report says the concern is big platforms have “huge market advantages” on account of combining their reach and data depth. And it points to concerns raised previously by the German Monopolies Commission over how a concentration of ad-relevant data in individual companies could create competition problems.

“Where the quality and quantity of data increasingly become a fact which is critical for the success of placing targeted advertising, concentration in this field could have considerable competitive feedback effects on the online advertising market,” it writes. “This in particular applies where individual companies have exclusive access to particularly relevant data volumes, for instance on account of interacting directly with users.

“Network effects could also have a role to play here.”