Neutralizing Online Behavioural Advertising: Algorithmic Targeting with Market Power as an Unfair Commercial Practice

Common Market Law Review, 58(3), 2021 (forthcoming)

31 Pages Posted: 12 Apr 2021

See all articles by Johann Laux

Johann Laux

University of Oxford - Oxford Internet Institute

Sandra Wachter

University of Oxford - Oxford Internet Institute

Brent Mittelstadt

University of Oxford - Oxford Internet Institute

Date Written: April 9, 2021

Abstract

Online behavioural advertising (‘OBA’) relies on inferential analytics to target consumers based on data about their online behaviour. While the technology can improve the matching of adverts with consumers’ preferences, it also poses risks to consumer welfare as consumers face offer discrimination and the exploitation of their cognitive errors. The technology’s risks are exacerbated by the market power of ad intermediaries. This article shows how the Unfair Commercial Practices Directive (UCPD) can protect consumers from behavioural exploitation through incorporating market power analysis. By drawing on current research in economic theory, it argues for applying a stricter average consumer test if the market for ad intermediaries is highly concentrated. This stricter test should neutralize negative effects of behavioural targeting on consumer welfare. The article shows how OBA can amount to a misleading action and/or a misleading omission according to Articles 6 and 7 UCPD as well as an aggressive practice according to Article 8 UCPD. It further considers how the recent legislative proposals by the European Commission to enact a Digital Markets Act (DMA) and a Digital Services Act (DSA) may interact with the UCPD and the suggested stricter average consumer test.

Keywords: Online behavioural advertising, digital single market, consumer law, competition law, Unfair Commercial Practices Directive, market regulation, law and economics, platform economy, Digital Markets Act, Digital Services Act, EU, European Union

Suggested Citation

Laux, Johann and Wachter, Sandra and Mittelstadt, Brent, Neutralizing Online Behavioural Advertising: Algorithmic Targeting with Market Power as an Unfair Commercial Practice (April 9, 2021). Common Market Law Review, 58(3), 2021 (forthcoming), Available at SSRN: https://ssrn.com/abstract=3822962

Johann Laux (Contact Author)

University of Oxford - Oxford Internet Institute ( email )

1 St. Giles
University of Oxford
Oxford OX1 3PG Oxfordshire, Oxfordshire OX1 3JS
United Kingdom

Sandra Wachter

University of Oxford - Oxford Internet Institute ( email )

1 St. Giles
University of Oxford
Oxford OX1 3PG Oxfordshire, Oxfordshire OX1 3JS
United Kingdom

Brent Mittelstadt

University of Oxford - Oxford Internet Institute ( email )

1 St. Giles
University of Oxford
Oxford OX1 3PG Oxfordshire, Oxfordshire OX1 3JS
United Kingdom

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