News

What do food prices and Google’s ad rates have in common?  

They are both inflated by monopoly power.     

A recent economic study characterised pandemic era food price hikes as “a sellers’ inflation”, i.e.,  a consequence of market concentration where producers rather than consumers make the price. Widely reported macroeconomic factors, such as broken supply chains and soaring energy prices, were the implicit justification rather than the cause of inflation for customers “who would otherwise feel betrayed by the firms they are used to buying from if the price increase occurred without such legitimation.”  

Tellingly, food producers have continued to enjoy substantial profits even as volume has fallen.   

In the UK, where the cost of a weekly shop has increased by over £600 a year whilst supermarkets continue to make billion pound profits, LibDem leader Ed Davy has called for an inquiry into profiteering.   

By the same token, over-concentration in the digital advertising sector has been shown to significantly inflate the cost of advertising. This ultimately harms the consumer who indirectly incur the ad spend of any producers of consumer goods. For instance, when buying a Unilever-owned brand in Tesco, the consumer is essentially paying for the costs of production (and then some) of Unilever, a proportion of which is spent on advertising.   

The CMA found that the per UK household spend on advertising is £500 annually, far higher than it would otherwise be in a competitive market.   

Thus, Google and a handful of other dominant ad-tech players are equally responsible for the price inflation observed in the shop-front. They do not, however, experience they’re fair share of censure. Broadening the public understanding of their role in the exploitation of consumers is a crucial step in conveying the need for regulation to government.