Neutralizing online behavioural advertising: Algorithmic targeting with market power as an unfair commercial practice

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 by incorporating market power analysis. 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 under Articles 6 and 7 UCPD, as well as an aggressive practice under 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.