Sponsored ranking: Effects on consumer welfare

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The Netherlands Authority for Consumers and Markets (ACM) has conducted a study into paid ranking (or sponsored ranking). Paid ranking involves providers paying extra in exchange for a higher position in search results on platforms. Many platforms use paid ranking. ACM has studied whether this practice poses any risks to consumers, and whether transparency requirements regarding paid ranking are effective. The study is based on information submitted by platforms, an assessment of the effect of a transparency measure on purchasing behavior, and on literature. Paid ranking can restrict competition on price and quality among providers|. Moreover, the platform may offer consumers less relevant recommendations because of the extra fees. At the moment, these risks are limited in real life, because the prevalence of paid ranking on most platforms is still limited. ACM does identify the risk that frequently used transparency measures are not easy-to-spot and/or not easy-to-understand. ACM’s effect assessment has revealed that the measure hardly had an effect on purchasing behavior. ACM will carry out a follow-up study into the effectiveness of transparency.