regulator

The business models of Google and Facebook are impressive. In search and social media, respectively, they have become the way we source much of our information. Most can’t imagine life without them. With a clear commercial focus and almost imperceptibly to many users, these digital platforms have monetised our attention by using the data we freely give them. Their success and dominance in online advertising has become the driver of their market power. However, this power raises the question of the need for greater scrutiny as their influence becomes ubiquitous.

70% of Australian digital platform users use Google Search daily

58% use Facebook

29% use YouTube

22% use Instagram

Source: Roy Morgan Research 2018

Digital Platforms Inquiry

In December 2017, the ACCC began an inquiry into the effect digital search engines, social media platforms and other digital content aggregation platforms have on competition in media and advertising services markets. Our specific focus was on the supply of news and journalistic content and how this affects consumers, advertisers and content creators.

In our preliminary report, tabled in December last year, the ACCC concluded Google and Facebook have significantly disrupted the traditional way consumers communicate, access news and view advertising online. Therefore it’s imperative that the governing policy settings and regulatory framework are fit for purpose, particularly in this rapidly changing environment. The report contained 11 preliminary recommendations plus eight focus areas for further analysis. These will form the basis for extensive consultation and feedback.

The inquiry found these digital platforms are unavoidable business partners for many Australian media businesses. About 50 per cent of traffic to all media websites comes from Google and Facebook — they are gateways. Each month, 19 million Australians use the Google search engine while 17 million access Facebook to source information and news. We found that Google has substantial market power in online search, news referral and search advertising. Facebook has substantial market power in markets for social media, display advertising and online news referral.

Based on our findings, Google and Facebook have both the ability and incentive to favour related businesses or those businesses with which they may have an existing commercial relationship. The platforms’ algorithms rank and present the advertising and news content in a way that lacks transparency to advertisers and news organisations.

These businesses are more than mere distributors or intermediaries in the supply of news in Australia; they increasingly perform similar functions to media businesses such as selecting, curating and ranking content. Yet digital platforms face significantly less regulation than many media businesses.

Of course, in market economies industries come and go with “creative destruction”, but great care needs to be taken when dealing with the media and journalism, which perform such a critical role in society.

The Digital Platforms Inquiry also considered important questions regarding consumer awareness of the extensive amount of personal information collected by digital platforms and the use to which this is put. Companies with market power and massive amounts of data are in a strong position to decide what to do with that data — who to share it with. Australian law does not prohibit a business from possessing significant market power or using its efficiencies or skills to out-compete its rivals. However, when their dominant position risks creating competitive or consumer harm, governments should act to protect consumers and businesses through regulation, including ensuring the protection of consumer privacy.

The ACCC response

The ACCC proposes that a new or existing regulatory authority be given the task of investigating, monitoring and reporting on the activity of digital platforms. Its additional preliminary recommendations deal with copyright, takedown orders and the review of existing disparate media regulations.

Questions inevitably arise as to the role of government and what fundamental rights in relation to personal data should exist. As the regulator for both competition and consumers, the ACCC recognises that the issues Australia faces with digital platforms are not unique. The ACCC will discuss its findings and recommendations with regulators overseas.

The ACCC is currently assessing feedback on the preliminary recommendations and working on its final report (due 3 June) to ensure regulations and policies remain appropriate for the digital age.