ACCC: Facebook and Google's power distorts companies' ability to compete

The long-awaited Australian Competition and Consumer Commission (ACCC) report into the out-of-control growth and dominance of digital platforms has been released today, with the watchdog critical of giants Facebook and Google.

The overarching theme of the report can be distilled into the ACCC not trusting the platforms to self-regulate, with "holistic reform" required to stop them from growing further out of control.

A raft of reforms has been proposed in the 623-page report spanning competition law, consumer protection, media regulation and privacy law.

The watchdog has even recommended a new body be established within the ACCC dedicated exclusively to monitoring and investigating digital platform giants and their potential overreach into the lives of Australians.

"Our recommendations are comprehensive and forward looking and deal with the many competition, consumer, privacy and news media issues we have identified throughout the course of this Inquiry," says ACCC Chair Rod Sims.

"Importantly, our recommendations are dynamic in that they will provide the framework and the information that governments and communities will need to address further issues as they arise. Our goal is to assist the community in staying up to date with these issues and futureproofing our enforcement, regulatory and legal frameworks."

The ACCC says many of the adverse effects associated with digital platforms flow from the two major players in the online landscape: Facebook and Google.

These include how the platforms have "distorted" the ability of businesses to compete on their merits in advertising and media, the opaque and uncertain nature of automated and programmatic advertising, the little control users have over their personal data, the dominance the platforms have over news and content creators, and the rise of disinformation and mistrust of news.

"The dominant digital platforms' response to the issues we have raised might best be described as 'trust us'," says Sims.

"There is nothing wrong with being highly focused on revenue growth and providing increasing value to shareholders; indeed, it can be admired. But we believe the issues we have uncovered during this Inquiry are too important to be left to the companies themselves."

"Action on consumer law and privacy issues, as well as on competition law and policy, will all be vital in dealing with the problems associated with digital platforms' market power and the accumulation of consumers' data," Mr Sims said.

The report has eight chapters exploring the various impacts platforms like Google and Facebook have had on the media landscape and on the privacy of Australian citizens.

The recommendations of the watchdog can be broken down into six categories, detailed below:

Australian media business and news consumers

One of the biggest impacts of the emergence and unrestricted growth of platforms like Facebook and Google has been felt by Australia's media and news industry.

The platforms effectively control not just how news and journalism is disseminated, but what types of news and journalism thrive. Think of how clickbait thrives online while in-depth investigative journalism has been decimated by the social media industrial complex.

The ACCC recommends digital platforms provide the Australian Communications and Media Authority with codes to address the imbalance in the bargaining relationship between these platforms and news media businesses, and recognise the need for value sharing and monetisation of content.

The watchdog also believes targeted grants to support local journalism of about $50 million per year are necessary to ensure publications not only survive but thrive.

Promoting competition

The report highlights the acquisition of startups by large digital platforms has the potential to remove future competitive threats.

The ACCC recommends changes to Australia's merger laws to expressly require consideration of the effect of potential competition and to recognise the importance of data.

The watchdog also recommends that large digital platforms agree to a notification protocol that would alert the ACCC to proposed acquisitions that may impact competition in Australia.

Empowering consumers

The watchdog in its inquiry noted "problematic" data practices employed by these digital giants, with the potential to cause harm to consumers.

It is currently conducting investigations into some of these data practices to determine whether there has been a contravention of consumer law.

To deal with further data practices that do not fit neatly within the existing consumer law, the ACCC also recommends introducing a general prohibition on unfair commercial practices.

"Introducing this broad, flexible prohibition will increase consumer protections in fast-moving digital markets to safeguard consumers' ability to make informed and genuine choices," says Sims.

The ACCC further recommends a mandatory standard to bolster a digital platforms' internal dispute resolution processes and that an ombudsman scheme be established, to assist with resolving disputes and complaints between consumers and digital platform providers.

Protecting privacy

Strengthening the Privacy Act is a must according to the ACCC in order to protect consumers in digital markets.

The privacy policies of major digital platforms have been found to be "long, complex, vague and difficult to navigate".

"We're very concerned that current privacy policies offer consumers the illusion of control but instead are almost legal waivers that give digital platforms' broad discretion about how they can use consumers' data," says Sims.

"Due to growing concerns in this area, we believe some of the privacy reforms we have recommended should apply economy wide."

Continued scrutiny of digital platforms

Perhaps one of its most important recommendations is that a new branch be established within the ACCC to monitor and investigate anti-competitive conduct by digital platforms.

"We believe continuing scrutiny is necessary given the critical position that digital platforms occupy in the digital economy, their continued expansion and the opacity and complexity of the markets in which they operate," says Sims.

The first port of call for this branch would be to conduct an inquiry into the supply of ad-tech services and the supply of online advertising services by advertising and media agencies to determine whether any competition or efficiency concerns exist.

Expert regulators and agencies to play complementary roles

The ACCC recommends future law enforcement and regulation of digital platforms be dealt with by the current regulators including the ACMA, the OAIC and the ACCC.

"The ACCC, the ACMA and the OAIC are already working together closely and have now built up expertise in the areas covered by this Inquiry," says Sims.

"There has been global interest in this timely Australian inquiry and the many significant international reports and external developments in the past 18 months. These reports demonstrate the shared concerns and momentum for reform."

"The world has now recognised the impact of the digital platforms' market power and the impact this has on consumers, news, businesses and society more broadly. Continuing national and world action will now follow."

Today's report follows yesterday's announcement from Facebook that it was hit with a $5 billion fine form the US Federal Trade Commission (FTC).

The penalty also requires Facebook to enhance its practices and processes for privacy compliance and oversight.

The fine is the largest such fine ever paid to the FTC.

The ACCC report also comes just days after the US Department of Justice (DOJ) launched a review into whether America's largest tech companies are breaching antitrust laws.

The review will consider the effect tech giants have had on social media and retail services online.

It follows significant criticism levelled at social media giants Facebook, YouTube and Twitter following the 2016 Presidential election, during which it was alleged that Russian operatives used the platforms to spread misinformation in an attempt to sway the general public.

Facebook CEO Mark Zuckerberg, Twitter CEO Jack Dorsey and Google CEO Sundar Pichai have all recently appeared on Capitol Hill to testify before congress about privacy, the 2016 election and censorship.