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News & Analysis

Consumer watchdog the ACCC wants to crack down on Facebook and Google

- July 26, 2019 5 MIN READ

 

Australia’s consumer watchdog wants to lift the carpet on some of the world’s biggest and most powerful tech companies, especially Facebook and Google, to see how their greatest trade secrets work in sweeping changes to check their power in the nation’s digital economy.

The final report of the landmark Australian Competition and Consumer Commission (ACCC) Digital Platforms Inquiry, released today, contains 23 recommendations to address competition, consumer protection, media regulation, advertising and privacy in the digital age.

It’s a scathing 620-page assessment of the rise of Google and Facebook and how they assert their market power.

The review, which took 18 months, is being viewed as the last hope of waning traditional media companies bleeding advertising revenue to the likes of Google and Facebook. The ACCC does not disappoint saying the regulatory frameworks for media, communications and advertising need to change because they no longer allow competition on its merits.

“The ubiquity of the Google and Facebook platforms has placed them in a privileged position. They act as gateways to reaching Australian consumers and they are, in many cases, critical and unavoidable partners for many Australian businesses, including news media businesses,” the report says.

“The opaque operations of digital platforms and their presence in inter-related markets mean it is difficult to determine precisely what standard of behaviour these digital platforms are meeting.”

The inquiry concluded that the market power of Google and Facebook had distorted the ability of businesses to compete on their merits in a range of markets, including advertising and media. Digital advertising was particularly “opaque”, while news services became reliant on the dominant digital platforms, but faced difficulties monetising the content.

At the same time, the digital era led to a dramatic rise in fake news and distrust in news services.

Meanwhile, consumers had lost control of their data and were not adequately informed about how it was collected and used, with the ACCC arguing some of the ways it’s being used have “the potential to cause consumer harm” and may contravene Australian Consumer Law.

Trust us

ACCC Chair Rod Sims said the dominance of the leading digital platforms and their impact across Australia’s economy, media and society needed to be addressed with “significant” reform.

“The dominant digital platforms’ response to the issues we have raised might best be described as ‘trust us’,” he said.

“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.”

 

The competition watchdog wants increased powers to scrutinise, monitor and investigate potentially anti-competitive conduct by digital platforms, including take a peek at the top-secret algorithms used by Google and Facebook to drive their companies.  It wants the federal government to establish a specialist digital platforms branch within the ACCC, withstanding information-gathering powers to do it.

“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,” Rod Sims said.

One of the first things he wants the new arm to do is conduct an inquiry into the supply of ad-tech services and online advertising services by advertising and media agencies with a view to greater transparency into their supply.

Swallowing startups

The Inquiry also took a dim view of the voracious appetites of Facebook and Google when it came to acquiring startups, which the ACCC viewed as having the potential to remove future competitive threat, increase their access to data and entrench market power.

The ACCC wants changes to the country’s merger laws, as a result, to take that into account, as well as forcing large digital platforms to notify them of proposed acquisitions.

The report also calls on Google to follow European plans and allow Australian Android devices users to choose their search engine and internet browser from several options.

When it comes to consumer privacy and the use of their data, the ACCC wants a general prohibition on unfair commercial practices, with unfair contract terms prohibited and attracting fines, rather than the current regime where they’d simply voided.

“Introducing this broad, flexible prohibition will increase consumer protections in fast-moving digital markets to safeguard consumers’ ability to make informed and genuine choices,” Rod Sims said.

The watchdog wants a mandatory standard for dispute resolution, as well as an ombudsman to help resolve disputes and complaints between consumers and digital platform providers.

Privacy was also a concern, with the report recommending a strengthening of protections in the Privacy Act, the introduction of a privacy code of practice specifically for digital platforms, broader reforms to privacy law new civil laws for serious invasions of privacy.

The Inquiry found that digital platforms’ privacy policies are long, complex, vague and difficult to navigate and that many do not provide consumers with meaningful control over the collection, use and disclosure of user data.

It said problematic data practices include the use of ‘click-wrap’ agreements and take it or leave it terms.

“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,” Rod Sims said.

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

Media reforms in the Facebook age

The ACCC made recommendations to address the impact of Facebook and other digital giants on Australian media and access to ­­­­­­news.

They include:

  • Requiring designated digital platforms to each provide the Australian Communications and Media Authority (ACMA) 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
  • Addressing the regulatory imbalance that exists between news media businesses and digital platforms, by harmonizing the media regulatory framework
  • Targeted grants to support local journalism of about AU$50 million a year
  • Introducing measures to encourage philanthropic funding of public interest journalism in Australia
  • ACMA monitoring the digital platforms’ efforts to identify reliable and trustworthy news
  • Requiring the digital platforms to draft and implement an industry code for handling complaints about deliberately misleading and harmful news stories
  • Introducing a mandatory take-down ACMA code to assist copyright enforcement on digital platforms.

Shared policing

The ACCC wants future law enforcement and the regulation of digital platforms shared between the current regulators including the ACMA, the Office of the Australian Information Commissioner (OAIC), and the ACCC.

Rod Sims said the three agencies were already working together closely and built up expertise in the areas covered by the Inquiry.

The concerns expressed in the report are shared globally, he added

“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,” Sims said.

“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.”

You can read the 42-page executive summary into the final report here.

The full 620-page report is here.