ACCC Digital Inquiry Preliminary Report: ‘Google & Facebook Substantially Powerful’

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The Australian Competition & Consumer Commission (ACCC) has released its Digital Platforms Inquiry preliminary report, which dives into Google, Facebook and Australian news and advertising.

The inquiry into digital platforms kicked off in February of this year, with the ACCC calling for submissions from Australian media outlets and publishers to determine if the likes of Facebook’s and Google’s algorithms have breached consumer protection laws.

Several networks and media organisations entered submissions into the inquiry in the months following.

Now, the ACCC is offering 11 preliminary recommendations and eight areas for further analysis as the inquiry continues in its preliminary report.

According to the ACCC, the commission has reached the view that Google has substantial market power in online search, search advertising and news referral, and Facebook has substantial market power in markets for social media, display advertising and online news referral.

In the report, the ACCC detailed Google and Facebook’s dominance over traditional media in ad spend with a series of graphs, one of which pinpoints 2013 as the year online spending took over print media. shareofadspend

The report also outlines the ACCC’s concerns regarding the market power held by these key platforms, including their impact on Australian businesses and, in particular, on the ability of media businesses to monetise their content.

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The report addresses concerns regarding the extent to which consumers’ data is collected and used to enable targeted advertising.

Speaking on the findings, ACCC Chair Rod Sims said: “Digital platforms have significantly transformed our lives, the way we communicate with each other and access news and information.

“We appreciate that many of these changes have been positive for consumers in relation to the way they access news and information and how they interact with each other and with businesses.”

“But digital platforms are also unavoidable business partners for many Australian businesses.

“Google and Facebook perform a critical role in enabling businesses, including online news media businesses, to reach consumers.

“However, the operation of these platforms’ key algorithms, in determining the order in which content appears, is not at all clear.”

According to the ACCC, Google and Facebook are now the dominant gateways between news media businesses and audiences and this can reduce the brand value and recognition of media businesses.

In addition traditional media businesses and in particular, traditional print media businesses, have lost advertising revenue to digital platforms.

This has threatened the viability of business models of the print media and their ability to monetise journalism.

“News and journalism perform a critical role in society,” Sims added.

“The downturn in advertising revenue has led to a cut in the number of journalists over the past decade.

“This has implications across society because of the important role the media plays in exposing corruption and holding governments, companies, powerful individuals and institutions to account.”

The ACCC’s preliminary view is that consumers face a potential risk of filter bubbles, or echo chambers, and less reliable news on digital platforms.

While the evidence of filter bubbles arising on digital platforms in Australia is not yet strong, the importance of this issue means it requires close scrutiny.

The ACCC added, “The report found that key digital platforms, Google and Facebook, had 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 display advertising and news content in a way that lacks transparency to advertisers and news organisations.”

Speaking on the preliminary report, a Nine spokesperson said: “Nine welcomes the preliminary report by the ACCC into digital platforms.

“We are pleased the ACCC has taken this issue raised by Nine and other media organisations very seriously.

“The report suggests some promising and real solutions that are encouraging.

“We will now review the report in detail with a view to a more detailed response.”

The report makes preliminary recommendations aiming to address Google and Facebook’s market power and promote increased consumer choice, including a proposal that would prevent Google’s internet browser (Chrome) being installed as a default browser on mobile devices, computers and tables and Google’s search engine being installed as a default search engine on internet browsers.

The ACCC also proposes that a new or existing regulatory authority be given the task of investigating, monitoring and reporting on how large digital platforms rank and display advertisements and news content. Other preliminary recommendations suggest ways to strengthen merger laws.

Sims added: “Organisations like Google and Facebook are more than mere distributors or pure intermediaries in the supply of news in Australia; they increasingly perform similar functions as media businesses like selecting, curating and ranking content.

“Yet, digital platforms face less regulation than many media businesses.

“The ACCC considers that the strong market position of digital platforms like Google and Facebook justifies a greater level of regulatory oversight.

“Australian law does not prohibit a business from possessing significant market power or using its efficiencies or skills to ‘out compete’ its rivals.

“But when their dominant position is at risk of creating competitive or consumer harm, governments should stay ahead of the game and act to protect consumers and businesses through regulation,” he added.

According to the ACCC, the comission is still seeking feedback on its preliminary recommendations, and the eight proposed areas for further analysis and assessment.

These eight areas for further analysis include the proposed ‘badging’ by digital platforms of media content, produced by an accountable media business, as well as options to fund the production of news and journalism, such as tax deductions or subsidies, a digital platforms ombudsman to investigate complaints and provide a timely and cost effective means to resolve disputes, and a proposal for digital platforms to allow consumers to opt out of targeted advertising.

“The inquiry has also uncovered some concerns that certain digital platforms have breached competition or consumer laws, and the ACCC is currently investigating five such allegations to determine if enforcement action is warranted,” Sims said.

 

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