ACCC Hands Down Scathing Facebook-Google Report

Australia will have a new media regulatory framework by the end of 2019, after the government released the highly-anticipated Digital Platforms Inquiry by the ACCC this morning.

Treasurer Josh Frydenberg fronted the media alongside communications minister Paul Fletcher (pictured) to unveil the 600-page report, which sets out 23 recommendations to respond to the “substantial market power” that digital platforms like Facebook and Google now hold in Australia.

While accepting “the ACCC’s overriding conclusion that there is a need for reform”, Frydenberg did not announce any new policies that will shape the new framework, rather he announced a 12-week consultation process for interested stakeholders to provide feedback, before the government’s response is finalised by the end of the year.

The government said Facebook and Google need to be “held to account” for their market dominance.

“While the ACCC recognises the significant benefits provided by digital platforms, there are potentially adverse consequences of their growth that need to be considered,” says the commission in the report.

The report focusses on the way digital platforms impact consumers, media content creators and advertisers.

It also analyses the cyclical nature of Facebook and Google’s business models, asserting “the breadth and depth of the ongoing data collection reinforces their market power”.

The ACCC rules both Facebook and Google have “substantial market power” in the markets they operate in, which is “unlikely to erode in the short to medium term”.

In terms of display advertising, Facebook and Instagram now have a combined share of 51 per cent in Australia, which the ACCC says provides the social media giant with “substantial bargaining power in its dealings with news media businesses”.

And while Australian law does not prohibit a firm from possessing substantial power, the ACCC suggests “a firm with substantial market power could damage this competitive process by preventing or deterring rivals, including potential rivals, from competing on their merits”.

It is widely suggested Facebook’s dominance has been in part assisted by its acquisition of Instagram.

As part of its recommendations, the ACCC suggests Australia makes changes to merger law and requires advance notice of acquisitions.

Lack of transparency for advertisers, review into ad tech sector looms 

The report highlights the need for change around online advertising, particularly in regard to how Google and Facebook operate their respective ad businesses.

“It is unclear how Google and Facebook rank and display advertisements and the extent to which each platform self preferences their own platforms or businesses in which they have interests,” said the ACCC.

“A lack of transparency makes it difficult for advertisers to understand the factors that influence the display of their advertising to consumers and, in particular, to identify whether Google or Facebook are favouring their own business interests at the expense of rival advertisers and consumers.

“While the ACCC appreciates the significance of minimising the opportunity for businesses to ‘game’ the key algorithms, it is not clear that the appropriate balance has been struck between avoiding this risk and ensuring advertisers are appropriately informed of the outcomes.”

The lack of transparency also gives Facebook and Google the opportunity to “self-preference” and conduct other anti-competitive conduct, pointing to recent revelations of Google abusing its dominance in Europe.

Advertisers are unable to determine whether they are in fact receiving value for money when they purchase digital services due to the “complexity and opacity” of the ad tech supply chain.

As a result, the ACCC has recommended an inquiry into the supply of ad tech services and advertising agencies.

What it means for journalism

The report looked at how the reduction in advertising revenue over the last 20 years, primarily due to the rise of online advertising, may impact different types of journalism that may be at risk of under-provision in Australia.

Data collected by the ACCC shows that between 2008 and 2018, 106 local and regional newspaper titles closed across Australia, representing a net 15 per cent decrease in the number of these publications. The research indicates a significant fall in the number of articles published covering local government, local court, health and science issues during the past 15 years. The decline in provision of each of these categories of journalism coincides with reductions in Australian metropolitan journalists and reductions in print/online media revenue.

The role of public broadcasters was also looked at in the report. In recognition of the role performed by the ABC and SBS in addressing the public good nature of journalism and consequent risk of under provision of public interest journalism, the ACCC recommended that stable and adequate funding be provided to the ABC and SBS. The report found public broadcasters are not currently resourced to fully compensate for the decline in local reporting previously produced by traditional commercial publishers.

The ACCC also looked at the risk of consumers being exposed to deliberately misleading and harmful news when using digital platforms. The report recommended digital platforms establish an industry code to govern the handling of complaints about disinformation. This would relate to news and journalism where content has the potential to cause serious public detriment. This proposal seeks to improve transparency and help consumers by publicising and enforcing the procedures and responses that digital platforms must apply when dealing with these complaints.

The industry responds

DIGI – the industry association that advocates for Facebook, Google, Twitter and Verizon in Australia – urged the government to take a considered approach to the findings.

“We urge the Australian Government to assess the ACCC’s recommendations against an innovation test, closely examining how they will impact Australia’s digital industry at large and Australia’s global standing as a place to invest in technology,” said DIGI managing director Sunita Bose.

“The terms of reference of the Inquiry were to look at the impact of digital platforms on competition in the media and advertising services market, with the incredibly important goal of protecting the future of journalism.

“We’re closely reviewing these recommendations to ensure they don’t bring unintended consequences to all digital businesses and the choice of digital products available to Australian consumers.

“A thriving technology sector means having large and small, local and global companies all alongside each other, creating an ecosystem where the calibre of employees, business opportunities and the choice of digital services available to Australians all increase.”

A Google spokesperson said: “The Final Report examines important topics in relation to Australia’s changing media and advertising industry and we have engaged closely with the ACCC throughout the process. We will continue to engage with the Government on the recommendations put forward in this report.”

Facebook Australia and New Zealand managing director Will Easton said:  “Over the past 18 months, we’ve worked with the Australian Competition and Consumer Commission as they’ve reviewed the future of sustainable journalism and digital advertising in Australia.

“It is important to get the rules for digital news distribution right, as they could impact the 16 million Australians who use our services to connect, share, and build community, as well as the hundreds of thousands of small businesses that use our free tools to grow, thrive, and create jobs.

“We are fully committed to engaging in the consultation process around this report, while continuing to deliver the benefits of technology to the millions of Australians who use our services.”