The consumer regulator is sharpening its focus on big tech, warning platform giants are pervasively tracking Australian users and dominating the local online advertising markets in its first major update since its landmark Digital Platforms inquiry.
The ACCC late last week released its first six-monthly report on digital platform services, oversight set up as part of the government’s response to the 2019 Digital Platforms Inquiry, which uncovered systematic problems including the two market leaders Facebook and Google having become “unavoidable trading partners”.
The digital duopoly now take more than 80 per cent of online advertising spend in Australia, according to the regulator.
In the first follow up report the ACCC examines some of the competition and consumer issues with online private messaging services as well as updating its previous findings on social media and online search services, including commissioning its own research on the Australian market.
The regulator identifies an increasingly dominant market position of Facebook and Google and the endemic tracking of Australians online as threats to competition and consumers.
Tracking Australians online
While big tech companies routinely collect data from users while on their platforms, they also supplement it with data obtained through their role providing advertising and other services to websites and mobile applications.
“The ACCC’s website analysis found Google and Facebook had the largest presence in online tracking, with Google and Facebook’s third party scripts present on over 80 per cent and 40 per cent respectively of 1000 popular websites in Australia,” the report states. “Amazon and Microsoft tracking were present on nearly 30 per cent and almost 20 per cent of websites respectively.”
The digital duopoly has a pervasive presence in mobile applications too, according to the report. Google and Facebook app development kits, which allow the companies to receive user information, are present in 92 per cent and 61 per cent respectively of the 1000 most popular android apps in Australia.
Almost two thirds of the apps analysed for the regulator have the ability to transmit user information to Facebook, regardless of whether those users have Facebook accounts.
The types of information being collected online ranges from advertising IDs and non identifiable information to location data and sensitive information like audio recording, camera access and health data, according to the report. And the advertising industry’s privacy solutions appear to be having little impact.
“… apps transmitting a resettable advertising identifier alongside other identifiers, which would allow apps to continue tracking the same user, even if that user chose to reset the advertising identifier.”
Facebook and Google use the data to dominate digital advertising globally with the Australian market no exception. According to the regulator’s report, for a typical AU$100 spent by advertisers on online advertising in 2019, $53 went to Google, $28 to Facebook and $19 to all other websites and ad tech. Both Facebook and Google’s share of ad spend is increasing.
In a seperate ACCC investigation into online advertising services, both companies have argued data collection does not necessarily give them an anticompetitive advantage as it is “non-rivalrous” and it is the insights they can generate from data which gives them a competitive advantage.
The latest report suggests the pervasive tracking and market dominance is a concern for the ACCC on both competition and consumer protection grounds. Its report says consumers have a “limited understanding of the data practices they consent to and the majority view third party use as a misuse”.
“Recent research indicates that less than 10 per cent of consumers have a very good understanding of how their personal information is used once they give consent and more than 4 in 5 consider it to be a misuse for an organisation to ask for information that is not relevant to the purpose of the transaction or to monitor and record their online activities without their knowledge.”
A major survey by Australia’s privacy regulator last month made similar findings, with consumers reporting being uncomfortable with many of the common data collection practices of platforms, online businesses and digital marketers.
The ACCC says the data collection also puts consumers at risk of scams, which are increasing on platforms, and urged the companies to do more to clean up their platforms.
“The ACCC remains of the view that effective dispute resolution mechanisms to address complaints and disputes to digital platforms are needed, and the establishment of an independent ombudsman is important to address these harms.”
The regulator also reiterated its recommendations from the original Digital platforms inquiry that called for changes to privacy law and the Australian Consumer Law, noting the government had supported the reviews.
Private messaging competition
The latest report’s other area of focus is on online private messaging, a service increasingly popular for Australians during COVID-19. The ACCC examined Apple and its iMessage and FaceTime services as well as Facebook’s Messenger and WhatsApp platforms.
According to the regulator, while both have millions of users in Australia, only Facebook has a “significant competitive advantage” over other suppliers. That’s because the switching costs to Facebook’s service are relatively low as, unlike Apple’s, they don’t require expensive proprietary hardware.
According to the regulator, both companies rely on identity based network effects to attract users – the more a user’s friends, family, colleagues and acquaintances use the service, the more attractive that service is to the user.
“The significant size of each of the user bases of Facebook Messenger and WhatsApp, and the presence of these network effects, gives Facebook a significant competitive advantage over smaller suppliers of standalone services in Australia. In order to attract individual users away from Facebook, rival standalone services need to attract some or many of the user’s friends, family, colleagues and acquaintances to their service.”