The dominance of Google and Facebook must be addressed through comprehensive reform, according to Australia’s competition watchdog, which has identified systemic problems in the digital media industry.

The ACCC today released its report on its inquiry into digital platforms, calling for new codes of practice, greater regulatory oversight, and reforms to Australian privacy law to bring it in line with current practice.

The regulator said it had little faith in the ability or intention of the US tech giants to address the problems on their own. 

Traditional publishers have welcomed the report while an industry group representing the platforms has warned overhanded reforms will threaten innovation and local jobs.

The federal government has accepted the reports overriding conclusion — the need for reform — and intends to provide a formal response by the end of the year.

The ACCC began an inquiry into digital platforms in 2017 with a particular focus on the industry’s two main players, US tech giants Google and Facebook, and their impact on media and journalism in Australia. The probe attracted over 180 submissions including those of consumers, publishers, advertisers and the platforms themselves.

The regulator concluded Facebook and Google’s substantial market power — in Australia Facebook platforms take over half of online display advertising while Google earns over 95 per cent of all search advertising revenue — has “ distorted the ability of businesses to compete on their merits in advertising, media and a range of other markets”.

ACCC chairman Rod Sims

The ACCC also found digital advertising supply chains are problematically opaque, consumers do not understand how their data is collected or what they are sacrificing for the “free” use of platforms, news content creators are reliant on the platforms but struggle to monetise their content, and the platforms facilitated the sharing of disinformation contributing to the rising mistrust of news.

ACCC Chair Rod Sims said it could not be left to the platforms to rectify these problems as they would be conflicted by their pursuit of profit.

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

“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,” Sims said.

Sweeping changes

In total the ACCC proposed 23 recommendations in its 623-page final report, summarised below:

  • 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 harmonising 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.

The ACCC has also proposed the establishment of its own digital platform branch to proactively monitor and investigate digital platforms and their ecosystem. Its first area of investigation would be a probe into the opaque advertising technology supply chain, according to the report.

Industry response

Channel Nine CEO Hugh Marks welcomed the report findings.

“We’d like to congratulate the ACCC and the government for the initiative they’ve taken and for the comprehensive nature of the response. We’re enthused by what we’ve seen so far,” Marks said in a statement.

The digital platforms, however, have questioned the proposed changes. Industry group DIGI, with members including Google and Facebook, said it looked forward to working with the government on the proposed changes but cautioned about “unintended consequences”.

“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 Sunita Bose, DIGI Managing Director.

“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.”

Update: Facebook has also released its own statement urging the government to strike a balance on reforms.

“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,” said Will Easton, Managing Director, Facebook Australia and New Zealand.

“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.”

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