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13 Dec 2018

ACCC seeks views on issues raised in Digital Platforms Inquiry Preliminary Report

Regulatory reform is necessary to monitor, and if necessary, correct the market power of organisations like Google and Facebook. That's the key finding in the ACCC's Digital Platforms Inquiry Preliminary Report, released on 10 December 2018 as the results of 12 months of investigation.

The ACCC seeks further comment and debate from interested stakeholders about its 11 preliminary recommendations and nine areas for further analysis, including the level of disclosure in the collection and use of consumer data. Submissions on the preliminary report are due by 15 February 2019, with the final report due for release on 3 June 2019.

From digital platform to digital publisher: the ACCC's key findings and concerns

The Report notes that the value of digital platforms to users and the lack of close alternatives has afforded both Google and Facebook substantial market power, and foreshadows both further inquiries and increased regulation of these platforms in the future. The Report states that Australia:

"[I]s at a critical point in considering the impact of digital platforms in society. While the ACCC recognises their significant benefits to consumers and businesses, there are important questions to be asked about the role the global digital platforms play in the supply of news and journalism in Australia, what responsibility they should hold as gateways to information and business, and the extent to which they should be accountable for their influence."

One of the ACCC's key preliminary findings is that Google and Facebook, with their rapidly growing market share, have disrupted the media-news business model and are the key gateway between consumers and news. The Reports states that news media businesses and digital platforms have a symbiotic relationship, and considers the ways in which this relationship has occurred, such as (for example) Google's ability to position the Google search engine as the source of all information, and for news stories, Google's positioning as an intermediary between consumers and providers of news and journalism. To date, however, digital platforms have not been subject to the types of regulation applied broadly to Australia's more traditional news and media businesses. This could change under the ACCC's preliminary recommendations.

The preliminary Report finds that both Google and Facebook are important sources of internet traffic (and therefore audience) for news media businesses in Australia and, combined, account for more than 50% of traffic to news media websites. It further notes that Google has substantial market power in supplying general search services in Australia (with a market share of around 94%) and in the market for search advertising, while Facebook has substantial market power in supplying social media services, and in the supply of display advertising.

A lack of transparency is highlighted in the operation of Google and Facebook's key algorithms, and in the other factors that influence the display of results on Google's search engine page, and the surfacing of content on Facebook's News feed. This lack of transparency will be a key focus for the ACCC in the future.

Among the ACCC's considerations is the extensive amount of personal information and data that digital platforms collect from consumers, and whether consumers are sufficiently protected by service and privacy terms to be able to make sufficiently informed decisions about the use and disclosure of personal data. One recommendation being considered by the ACCC would make it easier for Australians to delete their personal information from a digital platform. Conceptually, this is similar to the Consumer Data Right which currently applies in the banking sector and will give consumers greater access and control over the data companies hold about them.

Measures to address Google and Facebook's market power

The Report states that strategic acquisitions by both Google and Facebook have contributed to their market power. The following preliminary recommendations are intended to remove some potential impediments to the growth and independence of potential competitors to Google and Facebook:

  • Preliminary recommendation 1 – merger law: legislative reform to clarify that the likelihood of an acquisition removing a potential competitor, and the amount and nature of data which the acquirer would likely have access as a result of the proposed acquisition, are factors to be considered in any merger analysis.
  • Preliminary recommendation 2 – prior notice of acquisitions: the provision of advance notice by digital platforms such as Google and Facebook of acquisition intentions to enable a thorough review by the ACCC prior to a transaction closing.
  • Preliminary recommendation 3 – choice of browser and search engine: consumers should be offered the choice of browser and search engine rather than have a default setting on their operating system for their mobile, device and tablet.

Measures to monitor digital platforms' activities and the potential consequences of those activities for news media organisations and advertisers

A recurring theme in the Inquiry is that Google and Facebook play a critical role in enabling businesses to reach their consumers or audience, but a lack of transparency exists in the operation of algorithms and other factors. In particular, the Report notes that in the case of media markets, the lack of transparency causes concerns that the algorithms or policies may be operating in a way that affect competition in media markets, and/or the production of news and journalistic content. In addition, this lack of transparency compounds the ACCC's concerns that Google or Facebook's activities across multiple levels of the advertising supply chain could be favouring their own businesses interests above those of advertisers or potential competitors.

  • Preliminary recommendation 4 – advertising and related business oversight: a regulatory authority is proposed to be tasked to monitor, investigate and report on whether digital platforms which are vertically integrated and meet a relevant threshold, are engaging in discriminatory conduct.
  • Preliminary recommendation 5 – news and digital platform regulatory oversight: the regulatory authority could also monitor, investigate and report on the ranking of news and journalistic content by digital platforms and the provision of referral services to news media businesses. These functions could apply to digital platforms which disseminate news and journalistic content and which generate more than AU$100 million per annum in revenue in Australia).

Measures to address regulatory imbalance

If implemented, this recommendation would enable the ACCC to conduct a review of regulatory frameworks to identify unnecessary regulation, and to ensure that regulations are applied effectively and consistently across business types (eg. publishers, broadcasters, other media business, and digital platforms).

  • Preliminary recommendation 6 – review of media regulatory frameworks: the Government should conduct a separate, independent review to design a regulatory framework to effectively and consistently regulate the conduct of all entities which perform comparable functions in the production and delivery of content in Australia.

Measure to assist a more effective removal of copyright infringing material

The Report notes that rights holders in Australia, including media businesses, face particular difficulties requesting the take of copyright infringing content on digital platforms in a timely way.

  • Preliminary recommendation 7 – take-down standard: the Australian Communications and Media Authority determines a Mandatory Standard regarding digital platforms take down procedures for copyright infringing content to enable effectively and timely take down. This may take the form of amendments to the Telecommunications Act.

Measures to better inform consumers when dealing with digital platforms and to improve their bargaining power

One of the ACCC's observations is that many digital platforms collect a large amount and variety of user data, but that consumers are not able to make informed choices over the amount of data collected by digital platforms and how that data is used. The Report notes that current laws governing data collection have enabled digital platforms' data practices to undermine consumers' ability to select a product that best meets their privacy preferences. In addition, as stated by ACCC Chair Rod Sims, "[c]oncerns over data collection are heightened by the length, complexity, and ambiguity of online terms of services and privacy policies. This is an important point, there seems an understatement to consumers of the extent of data collection if you read the policies, and an overstatement to consumers of the level of control consumers have over their personal data use."

  • Preliminary recommendation 8 – use and collection of personal information: amend the Privacy Act to better enable consumers to make informed decisions by strengthening notification requirements, introducing an independent third-party certification scheme for certain businesses, strengthening consent requirements, enabling the erasure of personal information; and introducing direct rights of action for individuals.
  • Preliminary recommendation 9 – OAIC Code of Practice for digital platforms: OIAC engages with key digital platforms in Australia to develop an enforceable Code that would provide Australians with greater transparency and control over how their personal information is collected, used and disclosed by digital platforms. A Code would likely contain specific obligations on how digital platforms must inform consumers and how to obtain consumers' informed consent, as well as consumer controls over digital platforms' data practices.
  • Preliminary recommendation 10 – serious invasions of privacy: the Government adopt the Australian Law Reform Commission's recommendation to introduce a statutory cause of action for serious invasions of privacy.
  • Preliminary recommendation 11 – unfair contract terms: unfair contract terms should be illegal (not just voidable) under the Australian Consumer Law and civil pecuniary penalties should apply to their use, to deter digital platforms from using unfair contract terms in their terms of use.

The ACCC's 9 proposed areas for further analysis

The ACCC's research and analysis to date has identified a number of issues that could, or should, be addressed. However, the Report notes that many of these issues are complex and so in addition to its preliminary recommendations, 9 specific areas are identified as requiring further analysis and assessment. The issues that the ACCC is particularly interested in stakeholder views and analysis on are as follows:

  • Further consideration of measures to support choice and quality of news and journalism;
  • Improving news literacy online through the development of a broad campaign targeted at improving Australians' understanding of how news and journalism is curated and displayed on social media and other digital platforms;
  • Improving the ability of news media businesses to fund the protection of news and journalism;
  • The creation of a digital platforms ombudsman;
  • Monitoring the pricing of intermediary services supplied to advertisers or websites for the purpose of digital display advertising;
  • Third party measurement of advertising digital platforms;
  • Further consideration of measures to enable consumers to delete user data held by digital platforms;
  • Whether targeted advertising should require express, opt-in consent; and
  • Prohibition against unfair practices.

Submissions in response to issues raised in the ACCC's preliminary report, and other issues relevant to the terms of reference, are sought by 15 February 2019. The ACCC may also hold stakeholder forums early in 2019 although this has not been confirmed.

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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.