ACCC Digital Platform Inquiry: Preliminary Report Released

Wednesday 12 December 2018 @ 2.21 p.m. | Corporate & Regulatory | Trade & Commerce

On Monday (10 December 2018) the Australian Competition and Consumer Commission (the ACCC) published its Digital Platform Inquiry: Preliminary Report (the Preliminary Report) which sets out 11 preliminary recommendations and eight areas to be further analysed as its inquiry continues.


The Preliminary Report was requested in December 2017 by the Australian Government, which directed the ACCC to undertake a public inquiry into the impact of digital platforms on competition in the media and advertising services markets, and in particular, in relation to the supply of news and journalistic content. The Preliminary report is the first part of the process with the ACCC aiming to provide a final report to the Government by 3 June 2019.

From the ACCC's media release:

"With Google and Facebook transforming the way consumers communicate, access news and view advertising online, it is critical that governments and regulators consider the potential issues created by the concentration of market power and the broader impacts of digital platforms."

Substantial Market Power

In its report, the ACCC 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 Preliminary Report the ACCC's concerns regarding the market power held by these key platforms are outlined, such as their impact on Australian businesses and, in particular, on the ability of media businesses to monetise their content. The Preliminary Report also looks at concerns arising from the extent to which the data of consumers is collected and used for the purpose of enabling targeted advertising. 

There is recognition in the Preliminary Report that Google and Facebook are now "the dominant gateways between news media businesses and audiences" and that as such this can reduce the brand value and recognition of media businesses.The traditional media businesses and in particular, the traditional print media businesses, have lost significant advertising revenue to digital platforms and this has threatened the viability of business models of the print media and their ability to pay for and profit from journalism. According to ACCC Chairman Rod Sims:

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

Filter Bubbles and Echo Chambers

In broad terms a "filter bubble" is a state of intellectual isolation that can result from personalised searches when a website algorithm selectively guesses what information a user would like to see based on information about the user, such as location or past click-behavior.  An "echo chamber", in internet parlance, is a description of a situation in which beliefs are amplified or reinforced by communication and repetition inside a closed system where people are able to seek out information which reinforces their existing views, effectively increasing political and social polarization and extremism.

The Preliminary Report indicates that the ACCC inquiry has also considered important questions about the range and reliability of news available via Google and Facebook and has formed the preliminary view that consumers face a potential risk of "filter bubbles", or "echo chambers", and thus less reliable news on digital platforms. While according to the Preliminary Report 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".

Amount of Consumer Data Collected 

In the Media Release relating to the Preliminary Report the ACCC has indicated it is also concerned with the large amount and variety of data which digital platforms such as Google and Facebook collect on Australian consumers. This collection of data goes way beyond the data which users actively provide when using these digital platforms. The ACCC's concern is supported by research commissioned as part of the Digital Inquiry which indicates consumers are concerned about the extent and range of information collected by digital platforms. 

The Preliminary Report also indicates the ACCC's concern with the nature of "terms and conditions" for the use of online platforms. In particular it is concerned about the length, complexity and ambiguity of online terms of service and privacy policies - including "click-wrap agreements" with "take-it-or-leave-it terms".

Preliminary Recommendations and Areas for Further Analysis

The ACCC indicates in their Preliminary Report that the preliminary recommendations along with the "areas for further analysis" have been put forward as potential options to address the actual and potential negative impacts of digital platforms and contribute to the debate about the appropriate level of government oversight required.

The first group of recommendations considers measures to address Google and Facebook’s market power.

In this group preliminary recommendation 1 looks a the merger laws and in particular the Competition and Consumer Act 2010 section 50(3), which identifies the factors to be taken into account in assessing the likely competitive effects of a merger or acquisition. These factors it is proposed could be amended to make it clearer that the following are relevant factors: the likelihood that an acquisition would result in the removal of a potential competitor, and the amount and nature of data which the acquirer would likely have access to as a result of the acquisition.

Preliminary recommendation 2, requiring prior notice of acquisitions, would see the ACCC ask large digital platforms (such as Facebook and Google) to provide advance notice of the acquisition of any business with activities in Australia and to provide sufficient time to enable a thorough review of the likely competitive effects of the proposed acquisition.

Preliminary recommendation 3 deals with choice of browser and search engine and the recommendation that suppliers of operating systems for mobile devices, computers and tablets be required to provide consumers with options for internet browsers (rather than providing a default browser); and suppliers of internet browsers be required to provide consumers with options for search engines (rather than providing a default search engine). Further, where options for internet browsers and search engines are presented, no option should be pre-selected.

The second group of recommendations deals with measures to monitor digital platforms’ activities and the potential consequences of those activities for news media organisations and advertisers.

Preliminary recommendation 4 deals with advertising and related business oversight and among other points indicates that a regulatory authority should be tasked to monitor, investigate and report on whether digital platforms, which are vertically integrated and meet the relevant threshold, are engaging in discriminatory conduct (including, but not limited to, conduct which may be anti-competitive) by favouring their own business interests above those of advertisers or potentially competing businesses.

Preliminary recommendation 5 deals with news and digital platform regulatory oversight and considers that the regulatory authority discussed in recommendation 4 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. The regulatory authority would apply to digital platforms generating more than AU$100 million per annum revenue in Australia and which also disseminate news and journalistic content, including by providing hyperlinks to news and journalistic content, or snippets of such content. The regulatory authority would have the power to investigate complaints, initiate its own investigations, make referrals to other government agencies and to publish reports and make recommendations.

The third group of recommendations looks at measures to address regulatory imbalance. 

Preliminary recommendation 6 considers the need to review the media regulatory frameworks and proposes the Government conduct a separate, independent review to design a regulatory framework that is able to effectively and consistently regulate the conduct of all entities which perform comparable functions in the production and delivery of content in Australia, including news and journalistic content, whether they are publishers, broadcasters, other media businesses, or digital platforms.

The fourth group of recommendations covers measures to assist a more effective removal of copyright infringing material.

Preliminary recommendation 7 proposes a "take-down standard" be established by recommending that the Australian Communications and Media Authority (ACMA) determine a "Mandatory Standard" regarding digital platforms’ take-down procedures for copyright infringing content to enable effective and timely take-down of copyright-infringing content. This "Mandatory Standard" may take the form of legislative amendments to the Telecommunications Act 1997 (Cth) enabling ACMA with the power to set a mandatory industry standard,

The fifth group of recommendations deals with measures to better inform consumers when dealing with digital platforms and to improve their bargaining powers.

Preliminary recommendation 8 deals with the use and collection of personal information and recommends amendments to the Privacy Act to better enable consumers to make informed decisions in relation to, and have greater control over, privacy and the collection of personal information. Amendments would:

  • Strengthen notification requirements
  • Introduce an independent third-party certification scheme
  • Strengthen consent requirements
  • Enable the erasure of personal information
  • Increase the penalties for breach
  • Introduce direct rights of action for individuals by giving individual consumers a direct right to bring actions for breach of their privacy under the Privacy Act.
  • Expand resourcing for the Office of the Australian Information Commissioner (OAIC) to support further enforcement activities

Preliminary recommendation 9 recommends the development of an enforceable OAIC Code of Practice for digital platforms. The code of practice would likely contain specific obligations on how digital platforms must inform consumers and how to obtain consumers’ informed consent, as well as appropriate consumer controls over digital platforms’ data practices.

Preliminary recommendation 10 recommends that the Government adopt the Australian Law Reform Commission’s recommendation that it introduce a statutory cause of action for serious invasions of privacy to increase the accountability of businesses for their data practices and give consumers greater control over their personal information.

Preliminary recommendation 11 proposes that unfair contract terms should be illegal (not just voidable) under the Australian Consumer Law, and that civil pecuniary penalties should apply to their use, to more effectively deter digital platforms, as well as other businesses, from leveraging their bargaining power over consumers by using unfair contract terms in their terms of use or privacy policies.

Responses to the Preliminary Report

The Sydney Morning Herald reported that Facebook had released a statement calling the recommendations ""unnecessary", "unprecedented" and "unworkable"", with Andy O’Connell, a senior policy executive from Facebook’s global headquarters in Menlo Park, California, releasing a statement saying:

“This idea that we would create a generalised algorithm regulator without a specific set of problems they are trying to fix, to make choices for consumers rather than putting users in control, it is pretty unprecedented...  I am not aware of any other country seriously looking at this idea of an algorithm regulator."

Mr O'Connell also said:

"There is not a lot of clarity in what it would do but ... it seems pretty unworkable... These algorithms are personalised feeds based on choices individual people have made, so it is really hard to conceive how a government body can intervene in those choices."

What Happens Next for the Inquiry

According to the ACCC 's Media Release, it is seeking feedback on its preliminary recommendations, and the eight proposed areas for further analysis and assessment which 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.

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