The report comments
Overview On 4 December 2017, the then Treasurer, the Hon Scott Morrison MP, directed the Australian Competition and Consumer Commission (the ACCC) to hold an inquiry into the impact of online search engines, social media and digital content aggregators (digital platforms) on competition in the media and advertising services markets. The ACCC was directed to look at the implications of these impacts for media content creators, advertisers and consumers and, in particular, to consider the impact on news and journalistic content.
Digital platforms offer innovative and popular services to consumers that have, in many cases, revolutionised the way consumers communicate with each other, access news and information and interact with business. Many of the services offered by digital platforms provide significant benefits to both consumers and business; as demonstrated by their widespread and frequent use by many Australians and many Australian businesses.
The ACCC considers, however, that we are at a critical point in considering the impact of digital platforms on 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.
In particular, this report identifies concerns with the ability and incentive of key digital platforms to favour their own business interests, through their market power and presence across multiple markets, the digital platforms’ impact on the ability of content creators to monetise their content, and the lack of transparency in digital platforms’ operations for advertisers, media businesses and consumers. Consumers’ awareness and understanding of the extensive amount of information about them collected by digital platforms, and their concerns regarding the privacy of their data, are also critical issues. There are also issues with the role of digital platforms in determining what news and information is accessed by Australians, how this information is provided, and its range and reliability.
Digital platforms are having a profound impact on Australian news media and advertising. The impact of digital platforms on the supply of news and journalism is particularly significant. News and journalism generate broad benefits for society through the production and dissemination of knowledge, the exposure of corruption, and holding governments and other decision makers to account.
It is important that governments and the public are aware of, and understand, the implications of the operation of these digital platforms, their business models and their market power.
The ACCC’s research and analysis to date has provided a valuable understanding of the markets that are the subject of this Inquiry, including information that has not previously been available, and has identified a number of issues that could, or should, be addressed. Many of these issues are complex. The ACCC has decided that the best way to address these issues in the final report, due 3 June 2019, is to identify preliminary recommendations and areas for further analysis, and to engage with stakeholders on these potential proposals.
Such engagement may result in considerable change from the ACCC’s current views, as expressed in this report.
The ACCC’s preliminary recommendations are summarised on pages 9-14 and the specific matters for further analysis and assessment are summarised on pages 14–17. The ACCC welcomes feedback, and will use the preliminary recommendations and areas for further analysis identified in this report as the basis for further engagement with businesses, consumers and other stakeholders that have an interest in these issues.
In carrying out the Inquiry, the ACCC has looked generally at the three categories of digital platforms identified in the Terms of Reference, namely, digital search engines, social media platforms and digital content aggregators. However, the influence, significance and size of Google and Facebook, has resulted in them being the principal focus of the Inquiry. Google and Facebook are the two largest digital platforms in Australia and are the most visited websites in Australia. This focus also reflects the submissions received from interested parties and consumers, almost all of which concerned Google and Facebook.
The growth of digital platforms
Australian consumers are frequent users of digital platforms, and in particular the platforms operated by Google and Facebook. The use of these platforms has grown substantially over the past ten years and they are now an integral part of life for most Australians. Each month, approximately 19 million Australians use Google Search, 17 million access Facebook, 17 million watch YouTube (which is owned by Google) and 11 million access Instagram (which is owned by Facebook).
The ACCC recognises the transformational innovation provided by digital platforms such as Google and Facebook. The widespread and frequent use of digital platforms by consumers is an indication of the benefits that they derive from the platforms. Google Search, for example, has transformed the way consumers access information.
This widespread and frequent use of Google and Facebook means that these platforms occupy a key position for businesses looking to reach Australian consumers, including advertisers and news media businesses. Google and Facebook are critical and, in many cases, unavoidable business partners.
While the ACCC recognises the consumer benefits provided by digital platforms such as Google and Facebook, there are potentially adverse consequences from the growth of digital platforms that need to be considered:
ƒ the impact of digital platforms on the sustainability of the commercial news sector in Australia and the risk that particular news and journalism which is beneficial to society may be underprovided
ƒ the impact of digital platforms on advertisers
ƒ the impact of digital platforms on consumers in terms of digital platforms’ acquisition and treatment of consumers’ information as well as the reliability, quality and diversity of news provided to consumers by the platforms.
The disruption of Australian news media
Australian news media has been significantly impacted by digitalisation and the growth of digital platforms.
Traditionally, commercial media businesses in Australia have been reliant on advertising to fund news and journalism. The advertising revenue of key providers of news and journalism, the traditional print media, has declined substantially in the past 20 years for reasons including the rise of online advertising.
Australian commercial media, and in particular traditional print media, first suffered a significant reduction in advertising revenue with the unbundling of classified advertisements from newspapers. This resulted in a decline from $2 billion in classified advertising revenue in 2001 to $200 million in 2016.
At the same time, traditional print media (now print/online media) faced increased competition from both international sources and other media, both commercial and publicly funded. Consumers are now more easily and frequently able to access free-of-charge news from local as well as international sources.
Over the past decade, a strong fall in the print advertising revenue of commercial Australian media publishers has been accompanied by a rise in spending on online advertising .... It is also clear that digital platforms have taken an increasing share of advertising expenditure with a significant portion of the increase in online advertising revenue from 2014–2017 going to Google and Facebook
Importantly, the revenue of the traditional print publishers, including their overall advertising revenue, continued to decline even after the vast majority of classified revenue had shifted online.
Digital platforms also created opportunities and cost savings for online media, enabling news media businesses to reach a larger potential audience and by lowering the costs of journalists collecting news and information as well as significantly cutting distribution costs. However, at the same time the shift in advertising revenue online, and to digital platforms, appears to have reduced the ability of some media businesses to fund Australian news and journalism.
Census data shows that from 2006 to 2016, the number of people in journalism-related occupations fell by 9 per cent, and by 26 per cent for traditional print journalists (including those journalists working for print/online news media businesses). Data provided by media companies show the number of journalists in traditional print (now print/online) businesses fell by 20 per cent from 2014 to 2017. This is at a time when Australia’s population and economy were growing strongly.
While the ACCC recognises that there are wider sources of journalism and news available than in the past (such as blogs and podcasts), the ACCC is concerned with the reduction in the number of professional journalists. In particular, the ACCC is concerned that this continuing reduction in journalist numbers has led and will lead to a reduction in certain forms of journalism which are beneficial to society including, for example, local, regional and court reporting and public interest investigative journalism.
The reduction in journalist numbers is important given the critical role news and journalism perform in society. Even those members of the public that do not read, watch or listen to the news benefit from the role journalism performs in exposing corruption, the creation of public debate and holding governments, corporations and individuals to account through their questioning and investigation.
The extent to which the reduction in journalist numbers results in an underinvestment in news and journalism is not yet fully clear. The data, however, shows that there has been a downward trend in the number of journalists working in Australia, particularly for the traditional print (now print/online) sector. The risk of under provision is not a new risk and the ACCC recognises the difficulties in determining the extent to which digital platforms may contribute to the under-provision of any categories of news or journalism.
The ACCC is continuing to explore this issue, but as set out below, is considering a number of measures aimed at increasing the production and/or consumption of certain types of journalism, including public investigative journalism and also other forms of journalism that provide benefits to society.
Digital platforms: their business model and their market power
Google and Facebook have similar business models: both are reliant on consumer attention and consumer data in order to sell advertising opportunities Both Google’s and Facebook’s business models rely on attracting a large number of users and collecting rich data sets associated with those users. This enables them to offer highly targeted or personalised advertising opportunities to advertisers. The advertising revenue in turn allows them to invest in the functionality and services provided, improving the consumer experience and attracting greater numbers of users to the platform, as well as improving data gathering techniques. As more consumers are attracted to the platform, and increasingly detailed data is gained, more advertisers are likely to regard the platform as a valuable place to advertise.
Google has substantial market power
The ACCC’s preliminary report finds that Google enjoys substantial market power in a number of markets relevant to this Inquiry and that this power is unlikely to erode in the short to medium term:
ƒƒ Google has substantial market power in the supply of online search in Australia with approximately 94 per cent of online searches in Australia currently performed through Google.
ƒ Google has substantial market power in the supply of online search advertising. This flows directly from its substantial market power in the consumer facing market for online search.
ƒ Google has substantial market power in the supply of news media referral services. Google is a substantial source of referral traffic for news media businesses, and for many news media businesses, having links to their websites displayed on Google is a necessity.
Facebook has substantial market power
The ACCC’s preliminary report finds that Facebook also enjoys substantial market power in a number of markets relevant to this Inquiry and this market power is unlikely to erode in the short to medium term:
ƒ Facebook has substantial market power in the market for social media services (the consumer facing market). The Facebook and Instagram platforms, operated by Facebook have, by a significant margin, the largest audience in Australia of any social media platform. While the ACCC recognises that the threat of potential new entry may in theory provide a competitive constraint on Facebook, the considerable scale of Facebook (over 20 times that of MySpace at its peak) appears to protect it from dynamic competition, through the operation of same-side and cross-side network effects, as well as economies of scale.
ƒ Facebook has substantial market power in display advertising. Facebook and Instagram together obtain approximately 46 per cent of Australian display advertising revenue. No other website or application has a market share of more than five per cent.
ƒ Facebook has substantial market power in the supply of news media referral services. While there is some variation between news media businesses, Facebook is a substantial source of referrals for many news media businesses and a relationship with Facebook is unavoidable.
Australian law does not prohibit a firm from possessing a substantial degree of market power. Nor does it prohibit a firm with a substantial degree of market power from ‘out-competing’ its rivals by using superior skills and efficiency to win customers at the expense of firms that are less skilful or less efficient. However, a firm with substantial market power could damage this competitive process by preventing or deterring rivals, or potential rivals, from competing on their merits. That is, a firm with substantial market power could maintain or advance its position by restricting or undermining its rivals’ ability to compete, rather than by offering a more attractive product.
It is important to note that the Terms of Reference for this Inquiry are broad and do not focus on whether digital platforms have misused their market power but, instead, pose broader questions; including whether the digital platforms are exercising their market power in their dealings with advertisers and content creators.
Digital platforms and advertisers
Lack of transparency
There is a lack of transparency in the operation of Google and Facebook’s key algorithms, and the other factors influencing the display of results on Google’s search engine results page, and the surfacing of content on Facebook’s News feed. This lack of transparency makes it difficult for advertisers to understand the factors influencing 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 advertisers.
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.
The ACCC’s concerns with the lack of transparency extend to the operation of the intermediary services offered by the digital platforms. A range of intermediary services are offered by Google (and other businesses) to advertisers and websites in order to match advertising demand and supply. The processes used by these intermediary platforms and their share of the total advertising price are opaque which inhibits competition.
Risk of favouring related businesses or business interests
Google and Facebook operate across online advertising markets, offering advertising opportunities on their own owned and operated platforms, third party websites and platforms as well as a range of intermediary services.
Google and Facebook have both the ability and incentive to favour their own related businesses. They also have the ability and incentive to favour a business with which they have an existing relationship (and through which additional revenue may be generated), such as websites which are members of their display or audience network or which use other intermediary services. This ability and incentive derives from their market power, their presence across the multiple levels of the advertising supply chain as well as the opacity of key algorithms. Anti-competitive discrimination by digital platforms in favour of a related business has been found to exist in overseas cases. For example, in the European Commission’s 2017 decision, Google was found to have systematically given prominent placement to its own comparison shopping service (Google Shopping) and to have demoted rival comparison shopping services in its search results.
Monopoly or near monopoly businesses are often subject to specific regulation due to the risks of competitive harm. The risk of competitive harm increases when the monopoly business is vertically integrated. The ACCC considers that Google and Facebook each have substantial market power and each have activities across the digital advertising supply chain. Google in particular occupies a near monopoly position in online search and online search advertising, and has multiple related businesses offering advertising services.
These factors, combined with the roles the platforms perform as gateways to the internet and Australian consumers and the lack of transparency, justify a greater level of regulatory oversight as proposed in preliminary recommendation 4.
Questions over advertisement verification
The lack of transparency also means that advertisers are unable to verify whether advertisements are served to their intended audience. While independent third party verification may address these concerns, this depends on the nature of the verification the third parties are able to provide. The ACCC has not yet reached a view about the extent to which the current third party verification available overcomes this issue.
The inability for advertisers to verify the delivery and performance of their advertisements on Google and Facebook has the potential to lessen competition in the supply of advertising services. This is because it has the potential to mislead advertisers into thinking their advertisements perform better than they actually do. This impedes the transmission of price and quality signals in the market and encourages some advertisers to advertise on certain platforms rather than with competing suppliers of advertising services.
The ACCC welcomes further feedback on both the measurement undertaken by digital platforms and the ability of advertisers to verify such measurement so it can form a view in its final report.
Digital platforms and news media businesses
News media businesses and digital platforms have a symbiotic relationship
Content creators, including news media businesses, have a symbiotic relationship with the key digital platforms, in that they are rivals in the supply of display advertising opportunities and essential business partners. Both Google and Facebook are important sources of internet traffic (and therefore audience) for news media businesses. Approximately 50 per cent of traffic to Australian news media websites comes from Google or Facebook. The significance of the referral traffic from Google and Facebook to Australian news media businesses has provided these digital platforms with a substantial degree of market power in the market for news media referral services.
The content produced by news media businesses is also important to digital platforms. For example, between 8—14 per cent of Google search results trigger a “Top Stories” result, which typically includes reports from news media websites including niche publications or blogs. While the digital platforms clearly value the news media content which they are able to display to their users, Google and Facebook each appear to be more important to the major news media businesses than any one news media business is to Google or Facebook.
At the same time digital platforms have obtained a significant and increasing share of online advertising expenditure, traditional print media (now print/online media) have suffered a significant decline in advertising revenue. The reduction in advertising revenue has made it difficult for print/online media to monetise their content. The financial difficulties of the traditional print sector have occurred at the same time their content has been used by digital platforms to attract and retain consumers to their platforms.
Consequences of that relationship for news media
Given the reliance by news media businesses for traffic from Google and Facebook, digital platforms and their business models have a significant effect on news media businesses. Particular concerns include:
ƒƒ the lack of warning provided by digital platforms to news media businesses of changes to key algorithms relating to the display of news content or news referral links
ƒ the implementation of policies and formats that may have a significant and adverse impact on the ability of news media businesses to build or sustain a brand and therefore an audience, and
ƒ the impact of such policies on the incentives for news and journalistic content creation, particularly where significant effort is involved in researching and producing original content.
The ACCC considers that these concerns, in the case of Google, stem from the intention, and the ability, to position the Google search engine as the source of all information, and for news stories, the intention to position Google as an intermediary between consumers and providers of news and journalism. The ubiquity of the Google and Facebook platforms, and the lack of transparency in the operation of their algorithms, have had adverse effects on news publishers and their opportunities to monetise their content.
While a greater level of transparency to news media businesses may address some of these issues, the ACCC recognises that providing detailed information about a digital platform’s algorithms to news media businesses could provide opportunities for ‘gaming’ the algorithms or potentially involve exposing information confidential to the digital platform. The ACCC considers that oversight by a regulatory authority, as proposed in preliminary recommendations 4 and 5, would help address some of the concerns identified above.
Consequences of that relationship for news media regulation
Digitalisation and the increase in online sources of news and media content are also highlighting inconsistencies in the current, sector-specific approach to media regulation. Digital platforms increasingly perform similar functions to media businesses, such as selecting and curating content, evaluating content, and ranking and arranging content online. This means digital platforms actively participate in the online news ecosystem and are acting as considerably more than mere distributors or pure intermediaries in the supply of news and journalistic content in Australia.
However, virtually no media regulation applies to digital platforms. This creates regulatory disparity between some digital platforms and some more heavily-regulated media businesses that perform comparable functions, which could provide some digital platforms with an unfair advantage in attracting advertising expenditure because they operate under fewer regulatory restraints and have lower regulatory compliance costs.
The ACCC also considers that digital platforms could do more to assist in the timely take-down of copyright infringing content, including content belonging to Australian news media businesses.
Digital platforms and consumers
The services provided by Google, Facebook and other digital platforms are clearly valued by Australian consumers as demonstrated by their frequent and widespread use. However, the ubiquity of digital platforms mean many consumers feel they have to join or use these platforms, and agree to their non-negotiable terms of use, in order to receive communications and remain involved in community life.
A lack of informed and genuine choice
Many digital platforms increasingly collect a large amount and variety of user data. The data collected often extends beyond data that users actively provide when using the digital platform’s services. Digital platforms may passively collect data from users, including from online browsing behaviour across the internet, IP addresses, device specifications and location and movement data. The user data collected can enable digital platforms to create more detailed segmented user profiles, for use by advertisers wishing to target advertisements. Consumers have informed the ACCC that they have concerns over the extent and range of information collected by digital platforms.
The ACCC considers that consumers are better off if they can make informed and genuine choices in how digital platforms collect and use their data. The ACCC’s preliminary view is that consumers’ ability to make informed choices is impacted by:
ƒ The information asymmetry between digital platforms and consumers. The ACCC’s preliminary finding is that consumers are generally not aware of the extent of data that is collected nor how it is collected, used and shared by digital platforms. This is influenced by the length, complexity and ambiguity of online terms of service and privacy policies. Digital platforms also tend to understate to consumers the extent of their data collection practices while overstating the level of consumer control over their personal user data.
ƒ The bargaining power held by digital platforms vis-à-vis consumers. The ACCC also found considerable imbalance in bargaining power between digital platforms and consumers. Many digital platforms use click-wrap agreements with take-it-or-leave-it terms and bundled consents, which limits the ability of consumers to provide well-informed and freely given consent to digital platforms’ collection, use and disclosure of their valuable data.
Without adequate information on how digital platforms collect and use their users’ data, or the ability to choose between digital platforms on the basis of their data practices, consumers are unable to make informed decisions. This is likely to impede potential competition between digital platforms on the privacy and data protection offered. This may also impede the new entry of rival services that use alternative business models.
Lack of consumer protection and effective deterrence under existing laws
The lack of both consumer protection and effective deterrence under laws governing data collection have enabled digital platforms’ data practices to undermine consumers’ ability to select a product that best meets their privacy preferences.
As a result, competition may have been distorted in multiple sectors where consumer data is used, including those markets beyond the digital platform, media and advertising services markets the subject of this Inquiry.
Risk of filter bubbles and less reliable news
As noted above, digital platforms have a significant influence on access to the news and journalism consumed. Over 50 per cent of the traffic on Australian news media websites comes from Google and Facebook. While issues relating to authenticity and quality of news are not new or confined to journalism curated via algorithms, the ACCC’s preliminary view is that these risks are potentially magnified online. In particular, the ACCC considers that there is a risk that consumers accessing news via digital platforms may be at risk of greater exposure to less reliable news and potential filter bubbles. That said, while there is a real risk of these effects occurring, there is not currently strong evidence of filter bubbles, arising from digital platform use, in Australia.
What can be done to address these issues?
Governments should respond to current problems and anticipate future issues
We are at a critical time in the development of digital platforms and their impact on society. Digital platforms have fundamentally changed the way we interact with news, with each other and with government and business. It is also clear that the markets in which digital platforms and news media businesses operate will continue to evolve.
It is very important that governments recognise the role digital platforms perform in our individual and collective lives and to be responsive, and indeed proactive, in reacting to and anticipating challenges and problems.
The ACCC’s preliminary report aims to contribute to the wider debate about the role digital platforms play and the appropriate level of government oversight. The ACCC is proposing specific preliminary recommendations aimed at addressing the actual and potential negative impacts of digital platforms identified in this report. The ACCC has also identified a number of other proposals for further analysis and assessment.
International engagement
The ACCC recognises that the issues Australia is facing with digital platforms are not unique. Many other countries face similar concerns and are also taking steps to explore these issues. The ACCC intends to share and discuss its findings and recommendations with fellow regulators overseas, both directly and via its existing networks such as the Organisation for Economic Cooperation and Development (the OECD), the International Competition Network (the ICN) and the International Consumer Protection Enforcement Network (ICPEN).
Potential funding of regulatory functions
The ACCC notes that the regulatory functions discussed in the preliminary recommendations and areas for future analysis and assessment, identified below, could be funded in a variety of ways, including from direct government funding or via cost recovery, having regard to relevant government policy.
Preliminary recommendations
Measures to address Google and Facebook’s market power
The value of digital platforms to users and the lack of close alternatives has afforded both Google and Facebook substantial market power. The ACCC considers that Google has substantial market power in supplying general search services (with a current market share of approximately 95 per cent) and appears likely to retain its dominant share at least in the short to medium term. This substantial market power has been extended to the supply of online search advertising and the supply of news referral services to news media businesses.
The ACCC also considers that Facebook has substantial market power in supplying social media services in Australia via its Facebook and Instagram platforms. In addition, the ACCC considers that Facebook also has substantial market power in display advertising and the supply of news referral services to news media businesses.
While dynamic competition may place some degree of competitive constraint on Google and Facebook, the ACCC considers that this constraint is likely to be weak due to the size of the barriers to entry and expansion (including the value of accumulating data on users, which includes, but is not limited to, data on their use of the platform). The ACCC is also of the preliminary view that Google’s position as the current default search engine on the major browsers underpins its market power.
The ACCC has reached the preliminary view that strategic acquisitions by both Google and Facebook have contributed to the market power they currently hold.
The aim of the preliminary recommendations below is to remove some of the potential impediments to the growth and independence of potential competitors that may challenge that market power by:
ƒ strengthening merger laws and processes
ƒ promoting consumer choice by addressing the barriers caused by the pre-installation or establishment of default search engines or internet browsers.
Preliminary Recommendation 1—merger law
The ACCC considers that section 50(3) of the Competition and Consumer Act 2010, which identifies the factors to be taken into account in assessing the likely competitive effects of a merger or acquisition, could be amended to make it clearer that the following are relevant factors: (a) the likelihood that an acquisition would result in the removal of a potential competitor, and (b) the amount and nature of data which the acquirer would likely have access to as a result of the acquisition.
Preliminary Recommendation 2—prior notice of acquisitions
The ACCC is also intending to 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.
If such a commitment were not forthcoming from the major digital platforms other options could be considered to address this issue.
Preliminary Recommendation 3—choice of browser and search engine
The ACCC is considering recommending that:
(a) 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
(b) suppliers of internet browsers be required to provide consumers with options for search engines (rather than providing a default search engine).
The ACCC considers that where options for internet browsers and search engines are presented, no option should be pre-selected.
Measures to monitor digital platforms’ activities and the potential consequences of those activities for news media organisations and advertisers A recurring theme in this Inquiry is the market power of Google and Facebook and the critical role these platforms play in enabling businesses to reach consumers, including the ability of news media businesses to reach their audience. The algorithms operated by each of Google and Facebook, as well as other policies, determine which content is surfaced and displayed to consumers in news feed and search results. However, the operation of these algorithms and other policies determining the surfacing of content remain opaque.
In the case of the advertising markets, this lack of transparency compounds concerns that Google or Facebook may be favouring either their own related businesses or those businesses with which they have a particular commercial relationship. The ACCC considers that given Google’s and Facebook’s market power, as well as their presence across multiple levels of the advertising supply chain, each has the ability and incentive to favour its own business interests above those of advertisers or potential competitors.
In the case of the media markets, the lack of transparency causes concerns that the algorithms and policies may be operating in a way that affect competition in media markets, and/or the production of news and journalistic content.
Given the significance of these issues, the preliminary recommendation below calls for a regulatory authority to be tasked with monitoring, investigating and reporting on the criteria, commercial arrangements or other factors used by relevant digital platforms (identified according to objective criteria reflective of influence and size) to impact:
(a) the ranking and display of advertisements (or other content when displayed alongside advertisements) with the aim of identifying whether the platforms may be discriminating in favour of their own related businesses or a business with which they have a specific commercial relationship as well as the potential competitive effect
(b) the ranking and display of news and journalistic content with the aim of identifying the effects of algorithms or other policies on the production of news and journalistic content or competition in media markets.
The regulatory authority could also refer matters to other government agencies for investigation where relevant.
The ACCC considers that such a regulatory approach would provide assurances to both businesses and consumers that algorithms are not being used to favour certain businesses or, in the case of news stories, are operating in such a way as to cause significant detriment to the production of news and journalistic content or media markets. The ACCC also considers that this regulatory proposal would ensure Governments stay ahead of the game and are able to identify potentially significant consumer detriment.
The ACCC recognises the importance of preventing ‘gaming’ of algorithms by advertisers and news media businesses. Accordingly, while the ACCC is proposing to recommend that the regulatory authority report publicly on the performance and impact of key algorithms and policies, the ACCC is not proposing that the underlying information provided by the relevant digital platforms to the regulatory authority be made publicly available.
Preliminary Recommendation 4—advertising and related business oversight
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.
These functions could apply to digital platforms which generate more than AU$100 million per annum from digital advertising in Australia.
The regulatory authority could consider the digital platform’s criteria, commercial arrangements and other circumstances which impact competition between advertisers, suppliers of advertising services and digital platforms. This may include:
ƒ the ranking and display of advertisements and also organic content (when advertisements are displayed alongside the organic content)
ƒ whether the acquisition of any other product or service from the same digital platform (or a related business) affects the display or ranking of advertisements or content
ƒ the impact of any related business of a digital platform (e.g. how referral links appear in the search engine results page or social media news feed).
The relevant digital platforms would need to be obliged to provide information and documents to the regulatory authority on a regular basis, and the regulatory authority would need appropriate investigative powers. The regulatory authority could have the power to investigate complaints, initiate its own investigations, make referrals to other government agencies and to publish reports and make recommendations.
Preliminary Recommendation 5—news and digital platform regulatory oversight
The ACCC considers that 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 generate more than AU$100 million per annum in 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.
In performing its functions, the regulatory authority could consider the digital platform’s criteria, commercial arrangements and other factors that affect competition in media markets or the production of news and journalistic content in Australia. This may include: (a) the rankings of news and journalistic content presented to consumers (b) the referrals of consumers to media businesses.
The relevant digital platforms would need to be obliged to provide information and documents to the regulatory authority on a regular basis, and the regulatory authority would need appropriate investigative powers.
The regulatory authority could have the power to investigate complaints, initiate its own investigations, make referrals to other government agencies and to publish reports and make recommendations.
Measures to address regulatory imbalance Publishers, broadcasters and other media businesses, and digital platforms operate under different regulatory frameworks. The purpose of the preliminary recommendation below is to conduct a review of these frameworks to identify unnecessary regulation and to ensure, where practicable, regulations are applied effectively and consistently across business types, both online and offline.
Preliminary Recommendation 6—review of media regulatory frameworks
The ACCC proposes to recommend 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.
Such a review should focus on content production and delivery and consider the following matters:
ƒ Underlying principles: creating clear guiding principles for an overarching platform-neutral regulatory regime that can apply effectively across media formats and platforms, with common rules applying to online and offline activities, and which is adaptable to new services, platforms and technologies.
ƒExtent of regulation: setting objective factors to determine whether regulations should be imposed on certain enterprises and determining appropriate roles for self-regulation and co-regulation.
ƒ Content rules: creating a nationally-uniform classification scheme to classify or restrict access to content regardless of the format of delivery.
ƒ Enforcement: implementing appropriate enforcement mechanisms and meaningful sanctions, including whether it is appropriate to establish or appoint a single agency responsible for monitoring, enforcing, complaints-handling, and administering the unified regulatory framework.
The implementation of a unified, platform-neutral framework will affect and simplify existing regulations across the different media, communications and telecommunications industries. The ACCC would intend to contribute its knowledge and expertise to such a review.
Measure to assist a more effective removal of copyright infringing material
Rights holders in Australia, including media businesses, face particular difficulties requesting takedown of copyright-infringing content on digital platforms in a timely way. This is, in part, due to the uncertainties in establishing authorisation liability (that is, liability for ‘authorising’ a copyright infringing act) in relation to digital platforms. The purpose of the proposed recommendation below is to encourage the development of timely and effective procedures for the take-down of copyright infringing content of Australian rights holders on digital platforms and increase the enforceability of copyright protections online.
Preliminary Recommendation 7—take-down standard
The ACCC proposes to recommend that the 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 may take the form of legislative amendments to the Telecommunications Act so that the ACMA has the power to set a mandatory industry standard applicable to digital platforms under Part 6 of the Telecommunications Act.
Measures to better inform consumers when dealing with digital platforms and to improve their bargaining power A key preliminary finding of the Inquiry is that consumers are unable to make informed choices over the amount of data collected by the digital platforms, and how this data is used. This reflects the bargaining power held by the digital platforms vis-à-vis consumers, and the information asymmetries that exist between digital platforms and consumers.
In Australia, the collection, use and disclosure of personal information is primarily regulated under privacy laws, though the increasing volume and importance of data in the digital economy means that the collection, use and disclosure of user data increasingly impacts on competition, innovation, and consumer protection issues in Australian markets. The ACCC considers that the current regulatory framework, including privacy laws, does not effectively deter certain data practices that exploit the information asymmetries and the bargaining power imbalances that exist between digital platforms and consumers.
The preliminary recommendations below aim to better inform consumers when dealing with digital platforms and to improve their bargaining power.
Preliminary Recommendation 8—use and collection of personal information
The ACCC proposes to recommend the following 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. In particular, recommendations (a) and (b) are aimed at reducing information asymmetries to improve the transparency of digital platforms’ data practices. Recommendations (c) and (d) seek to provide consumers with stronger mandated controls over the collection, use, disclosure and erasure of their personal information to lessen the bargaining power imbalance between consumers and digital platforms. Recommendations (e) to (g) are measures to increase the deterrence effect of the Privacy Act.
(a) Strengthen notification requirements: Introduce an express requirement that the collection of consumers’ personal information directly or by a third party is accompanied by a notification of this collection that is concise, transparent, intelligible and easily accessible, written in clear and plain language (particularly if addressed to a child), and provided free of charge.
(b) Introduce an independent third-party certification scheme: Require certain businesses, which meet identified objective thresholds regarding the collection of Australian consumers’ personal information, to undergo external audits to monitor and publicly demonstrate compliance with these privacy regulations, through the use of a privacy seal or mark. The parties carrying out such audits would first be certified by the OAIC.
(c) Strengthen consent requirements: Amend the definition of consent to require express, opt-in consent and incorporate requirements into the Australian Privacy Principles that consent must be adequately informed (including about the consequences of providing consent), voluntarily given, current and specific. This means that settings that enable data collection must be pre-selected to ‘off’. The consent must also be given by an individual or an individual’s guardian who has the capacity to understand and communicate their consent.
(d) Enable the erasure of personal information: Enable consumers to require erasure of their personal information where they have withdrawn their consent and the personal information is no longer necessary to provide the consumer with a service.
(e) Increase the penalties for breach: Increase penalties for breaches of the Privacy Act to at least mirror the increased penalties for breaches of the Australian Consumer Law.
(f) Introduce direct rights of action for individuals: Give individual consumers a direct right to bring actions for breach of their privacy under the Privacy Act.
(g) Expand resourcing for the OAIC to support further enforcement activities: Provide increased resources to equip the OAIC to deal with increasing volume, significance, and complexity of privacy-related complaints.
Preliminary Recommendation 9—OAIC Code of Practice for digital platforms
The ACCC proposes to recommend that the OAIC engage with key digital platforms operating in Australia to develop an enforceable code of practice under Part IIIB of the Privacy Act to provide Australians with greater transparency and control over how their personal information is collected, used and disclosed by digital platforms. A code would allow for proactive and targeted regulation of digital platforms’ data collection practices under the existing provisions of the Privacy Act.
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. The ACCC should also be involved in the process for developing this code in its role as the competition and consumer regulator.
Preliminary Recommendation 10—serious invasions of privacy
The ACCC proposes to recommend that the Government adopt the Australian Law Reform Commission’s recommendation to 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—unfair contract terms
The ACCC proposes to recommend 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.
Proposed areas for further analysis and assessment
The ACCC has identified 9 areas where further analysis and assessment is required. The ACCC is particularly interested in views and analysis on the following issues.
1. Supporting choice and quality of news and journalism
The Terms of Reference direct the ACCC to consider the impact of digital platforms on the level of choice and quality of news and journalistic content to consumers. In considering the impact of the digital platforms on the quality of news and journalistic content, the ACCC has not attempted to undertake an empirical assessment of news and journalistic content. However, consistent with existing codes and frameworks that aim to hold Australian journalists and news media businesses to account, the ACCC considers that there are certain aspects of the process of producing news which are important indicators of quality, such as objectivity, accuracy (fact-checking) and the performance of functions such as analysis and investigation.
The rapid digitisation of news and the growth of the digital platforms have led to the atomisation of news and, for some consumers, a disconnect between news content and its source. These consumers may not know where their news comes from and whether the creator of that news content has committed to journalistic processes, such as fact checking and accuracy. Combined with the algorithmic selection of news, this potentially exposes individuals/consumers to the risk of filter bubbles or echo chambers, as well as the risk of unreliable information.
While the extent of these effects in Australia is not yet clear, the ACCC is concerned that there is a real risk of these consequences either now or in the immediate future. The ACCC is therefore considering proposals to provide greater transparency to consumers about the news they consume on digital platforms. The ACCC notes that some digital platforms, including Facebook and Google, are taking steps to signal and/or curate content served to consumers. In so doing, the platforms are making their own decisions regarding the quality or “trustworthiness” of the content to be served to consumers. While these steps may be well intentioned, individual decisions by platforms on these key factors may reflect their own interests and may not necessarily serve consumers well. The ACCC considers that a more transparent approach may be preferable.
The ACCC is considering whether digital platforms and media businesses should be required to take steps to increase the ability of consumers to make informed choices about news and journalism accessed via digital platforms. This proposal would not interfere with how the algorithms select and display news and journalism, the news stories which consumers may choose to access (consumer choice) or press freedom. The ACCC is particularly interested in feedback from news media businesses and journalists as to the potential operation of the proposal below and the relationship with existing codes of journalistic practice.
(a) Digital platforms would be required to signal, in their display of content to consumers, content from news media businesses that have signed up to certain standards for the creation of news and journalistic content by complying with registered codes of journalistic practice. This signalling could be by way of a ‘badge’ on the news content as it appears in search results or a user’s news feed.
(b) The ACMA would recognise codes of journalistic practice from news media representative groups that contain principles and processes, including but not limited to accuracy (fact-checking), clarity, and avoidance of harm.
(c) Digital platforms would be required to inform consumers about the processes put in place to ensure accountability and to better inform consumers about how their news and journalistic content is curated and displayed to them (for example, via a badge or signal).
(d) The obligations on digital platforms to take these steps could be contained in separate ACMA approved code(s) submitted by the digital platforms, or mandated by the ACMA.
As discussed further in chapters 4 and 6, the ACCC recognises that many Australian news media businesses are already subject to sectoral specific regulation aimed at journalistic standards of accountability (or in the case of traditional print media, a degree of self-regulation via the Australian Press Council). The ACCC is interested in exploring whether the existing sector specific codes of conduct (including the codes administered by Free TV or the Australian Press Council) could be the type of codes to be recognised by the ACMA.
2. Improve news literacy online
The ACCC is considering measures aimed at increasing news literacy and is considering recommending that the ACMA work with the leading digital platforms to develop a broad campaign targeted at all Australians, to improve their understanding of how news and journalism is curated and displayed on social media and other digital platforms.
3. Improving the ability of news media businesses to fund the production of news and journalism
As set out above, news and journalism have broad public benefits to society and the ACCC is concerned at the risk of under-provision. Australia’s existing policy and regulatory arrangements support the production of news and journalism in a number of ways. The most obvious is the public funding of the ABC and SBS, which deliver quality, independent news and journalism and add plurality. Commercial broadcasters, both TV and radio, also receive a level of public support via access to spectrum at below-market rates.
The ACCC considers that traditional print media (now print/online media) also play an important role in providing diversity and quality news and journalism. The ACCC is therefore continuing to consider mechanisms to maintain the incentives on print/online news media businesses to invest in news and journalism, particularly those types of news and journalism which may be at risk of being under-produced. At this stage, the ACCC has identified three potential options on which it would like feedback:
(a) A review of the impacts of the measures comprising the Regional and Small Publishers’ Jobs and Innovation Package in 2018–19 to determine whether the Package should be continued beyond its current three year funding profile (and potentially modified or expanded)
(b) Tax offsets for the costs incurred by news media organisations to produce particular types of journalism that have high public benefits and are at risk of under-production. The ACCC recognises the difficulties in determining the scope of such a subsidy and the risk of misappropriation or fraud
(c) Making personal subscriptions for publications by media businesses that are signatories to a registered ACMA code of practice, as set out in the potential proposal described above, tax deductible to encourage production and consumption of news and journalism.
The ACCC recognises that there can be concerns with implementing and proposing tax incentives and subsidies. Nevertheless, such arrangements can on occasion be a suitable option to achieve a particular objective. The ACCC welcomes feedback and suggestions regarding these or other approaches, including potential Government grants, which may maintain the incentives on news media businesses to invest in news and journalism, particularly those types of news and journalism which may be at risk of being under-produced.
4. A digital platforms ombudsman
The ACCC considers that one effect of Google’s and Facebook’s substantial market power in the markets for search and display advertising respectively, is that some advertisers, particularly small businesses, are unable to negotiate the terms on which they do business with Google and Facebook. This can be evident in the difficulties businesses may encounter when attempting to seek effective dispute resolution.
The ACCC is considering whether an ombudsman could be established to deal with complaints about digital platforms from consumers, advertisers, media companies, and other business users of digital platforms. For example, an ombudsman may have the power to resolve some or all of the following:
(a) disputes from businesses that consider digital platforms’ representations as to the performance or likely performance of purchased advertising to be inaccurate or unsubstantiated
(b) disputes from consumers relating to scams and the removal of such content
(c) disputes from media companies relating to the surfacing and ranking of news content
(d) disputes from businesses relating to false or misleading advertising.
An ombudsman could investigate complaints that are unable to be resolved by the internal dispute resolution mechanisms of digital platforms and make decisions that are binding on digital platforms. Terms of reference could set out the types of disputes the ombudsman can consider, how the ombudsman will resolve disputes and remedies the ombudsman can recommend or implement. The ACCC does not intend for any of the functions to duplicate those proposed elsewhere for a regulatory authority.
5. Monitoring of intermediary pricing
The ACCC considers that a regulatory authority could have the power to monitor the pricing of intermediary services supplied to advertisers or websites for the purpose of digital display advertising. To achieve this, businesses offering these services earning revenue exceeding a certain threshold (e.g. revenue in Australia greater than AUD 5million) could be required to provide a regulatory authority with details on: (a) the median price charged for each product offered (b) an explanation of how that price is determined (c) the revenue received for supplying each product or service (d) any discounts, rebates or other incentives offered to customers
This information should be provided at least once a year, or as required by the regulatory authority. The regulatory authority could be required to report publicly on this information.
6. Third party measurement of advertisements served on digital platforms
The ACCC is considering whether there is an ability for advertisers to verify whether advertisements on digital platforms, including Google and Facebook, are delivered to their intended audience and whether there may be instances where the performance of digital advertising is overstated; or advertisers are misled into thinking more consumers viewed their advertisements than actually did. The ACCC is examining the extent to which the current level of third party measurement overcomes these problems. The ACCC is seeking further feedback on the effectiveness of current mechanisms for verifying whether advertisements are served to their intended audience. If current mechanisms are not sufficient, the ACCC would be assisted by feedback and suggestions for mechanisms that are needed to address this issue.
7. Deletion of user data
The ACCC is considering whether there should be an explicit obligation to delete all user data associated with an Australian consumer once that user ceases to use the digital platform’s services or whether user data should automatically be required to be deleted after a set period of time. This obligation would seek to go further than preliminary recommendation 8(d) as it would not require a user to actively request the deletion of the data and would prevent open-ended retention of data.
ACCC invites views on the feasibility of such an obligation, and the appropriate timeframe for such deletion.
8. Opt-in targeted advertising
The ACCC is considering whether, in addition to proposed preliminary recommendation 8(c), consumer consents in relation to targeted advertising should be further strengthened by prohibiting entities from collecting, using, or disclosing personal information of Australians for targeted advertising purposes unless consumers have provided express, opt-in consent. Under such a proposal, consumers receiving advertising-funded services (including via a social media platform or search engine) can still be required by the platform to consent to view advertisements but the user must not be required to consent to view targeted advertisements based on their user data or personal information in order to use the platform. Such a requirement would be proposed to apply beyond entities covered by the Privacy Act to ensure coverage of all entities which may collect data for this purpose.
9. Prohibition against unfair practices
In its 2017 review of the Australian Consumer Law, Consumer Affairs Australia and New Zealand recommended to governments that exploration be undertaken as to how an unfair trading prohibition could be adopted within the Australian context to address potentially unfair business practices.
The ACCC is considering whether its exposure to issues through this Inquiry considerably strengthens the need for a general prohibition against the use of unfair practices in the Australian Consumer Law. Such a prohibition could deter digital platforms and other businesses from engaging in conduct that falls short of societal norms, but which is not currently captured under the Australian Consumer Law.
As in overseas jurisdictions, such a prohibition could involve boundaries to ensure it is appropriately targeted, for example by applying to practices that:
ƒ cause, or are likely to cause, substantial detriment to consumers,
ƒ the substantial detriment is not reasonably avoidable by consumers themselves, and
ƒ the detriments are not outweighed by countervailing benefits to consumers or to competition
