The eagerly awaited preliminary report into Google, Facebook and Australian news and advertising sector has been revealed – citing 11 preliminary recommendations and nine areas for further analysis as the inquiry continues.
The report, with the full version expected in June next year, outlines the Australian Competition & Consumer Commission's (ACCC) concerns regarding the market power held by these major platforms, including their impact on Australian businesses.
In particular, it looks at the ability of media businesses to monetise their content and the extent to which consumers’ data is collected and used to target advertising.
Due to it being such a “critical time in the development of digital platforms and their impact on society”, governments should respond to current problems and anticipate future issues, the report says.
ACCC chair Rod Sims says there is no doubt that Google has substantial market power in online search, search advertising and news referral, whereas Facebook has substantial market power in markets for social media, display advertising and online news referral.
It is also concerned with the large amount and variety of data that digital platforms collect on Australian consumers, which go beyond the data users actively provide when using the digital platform.
The report makes preliminary recommendations aiming to address Google and Facebook’s market power and promote increased consumer choice, including a proposal that would prevent Google’s internet browser (Chrome) being installed as a default browser and its search engine being installed as the default on internet browsers.
The ACCC also proposes that a new or existing regulatory authority be given the task of investigating, monitoring and reporting on how large digital platforms rank and display advertisements and news content. Other preliminary recommendations suggest ways to strengthen merger laws.
Additional recommendations deal with copyright, take-down orders, and the review of existing, disparate media regulations.
Each month, approximately 19 million Australians use Google search, 17 million access Facebook, 17 million watch Google-owned YouTube and 11 million access Facebook-owned Instagram.
Approximately 94% of online searches in Australia currently performed through Google and both Facebook and Instagram together obtain approximately 46% of Australian display advertising revenue.
The ACCC is further considering a recommendation for a specific code of practice for digital platforms’ data collection to better inform consumers and improve their bargaining power.
“The inquiry has also uncovered some concerns that certain digital platforms have breached competition or consumer laws, and the ACCC is currently investigating five such allegations to determine if enforcement action is warranted,” Sims says.
The inquiry has considered questions about the range and reliability of news available via Google and Facebook. The ACCC’s preliminary view is that consumers face a potential risk of filter bubbles, or echo chambers, and less reliable news on digital platforms.
While the evidence of filter bubbles arising on digital platforms in Australia is not yet strong, Sims says the importance of this issue means it requires close scrutiny.
He says the ACCC is in particular 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.
He adds that without adequate information and with limited choice, consumers are unable to make informed decisions, which can both harm consumers and impede competition.
“Google and Facebook perform a critical role in enabling businesses, including online news media businesses, to reach consumers. However, the operation of these platforms’ key algorithms determining the order in which content appears is not at all clear," Sims says.
Full report is due 3 June 2019
Lack of transparency
The report states that 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.
It says 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 says 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,” the report noted.
“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.”
Ad verification queries
Questions over advertisement verification and the lack of transparency have also been raised in the report as this 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 report noted.
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,” the report states.
“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 is calling for 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.
Similar functions as media businesses
With Google and Facebook being the dominant gateways between news media businesses and audiences, Sims says this can reduce the brand value and recognition of media businesses.
Traditional media businesses, particularly, traditional print media businesses, have lost advertising revenue to digital platforms. Sims argues this has threatened the viability of business models of the print media and their ability to monetise journalism.
Census data shows that from 2006 to 2016, the number of people in journalism-related occupations fell by 9%, and by 26% 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% from 2014 to 2017. This is at a time when Australia’s population and economy were growing strongly.
The ACCC says the reduction in journalist numbers is important given the critical role news and journalism perform in society.
“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,” Sims says.
“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.”
The ACCC says organisations like Google and Facebook are more than mere distributors or pure intermediaries in the supply of news in Australia as they increasingly perform similar functions as media businesses like selecting, curating and ranking content.
“Yet, digital platforms face less regulation than many media businesses,” Sims says.
“The ACCC considers that the strong market position of digital platforms like Google and Facebook justifies a greater level of regulatory oversight.”
Snapshot:
11 preliminary recommendation areas. See full detail here
1. Merger law
2. Prior notice of acquisitions
3. Choice of browser and search engine
4. Advertising and related business oversight
5. News and digital platform regulatory oversight
6. Review of media regulatory frameworks
7. Take-down standard
8. Use and collection of personal information
9. OAIC Code of Practice for digital platforms
10. Serious invasions of privacy
11. Unfair contract terms
Nine areas for further analysis and assessment:
1. Supporting choice and quality of news and journalism
2. Improve news literacy online
3. Improving the ability of news media businesses to fund the production of news and journalism
4. A digital platforms ombudsman
5. Monitoring of intermediary pricing
6. Third party measurement of advertisements served on digital platforms
7. Deletion of user data
8. Opt-in targeted advertising
9. Prohibition against unfair practices
What's next?
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.
It is now seeking feedback on the preliminary recommendations and the eight proposed areas for further analysis and assessment.
These areas for further analysis 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.
It's a year since the ACCC was directed by the then Treasurer, the Hon Scott Morrison MP, 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.
Want more? See:
Digital Platforms Inquiry: Top 20 must knows
ACCC confirms ‘misuse of market power’ investigations into tech giants
ACCC inquiry: Here's what media groups submitted to digital platforms inquiry
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