Australian Financial Review


It may have seemed obvious, but the ACCC’s move to spell out in clear language just how powerful both Google and Facebook have become in Australia was an important step for the broader debate about changing the rules.

“Australian law does not prohibit a business from possessing significant market power or using its efficiencies or skills to ‘out compete’ its rivals,” Sims said upon his report’s release.

“But when their dominant position is at risk of creating competitive or consumer harm, governments should stay ahead of the game and act to protect consumers and businesses through regulation.”

The report found that Google enjoys substantial market power in a number of areas in Australia, including 94 per cent of online searches, a huge chunk of online search advertising and being vital for other media companies’ traffic referrals.

Facebook was deemed to be similarly vital in referring news traffic to media sites, while combined with its Instagram app it has 46 per cent of Australian display advertising revenue.

No other website or application has a market share of more than 5 per cent.

New regulator, ombudsman

Among the measures proposed by the ACCC were a new regulatory body to pass judgment on things like the fair display of news stories and ads on Google and Facebook, as well as new requirements for the global giants to forewarn the ACCC about plans to buy out local companies.

The tech giants could also now face a digital platforms ombudsman with the power to rule on disputes between local companies and global platforms, which are currently fought entirely on “take it or leave it” terms, and are very much weighted in the platforms’ favour.

In echoes of the 1998 anti-trust victory for the US Department of Justice against Microsoft, Google could also be forbidden from setting Chrome as the default browser on Android smartphones and instead ensuring that a variety of search engine options are offered in addition to their own.

New rules were also proposed around the requirement for platforms to obtain informed consent for harvesting data, and to initiate new privacy laws akin to the EU’s General Data Protection Regulation where users have a right to be forgotten by websites.

“The ACCC’s response to the imbalance of regulatory obligations is one of the reasons the report is so significant,” says Dr Derek Wilding, co-director of UTS’ Centre for Media Transition.

“Instead of suggesting one sweeping response, it considers bringing digital platforms squarely under the regulatory frameworks applying to competition law, consumer protection, privacy, copyright and aspects of media regulation.

“There’s no one single solution and, while complicated, that could be far more onerous for Google and Facebook.”

Unexpected findings

Neither Google nor Facebook have said much about the report’s findings yet. Both have put out statements of varying degrees of nothingness, to say words to the effect that they welcome the report and are still reading it.

A look back at the submissions each made to the inquiry, however, show that neither wanted – nor expected – the kind of regulatory intervention that has been proposed by the ACCC.

Both sought to paint a picture of themselves as helpful, plucky market entrants, fighting the good fight for advertising dollars like everyone else – something the market share stats provided in the ACCC report show to be complete nonsense.

“Our relative success has been built, in part, on the fact that we have developed an advertising service that has enabled a whole new generation of entrepreneurs and small- and medium-sized local businesses, many of which could never have previously afforded newspaper or TV ads, to reach a national or even global audience affordably,” Facebook wrote in its submission.

Google talked of the low barriers for entry to online publishing making the media landscape a buzzing hive of activity, where small publishers could thrive alongside the traditional giants.

It tried to position the current paradigm as simply the latest evolution in an age-old struggle between established media and new technology-led rivals.

“The internet has enabled online advertising to become a vibrant competitive part of the advertising industry,” it wrote.

“These developments have also required traditional media content creators to rethink their revenue models … [but] new sites result in greater choice and utility for consumers, and generate economic growth.”

Economic growth for Google and Facebook would be a more accurate summation.

The ACCC extracted insight into the economic reality of the digital advertising era, showing that Google takes in $47 out of every $100 spent by digital advertisers in Australia, with Facebook pocketing $21 and the thousands of other local websites feverishly fighting over the remaining $32.

Reluctant media players

Importantly, the report delved into the vexed issue of Google and Facebook’s role as new media players.

Both of the platform giants had been at pains to dodge the responsibility of media ownership by promoting themselves as a facilitator of media distribution and consumption, rather than as a media company in their own right, but the ACCC blew their protests out of the water.

ACCC Chair Rod Sims spoke of investigative journalism as a public good and showed a clearer understanding of the realities of the modern news industry than any politician in recent memory.

 Peter Rae

The inquiry is not occurring in a bubble and the seemingly endless revelations about Facebook’s role in facilitating the manipulation of elections via Russian-controlled bots and deliberately planted fake news loomed as the geopolitical backdrop to the ACCC’s work.

Google has been similarly criticised (although less vehemently than Facebook) for the opaque role its algorithms play in promoting certain stories over others.

“Digital platforms increasingly perform similar functions to media businesses, such as selecting and curating content, evaluating content, and ranking and arranging content online,” the ACCC report found.

“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.”

The ACCC observed that 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.

However it was unable to prise out the details of such methods, as Google (perhaps reasonably) argued that publicising how it picked top stories would lead to the system being even more furiously gamed.

“The finding that digital platforms actively participate in the online news ecosystem is incredibly significant and goes against numerous attempts by platforms to position themselves as a platform and not a publisher,” says James Meese, senior lecturer in digital and social media at UTS.

“This may inform subsequent reform efforts, particularly around media policy.”

Google and its CEO Sundar Pichai has tried to position itself as a helpful intermediary in the media ecosystem, but the ACCC report is having none of it. ERIC RISBERG

This is where ACCC chairman Sims won most of his friends in the media on Monday, by framing his reports in terms of protecting the future of journalism in Australia against business-model destruction and the promotion of cut-and-paste rip-off stories that get great reach on Google and Facebook.

He spoke of investigative journalism as a public good and showed a clearer understanding of the realities of the modern news industry than any politician in recent memory.

“Journalists may work many days or weeks to break an exclusive online story and a competitor can quickly reproduce that story, post it on a rival site, which due to the reach of the digital platforms may draw traffic away from the original source of the story,” he said to cries of “amen” from newsrooms across the country.

Dr Wilding says that, along with the findings of market power exercised by digital platforms, it was the focus on the importance of news and journalism within the community that represented the most important point in the ACCC’s comprehensive report.

The market-power findings, he says, could be the foundation for several significant regulatory interventions, including the crucial step of simply having insight into the ways in which Google and Facebook really operate in Australia.

Meanwhile he says the focus on protecting journalism was an important move to highlight that, while the ACCC clearly believes competition law to be an important part of the country’s regulatory framework, it is not enough on its own.

“Journalism has a value to the community that extends beyond its usefulness to an individual consumer,” Wilding says.

“Digital platforms give us great opportunities for connection and access to information, but the ACCC’s report builds the case for them to accept responsibility not to harm the journalism we need for a healthy, functioning democratic country.”

Compared with his public grillings on Capitol Hill, the ACCC inquiry may seem tame to Facebook chief Mark Zuckerberg, but mooted changes could have a significant impact on his company. Andrew Harnik

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