Market power in the digital age: the ACCC Digital Platforms Inquiry

(Published on Medium)

From ACCC (2018). Digital Platform Inquiry Preliminary Report, p. 22.

The Australian Competition and Consumer Commission (ACCC)’s Digital Platforms Inquiry Preliminary Report is a landmark study internationally into the question of whether global digital platforms can exercise undue market power in news and advertising markets, and what responsibilities they have to journalists, content creators and consumers as gateways to information and business. At a time of growing global questioning of the power of companies such as Google and Facebook, it poses vital questions about the accountability and transparency of the digital behemoths, and their relationship to questions of trust in  news media and social institutions more generally.

The ACCC Report makes 11 preliminary recommendations. These recommendations include:

  • applying section 50(3) of the Competition and Consumer Act 2010 to any proposed new mergers and acquisitions by Google or Facebook;
  • ensuring that consumers have options around what web browsers and search engines can be used with different devices, to minimise hardware-software market dominance);
  • action to prevent vertically integrated companies favouring their own businesses in online search;
  • regulatory oversight over how digital platforms rank news content that is searched for online;
  • strengthening notification and consent requirements for consumers around the collection, use, disclosure and erasure of their personal information;
  • strengthening take-down procedures for copyright infringing content hosted on digital platforms.

The Digital Platforms Inquiry was announced by then-Treasurer Scott Morrison MP in December 2017. It was focused upon the effect that digital search engines, social media platforms and other digital content aggregation platforms have on competition in media and advertising services markets, with particular reference to the impact of digital platforms on the supply of news and journalistic content and the implications of this for media content creators, advertisers and consumers. It came about as part of a ‘deal’ with former SA Senator Nick Xenophon, to allow the government’s media reform laws to pass, which permitted the Nine-Fairfax merger to take place in 2018.

The ACCC Chair, Rod Sims, has been clear that while the Inquiry is by necessity focused upon the impact of Google and Facebook on Australian news and advertising markets, the questions raised about the impacts of media disruption, and the issues raised by the capacity of these digital companies to operate as multi-sided platforms (i.e. engaging simultaneously with consumers, businesses and content creators), have potentially international significance. The Economist has referred to the ‘global techlash’ facing platform providers such as Google, Facebook and Amazon. Notable recent examples include the European Commission’s findings that Google engaged in anti-competitive practices around both its Google Shopping comparative service site, and action against the mandating of Google as the search engine for mobile devices using the Android operating system.

The ACCC Preliminary report comes after a public inquiry process where they received over 60 submissions in response its Issues Paper released in February 2018, and public hearings in several major Australian cities. Broadly, the inquiry has pitted the digital platform companies (Google and Facebook) against the traditional media companies, most notably News Corporation, which presented a 144-page submission to the ACCC. Readers of The Australian would most likely be highly familiar with the inquiry, as it has maintained a steady stream of articles about how the ACCC is going to rein in the market power of Google and Facebook.

The ACCC Report focuses considerable attention on the impact of digital platforms on news. Noting the growing importance of ‘social news’, it argues that there is a lack of transparency about how particular news stories feature in platform algorithms, with the result being considerable uncertainty in how the platforms can enable traditional news providers to monetise their content through news aggregation and social media. More generally, the question of who pays for journalism hovers over the Inquiry, and the ACCC has flagged that a future platform-neutral regulatory regime may consider Google and Facebook to be media companies, and hence subject to media content regulations. Concerns about the role of digital platforms in the spread of ‘fake news’ also animate such questions in the ACCC Report.

There is a sustained reflection in the ACCC Report upon ways in which the disruption of media business models by digital platforms affect consumer choice and the quality and plurality of news and journalistic content.  Noting that both access to quality journalism and diversity of voices in the public domain are important public interest values, the ACCC drew upon an independent study by the Centre for Media Transition at UTS to clarify the relationship between diversity, quality and choice.

The UTS study found that while digital platforms have opened up the highly concentrated news media market in Australia to new voices (including The Conversation, The Guardian, Buzzfeed and others), the impact of digital platforms on advertising revenues has seen considerable job losses at more established commercial media businesses, and this has diminished the overall quality and reliability of news content. Drawing on this report, the ACCC has pointed to actions that the platforms themselves could take to address concerns about fake news, although it finds concerns about online ‘filter bubbles’ to be overstated.

As the ACCC Preliminary Report is digested and as the next stage of responses occur before the Final Report is released in 2019, three issues stand out. First, there is the regulatory disparity between traditional news providers and digital platforms, and whether any future ‘platform-neutral’ media regulations would bring companies such as Google and Facebook within the ambit of media and communications policy, with its public interest rationales. Second, there is the question of how to align any proposals for change in Australian laws and regulations with international standards, given the global nature of digital platforms. Finally, there is the question of whether future technology and market changes, such as the growing application of artificial intelligence in newsgathering and the growth in digital subscriptions, may act to strengthen or weaken the market power of the incumbent digital platform giants.