Reforms needed to address dominance of digital platforms
The dominance of the leading digital platforms and their impact across Australia’s economy, media and society must be addressed with significant, holistic reform, according to the final report of the Australian Competition and Consumer Commission's (ACCC’s) Digital Platforms Inquiry released yesterday.
The report contains 23 recommendations, spanning competition law, consumer protection, media regulation and privacy law, reflecting the intersection of issues arising from the growth of digital platforms.
During the course of its Inquiry, the ACCC identified many adverse effects associated with digital platforms, many of which flow from the dominance of Google and Facebook.
- The market power of Google and Facebook has distorted the ability of businesses to compete on their merits in advertising, media and a range of other markets
- The digital advertising markets are opaque with highly uncertain money flows, particularly for automated and programmatic advertising
- Consumers are not adequately informed about how their data is collected and used and have little control over the huge range of data collected
- News content creators are reliant on the dominant digital platforms, yet face difficulties in monetising their content
- Australian society, like others around the world, has been impacted by disinformation and a rising mistrust of news.
“The dominant digital platforms’ response to the issues we have raised might best be described as ‘trust us’,” Mr Sims said.
“There is nothing wrong with being highly focused on revenue growth and providing increasing value to shareholders; indeed it can be admired. But we believe the issues we have uncovered during this Inquiry are too important to be left to the companies themselves."
“Action on consumer law and privacy issues, as well as on competition law and policy, will all be vital in dealing with the problems associated with digital platforms’ market power and the accumulation of consumers’ data,” Mr Sims said.
The ACCC has made a series of recommendations to address the digital platforms’ impact on Australian businesses; of relevance to small business, the ACCC has recommended:
- Establishing an independent ombudsman scheme to resolve complaints and disputes between businesses and digital platforms, including those relating to the purchase or performance of advertising services, and the removal of scam content
- Amending the Competition and Consumer Act 2010 so that unfair contract terms are prohibited and for civil pecuniary penalties to apply
- Strengthening privacy protections to effectively protect consumers’ personal information in light of the increasing volume and scope of data collection in the digital economy.
The Inquiry notes the acquisition of startups by large digital platforms has the potential to remove future competitive threats. Acquisitions may also increase the platforms’ access to data. Both situations may further entrench a platform’s market power.
The ACCC recommends changes to Australia’s merger laws to expressly require consideration of the effect of potential competition and to recognise the importance of data. The ACCC also recommends that large digital platforms agree to a notification protocol that would alert the ACCC to proposed acquisitions that may impact competition in Australia.
The report also calls on Google to allow Australian users of Android devices (new and existing) to choose their search engine and internet browser from a number of options, as proposed in Europe, rather than being provided with defaults.
Effective consumer protections are critical to addressing issues associated with dominant digital platforms. Throughout this Inquiry, the ACCC has identified some problematic data practices with the potential to cause consumer harm.
The ACCC is well advanced with investigations into some of these data practices to determine whether there has been a contravention of the Australian Consumer Law.
To deal with further data practices that do not fit neatly within the existing consumer law, the ACCC also recommends introducing a general prohibition on unfair commercial practices.
“Introducing this broad, flexible prohibition will increase consumer protections in fast-moving digital markets to safeguard consumers’ ability to make informed and genuine choices,” Mr Sims said.
The ACCC has also again recommended unfair contract terms should be prohibited and should attract civil pecuniary penalties, and not just be voidable as they are now.
The ACCC further recommends a mandatory standard to bolster a digital platforms’ internal dispute resolution processes and that an ombudsman scheme be established, to assist with resolving disputes and complaints between consumers and digital platform providers.
In light of the overlapping nature of privacy, competition and consumer protection issues in digital markets, the ACCC has made a range of privacy-related recommendations, including:
- Strengthening protections in the Privacy Act
- Broader reform of the Australian privacy law framework
- The introduction of a privacy code of practice specifically for digital platforms
- The introduction of a statutory tort for serious invasions of privacy.
The Inquiry found that digital platforms’ privacy policies are long, complex, vague and difficult to navigate and that many digital platforms do not provide consumers with meaningful control over the collection, use and disclosure of user data.
Problematic data practices include the use of click-wrap agreements and take it or leave it terms.
“We’re very concerned that current privacy policies offer consumers the illusion of control but instead are almost legal waivers that give digital platforms’ broad discretion about how they can use consumers’ data,” Mr Sims said.
“Due to growing concerns in this area, we believe some of the privacy reforms we have recommended should apply economy wide.”
The recommended amendments to the Privacy Act should be supplemented by an enforceable privacy code of practice, developed by the Office of the Australian Information Commissioner (OAIC), and address data practices specific to digital platforms.
Continued scrutiny of digital platforms
The ACCC recommends the Government establish a specialist digital platforms branch within the ACCC, withstanding information-gathering powers, to proactively monitor and investigate potentially anti-competitive conduct by digital platforms and conduct that may breach our consumer laws, and to undertake rolling market studies.
“We believe continuing scrutiny is necessary given the critical position that digital platforms occupy in the digital economy, their continued expansion and the opacity and complexity of the markets in which they operate,” Mr Sims said.
One of the first tasks of the new branch should be to conduct an inquiry into the supply of ad-tech services and the supply of online advertising services by advertising and media agencies.
The inquiry would identify whether any competition or efficiency concerns exist and help achieve greater transparency in the supply of these services.
“The ACCC branch will also provide regular reports to Government on issues as they arise, work closely with other arms of government to help co-ordinate work in this vital area, and be the crucial link with our overseas counterparts to share learnings and responses," Mr Sims said.
Expert regulators and agencies to play complementary roles
The ACCC recommends future law enforcement and regulation of digital platforms be dealt with by the current regulators including the ACMA, the OAIC and the ACCC.
“The ACCC, the ACMA and the OAIC are already working together closely and have now built up expertise in the areas covered by this Inquiry,” Mr Sims said.
“There has been global interest in this timely Australian inquiry and the many significant international reports and external developments in the past 18 months. These reports demonstrate the shared concerns and momentum for reform."
“The world has now recognised the impact of the digital platforms’ market power and the impact this has on consumers, news, businesses and society more broadly. Continuing national and world action will now follow,” Mr Sims said.