26/07/2019

The Government has today released the ACCC’s Final Report following its inquiry into digital platforms.  In releasing the Final Report, the Treasurer, the Hon. Josh Frydenberg MP has indicated the Government’s broad support for the ACCC’s recommendations stating that “these companies are among the most powerful and valuable in the world.  They need to be held to account and their activities need to be more transparent”.  

The Government has accepted: “the ACCC’s overriding conclusion that there is a need for reform - to better protect consumers, improve transparency, recognise power imbalances and ensure that substantial market power is not used to lessen competition in media and advertising services markets” as well as the need to develop a harmonised media regulatory framework.

The Government’s position is broadly aligned with the global trend towards interrogating the business of large digital platforms and their impact on society and industries.  This trend has led to a dramatic increase in regulatory enforcement activity globally.

The Final Report broadly speaking endorses and builds on the recommendations in the Draft Report which go to consumer protection, competition, and privacy issues.  It goes further however to introduce new recommendations that are targeted to media specific issues, namely digital platforms and their relationship with news and media businesses, the disruption of Australian media and the risk of underinvestment in journalism, and the impact of digital platforms on the consumption of news and journalism.

At a glance:

  • There are 23 recommendations in total in the ACCC’s Final Report. 
  • Of the 23 recommendations, 8 are similar to the Draft Report, 2 vary proposals in its Draft Report and 13 are new.  There is also an additional recommendation for further work for the ACCC to revisit the applicability of the Consumer Data Right to digital platforms.   
  • The ACCC has reaffirmed its position of Google and Facebook’s market power, its recommendations broadly dealing with:
    • Measures directed to Google and Facebook’s market power.
    • Digital platforms and their interactions with advertisers.
    • Digital platforms and their interactions with news and media businesses.
    • Measures to assist effective removal of copyright infringing material.
    • The disruption of Australian media and the risk of underinvestment in journalism.
    • The impact of digital platforms on the consumption of news and journalism.
    • Measures to better inform consumers and improve their bargaining powers when dealing with platforms, particularly in relation to how personal information and data is handled by platforms.
    • Scams on digital platforms and other emerging issues.

At a glance - what’s changed since the preliminary report?

The key below identifies what has remained the same, varied or is new in the report:

Preliminary Report recommendation

Final Report recommendation

Measures directed to Google and Facebook’s market power

Preliminary Recommendation #1 - Merger law:  A reform to the merger law, which would apply to all mergers the ACCC assesses. This would more explicitly allow the ACCC to consider the likelihood that a transaction could remove a potential competitor, and the amount and nature of data that may be accessed because of the acquisition.

Recommendation 1 – Changes to merger law

The ACCC maintains this recommendation. 

Preliminary Recommendation #2 - Prior notice of acquisitions:  Requests for large digital platforms (eg. Facebook and Google) to provide advance notice of the acquisition of any business with activities in Australia (and absent such commitment, consider other options).

Recommendation 2 – Advance notice of acquisitions

The ACCC maintains this recommendation. 

Preliminary Recommendation #3 - Choice of browser and search engine:  Requirements for suppliers of operating systems to provide consumers with options for internet browsers – and for suppliers of internet browsers to provide options for search engines (as opposed to default search engines).

Recommendation 3 – changes to search engine and internet browser defaults

The ACCC maintains this recommendation with respect to Google only:

“Google should provide Australian users of Android devices with the same options being rolled out to existing Android users in Europe; that is, the ability to choose their default search engine and default internet browser from a number of options.  If Google does not introduce similar options for Australian Android users by six months from the date of the Report, the ACCC will submit to the Government that it should consider compelling Google to offer this choice.”

 

Direction for future the ACCC work: data portability

The ACCC will revisit the applicability of the Consumer Data Right to digital platforms in the future.

Digital platforms and advertisers

Preliminary Recommendation #4- Advertising and related business oversight
A regulatory authority should be tasked to monitor, investigate and report on whether digital platforms that are vertically integrated and meet the relevant threshold (>$100m p.a. in advertising revenue in Australia) are engaging in discriminatory conduct by favouring their own business interests above those of advertisers or potentially competing businesses. 

Relevant digital platforms would be obliged to regularly provide information and documents, and the authority would have investigative powers. 

Recommendation 4:  Proactive investigation, monitoring and enforcement of issues in markets in which digital platforms operate
The ACCC maintains a similar recommendation, however that it should be broader to encompass proactive investigation, monitoring and enforcement of issues in markets in which digital platforms operate. Furthermore, it recommends that it be given effect to by a creation of a branch within the ACCC to focus on digital platforms.
The ACCC has also recommended that this branch should be empowered by Ministerial direction to hold an extended public inquiry covering a period of at least five years and have the ability to compel relevant information.

Preliminary Recommendation #5 - News and digital platform regulatory oversight: the regulatory authority could also monitor, investigate and report on digital platforms’ ranking of news and journalistic content, and their provision of referral services to news media businesses.

 

Recommendation 5:  Inquiry into the supply of ad tech services and advertising agencies

The ACCC recommends that an inquiry into ad tech services and advertising and media agencies be held to consider issues of complexity and opacity of the services offered by suppliers involved in the ad tech supply chain, including advertising and media agencies.  This inquiry is to be held by the digital platforms branch proposed by Recommendation 4 above.

Measures to address regulatory imbalance between platforms and media

Preliminary Recommendation #6 - Review of media regulatory frameworks

A separate, independent government review to design a new, platform-neutral regulatory framework for news media organisations and content classification.

Recommendation 6:  Process to implement harmonised media regulatory framework

The ACCC maintains this recommendation. 
The ACCC recommends that media regulatory frameworks be updated, to ensure comparable functions are effectively and consistently regulated. The framework should, as far as possible, be platform neutral, clear and contain appropriate enforcement mechanisms and meaningful sanctions.

Digital platforms and news and media businesses

 

Recommendation 7: Designated digital platforms to provide codes of conduct governing relationships between digital platforms and media businesses to the ACMA

The ACCC recommends that designated digital platforms should each separately be required to provide a code of conduct to the Australian Communications and Media Authority (the ACMA) to govern their commercial relationships with news media businesses.

Breaches of the code would be dealt with by the ACMA. The ACCC considers that if a digital platform is unable to submit an acceptable code to the ACMA within nine months of designation, the ACMA should create a mandatory standard to apply to the designated digital platform.

Measures to assist effective removal of copyright infringing material

Preliminary Recommendation #7 - Take-down standard: The ACMA to determine a Mandatory Standard regarding digital platforms’ take-down procedures for copyright-infringing content.

Recommendation 8:  Mandatory take-down code to assist copyright enforcement on digital platforms

The ACCC maintains this recommendation. 

The disruption of Australian media and the risk of underinvestment in journalism

 

Recommendation 9:  Stable and adequate funding for the public broadcasters
Stable and adequate funding should be provided to the ABC and SBS in recognition of their role in addressing the risk of under-provision of public interest journalism that generates broad benefits to society.

 

Recommendation 10: Grants for local journalism
The Regional and Small Publishers Jobs and Innovation Package should be replaced with a targeted grants program that supports the production of original local and regional journalism, including that related to local government and local courts. The program should be platform-neutral and administered at arm’s length from Government, with eligibility criteria designed by an independent expert committee. Due to its broader scope than the Regional and Small Publishers Jobs and Innovation Package, which provided AU$20 million per year, the program should provide a greater amount of funding – totalling in the order of AU$50 million per year.

 

Recommendation 11: Tax settings to encourage philanthropic support for journalism
Tax settings should be amended to establish new categories of charitable purpose and deductible gift recipient (DGR) status for not-for-profit organisations that create, promote or assist the production of public interest journalism.

The impact of digital platforms on the consumption of news and journalism

 

Recommendation 12: Improving digital media literacy in the community
A Government program be established to fund and certify non-government organisations for the delivery of digital media literacy resources and training based on frameworks currently used by the Online Safety Grants Program and Be Connected program administered by the Office of the eSafety Commissioner. The resources and training should be broadly delivered through community centres, libraries, schools and seniors centres for the benefit of all Australians.

 

Recommendation 13: Digital media literacy in schools
The Terms of Reference for the review of the Australian Curriculum scheduled for 2020 should include consideration of the approach to digital media literacy education in Australian schools.

 

Recommendation 14: Monitoring efforts of digital platforms to implement credibility signalling
An independent regulator, such as the ACMA, should be directed to monitor the voluntary initiatives of digital platforms to enable users to identify the reliability, trustworthiness and source of news content featured on their services.

 

Recommendation 15: Digital Platforms Code to counter disinformation
Digital platforms with more than one million monthly active users in Australia should implement an industry code of conduct to govern the handling of complaints about disinformation (inaccurate information created and spread with the intent to cause harm) in relation to news and journalism, or content presented as news and journalism, on their services.

Measures to better inform consumers and improve their bargaining powers when dealing with platforms

Preliminary Recommendation #8 - Use and collection of personal information:  Amendments to the Privacy Act to enable consumers to make more informed choices and exert greater control over their data’s distribution. These amendments include strengthening the Privacy Act’s notification and consent requirements, providing for an ‘erasure right’ where information is no longer needed, increasing the penalties for Privacy Act breaches to the same level as those for ACL breaches, and introducing a direct right of action for individuals whose privacy has been breached under the Privacy Act.

Recommendation 16:  Strengthen protections in the Privacy Act

The ACCC maintains this recommendation.
This includes a recommendation to update the definition of ‘personal information’ in the Privacy Act 1988 to expressly capture information such as IP addresses, device identifiers and location data.

 

Recommendation 17: Broader reform of Australian privacy law
Broader reform of Australian privacy regime to ensure it continues to effectively protect consumers’ personal information in light of the increasing volume and scope of data collection in the digital economy

Preliminary Recommendation #9 - OAIC Code of Practice for digital platforms

That the OAIC develop an enforceable code of practice under Part IIIB of the Privacy Act which would apply specifically to digital platforms.

Recommendation 18: OAIC privacy code for digital platforms
The ACCC maintains this recommendation.

Preliminary Recommendation #10 - Serious invasions of privacy

Support for the Australian Law Reform Commission’s call for the introduction of a statutory cause of action for serious invasions of privacy.

Recommendation 19: Statutory tort for serious invasions of privacy

The ACCC maintains this recommendation with further specifics. 

Preliminary Recommendation #11 - Unfair contract terms

Amendments to the ACL to render unfair contract terms illegal and subject to pecuniary penalty proceedings.

Recommendation 20: Prohibition against unfair contract terms
The ACCC maintains this recommendation.

 

Recommendation 21: Prohibition against certain unfair trading practices
Amend the Competition and Consumer Act 2010 to include a prohibition on certain unfair trading practices, such as change of terms of service without notice, dissuading consumers from exercising their contractual or legal rights, or inducing consent by very long contracts or providing insufficient time to consider them. The scope of such a prohibition should be carefully developed such that it is sufficiently defined and targeted, with appropriate legal safeguards and guidance.

Scams on digital platforms and other emerging issues

 

Recommendation 22: Digital platforms to comply with internal dispute resolution requirements
The ACCC recommends the development of minimum internal dispute resolution standards by the ACMA to apply to digital platforms. The standards should, among other things, set out requirements for the visibility, accessibility, responsiveness, objectivity, confidentiality and collection of information of digital platforms internal dispute resolution processes. They should also set out the processes for continual improvement, accountability, charges and resources

 

Recommendation 23: Establishment of an ombudsman scheme to resolve complaints and disputes with digital platform providers
The establishment of an independent ombudsman scheme to resolve complaints and disputes between consumers and digital platforms, and businesses and digital platforms.

The ACMA and the relevant ombudsman will determine the nature of complaints and disputes that would be subject to the scheme. At a minimum, it should cover complaints or disputes from businesses relating to the purchase or performance of advertising services and complaints or disputes from consumers, including in relation to scams and the removal of scam content.

 

The story so far

For those joining late, on 4 December 2017 the then Treasurer Scott Morrison directed the ACCC to hold an inquiry into the impact of online search engines, social media and digital content aggregators (or digital platforms) on competition in the media and advertising services markets.  The Inquiry was part of a deal with Senator Nick Xenophon to secure support for the Government’s media ownership and regulation Bill in September 2017.

Since then, the ACCC has released an Issues Paper (26 February 2018) and published 76 responding submissions. It has released a Preliminary Report (10 December 2018) and published 124 responding submissions. And, after public forums, research commissioned by the ACCC and exercises of investigatory powers, it has now published its Final Report (26 July 2019)

The Inquiry has held the broad and active interest of people and companies across Australia (and globally), with submissions made by a range of interested parties including business, government entities, industry organisations, law societies, standards bodies, media companies, advertising companies, rights associations, academics and public advocacy groups as well as the primary objects of interest - digital platforms.

The broad interest is reflective of the significant impact of digital platforms felt across society in recent years.  Observers recognise that the impacts have been both good and bad – inviting the question as to what the proper balance is between encouraging innovation and promoting free services accessible to all Australians on one hand; and the potential detriments and responsibilities that should arise from successful digital platforms obtaining increased economic or social power and continuing largely self-regulated on the other. 

Key observations

The Report recognises digital platforms have delivered significant benefits to Australians – and their use can improve the quality of life.  However, it reiterates the sentiment of the draft report, which is an expectation that companies with substantial market power have special responsibilities:

“The ubiquity of the Google and Facebook platforms has placed them in a privileged position. They act as gateways to reaching Australian consumers and they are, in many cases, critical and unavoidable partners for many Australian businesses, including news media businesses. Dominant firms, of course, have a special responsibility that smaller, less significant businesses do not have. The opaque operations of digital platforms and their presence in inter-related markets mean it is difficult to determine precisely what standard of behaviour these digital platforms are meeting.”

The Final Report’s recommendations focus on ensuring the process of competition and interactions with consumers and businesses are fair, transparent and accountable.  It has focussed specifically on Google and Facebook (reflecting their size and influence) while noting that it has given attention to ensure the recommendations in the Final Report are adaptable to other digital platforms such as online market places (eg, Amazon).

One of the more significant recommendations to promote transparency and accountability is the recommendation for a new branch within the ACCC to specifically monitor and oversee digital platforms, including their algorithms and interactions with media companies and advertisers.  The ACCC has called for a Ministerial direction for this branch to conduct an ongoing extended public inquiry covering a period of 5 years with the power to compel information.

The ACCC recognises the significant impact of digital platforms on media markets and advocates for careful consideration.  This includes concerns around the reduced production of certain types of news and journalism which it considers important for the healthy functioning of the democratic process.

The ACCC’s recommendations are broad and far reaching. The ACCC has called on the Government to give immediate attention to the current and likely future issues with digital platforms in order to put in place frameworks that enable adverse consequences to be addressed and reduce the likelihood of new issues arising:

“Policy makers must ask whether the principles that have applied in the past are still fit for purpose and must review legislative tools, principles and oversight to address further technological and consumer-driven developments.”

Potential implications for businesses

Overall, the ACCC’s call to the Australian Government – and implied suggestion to governments further abroad – is to be more proactive in reacting to and anticipating the challenges that digital platforms may create. This call also signals to digital platforms that there is value in pre-emptively looking at how their business models and activities are impacting other industries, and society more broadly.

Businesses that interact with digital platforms as an acquirer or supplier of services, businesses that rely on digital platforms for advertising or content views, or businesses that have in some way been disrupted by digital platforms will benefit from understanding whether and how the Report’s recommendations impact their dealings in relation to digital platforms. 

Questions to consider arising from the Final Report include:

  • What does the wholesale amendment to merger laws mean for me and my M&A strategy, whether I’m an Australian target business, or a local or overseas acquirer?   
  • Do I fall within the threshold for a large digital platform? What does that mean for me?
  • How do I interact with digital platforms? What are the implications of these recommendations on my existing arrangements, or my potential future arrangements with digital platforms – in Australia or elsewhere?
  • Do I need to rethink internal business processes for consumer rights, privacy, and use of personal information and other consumer data?
  • How would increased regulation and oversight of digital platforms’ interactions in advertising, news and media industries affect the way I interact with these industries – whether within, or in relation to, Australia?

Next steps for this Inquiry

The Government is continuing to consider the Final Report in consultation with the ACCC to decide next steps in relation to each recommendation. 

The Final Report forms part of a broader assessment of digital platforms.  While the Inquiry was prompted by a desire to understand the impact of digital platforms on media and advertising – the Final Report invites further inquiry into the impact of digital platforms on consumers generally and other industries. 

If history is any indication, we expect:

  • Further rounds of Government consultation with other federal and international bodies, including studies on specific recommendations to better understand broader business and social impacts.
  • A follow-on inquiry by the ACCC or the new recommended regulatory authority, potentially in conjunction with other overseas regulators, that monitors digital platforms’ specific activity.
  • Debates on a legislative agenda for the recommendations.
  • Court action and enforcement activity arising from any conduct the ACCC has become aware of during its Inquiry.

The Final Report reflects the broader international trend of heightened levels of regulatory and enforcement activity observed globally.  For example, the recent UK Competition Markets Authority’s “Online Platforms and Digital Advertising Market Study” announced on 3 July 2019, the US Department of Justice’s review into Big Tech’s market power opened on 24 July 2019, and the European Commission’s recent announcement that it will work closely with the US FTC on investigations of abuse of dominance by certain digital platforms.