On 16 August 2022, the Australian Competition and Consumer Commission (ACCC) released its sixth Issues Paper for the Digital Platform Services Inquiry (DPSI).

Its next report will examine competition and consumer issues in the provision of social media services to consumers and businesses in Australia by social media platforms. Key social media platforms the ACCC will examine include Facebook, Instagram, Snapchat, Twitter and TikTok.

New entrants and changes to the competitive landscape of social media has prompted the ACCC to update its analysis from the 2019 Digital Platform Inquiry (DPI). The ACCC invites written submissions from interested parties by 9 September 2022.

Why is the ACCC looking at social media services again?

The ACCC’s 2019 DPI Final Report looked at the effect that digital search engines, social media platforms and other digital content aggregation platforms have on competition in media and advertising services markets. However, the ACCC has not substantially updated its analysis of competition in social media services since then. While in 2019 the ACCC’s DPI Final Report considered that Facebook (now Meta) had substantial market power, in this Issues Paper, the ACCC acknowledges that there has since been “new entry and changes to the competitive landscape for social media services in Australia, including the emergence of TikTok” (Issues Paper, pp 2-3).  Accordingly, the ACCC will be updating its prior DPI analysis, including to focus on the impact of new entry and considering future developments.

This DPSI topic gives the ACCC the opportunity to consider the substantial changes in social media markets over the past three years. The ACCC observes that since 2019 there has been a rising popularity of short-form videos, increasing use of integrated social media features and new entrants in Australia such BeReal and also TikTok who only became available in Australia in 2018. The ACCC considers these and other developments have evolved the ways in which users interact with other users on social media services.

What will be the ACCC’s key areas of focus?

The ACCC has identified the following key areas of focus in understanding any potential competition and consumer issues that matter most to consumers, businesses and advertisers in Australia:

  • The degree of competition between social media services, including barriers to entry and expansion for social media platforms, the degree of differentiation between social media services, the type and magnitude of switching costs faced by users and the extent to which multi-homing affects competition.
  • Mergers and acquisitions trends by social media platforms and how these activities affect competition for social media services.
  • The role of advertising services (both display and influencer advertising) on competition for social media services.
  • The use and abuse of social media services for scams and misleading or deceptive content.

The ACCC will focus predominately on social media apps but is also seeking feedback on whether social media usage on web browsers is an important offering for consumers.

What else can we draw from this Issues Paper?

According to the ACCC, developments in social media services since the 2019 DPI Final Report have changed the way consumers interact with platforms, businesses and other consumers. New entrants such as TikTok have emerged and grown significantly which have impacted the competitive dynamics of social media services, such as seeing big players introducing new features (eg Instagram Reels). “TikTok has seen significant growth in its usage since 2020,” with reportedly 32% of all Australian adult internet users using the app and over one billion users worldwide (Issues Paper, pp 8-10). The ACCC appears to acknowledge the dynamic nature of social media services and may factor this into its analysis more than in previous reports.

The ACCC has also observed that the COVID-19 pandemic has increased Australians’ online activity as they increasingly relied on social media services for leisure and to stay connected with friends and family. As users changed the way they interact with these platforms, it is likely the ACCC will consider closely whether there are new avenues for consumer harms, such as influencer or display advertising scams. The ACCC is also interested in any associated network effects and other consumer harms which accompany display and influencer advertising.

In this Issues Paper, the ACCC is also interested in bundling of social media services with related services, which may include e-commerce, private messaging and social media services that partner with other digital platforms to integrate services.

Finally, the ACCC is also specifically interested in switching costs between platforms and ability to multi-home and how it affects competition in social media services.

What are the key dates for the Sixth DPSI?

The ACCC has invited submissions from interested stakeholders by 9 September 2022. The Sixth DPSI Interim Report is scheduled to be submitted to the Treasurer on 31 March 2023 and will be published soon after.

What is the DPSI and how has it progressed so far?

The ACCC’s DPSI is a five-year inquiry (2020-2025) into markets for the supply of digital platform services. The Australian Government directed the ACCC to conduct the inquiry on 10 February 2020.

The ACCC’s First DPSI Interim Report was released in September 2020 and focused on private messaging and, to a lesser extent, social media and search services. The Second DPSI Interim Report focused on app marketplaces and the Third DPSI Interim Report examined search defaults and choice screens.

Earlier this year, the ACCC released its Fourth DPSI Interim Report on general online retail marketplaces and published a Discussion Paper for the Fifth DPSI Interim Report. The Discussion Paper considers whether Australia’s current competition and consumer law framework for digital platform services needs updating. The ACCC is scheduled to submit its findings in a Fifth DPSI Interim Report to the Treasurer on 30 September 2022, with general publication soon after.