Facebook to Facemusic?

The ACCC publicly released its Digital Platforms Inquiry Preliminary Report on 10 December 2018. Its final report must be provided to the Australian Treasurer before 3 June 2019, with submissions invited in relation to the preliminary report to be provided by email to platforminquiry@accc.gov.au no later than 15 February 2019. 

Context

On 4 December 2017 the current interim Prime Minister issued a notice requiring the ACCC to hold an inquiry into the impact of digital search engines, social media platforms and other digital content aggregation platforms on the state of competition in media and advertising services markets.

The ACCC was directed to consider the impact of digital platforms on the supply of news and journalistic content, and has now in particular investigated the:

  • extent to which platform service providers are exercising market power in commercial arrangements with the creators of journalistic content and advertisers;
  • impact of platform service providers on the level of choice and quality of news and journalistic content to consumers;
  • impact of platform service providers on media and advertising markets;
  • impact of longer-term trends, including innovation and technological change, on competition in media and advertising markets; and
  • impact of information asymmetry between platform service providers, advertisers and consumers and the effect on competition in media and advertising markets.

Key ACCC concerns

The preliminary report is a good (378 page) read, highlighting the ACCC’s concern about potential misuse of the market power of large digital platforms, in particular Facebook and Google, and the following related concerns:

  • the ability and incentive of major digital platforms to favour their own business interests, through their market power and presence across multiple markets;
  • digital platforms’ impact on the ability of content creators to monetise their content;
  • the lack of transparency in digital platforms’ operations for advertisers, media businesses and consumers;
  • consumers’ insufficient awareness and understanding of the extensive amount of information about them collected by digital platforms, and related privacy issues; and
  • the role of digital platforms in determining what news and information is accessed by Australians, how this information is provided, and its range and reliability.

 ACCC’s preliminary recommendations

11 substantial preliminary recommendations have been made which will be contested by the large platforms and further considered by the ACCC. However, the preliminary recommendations are significant, because:

  • dramatic change in the final report is unlikely, given the scope of the inquiry to date;
  • locally, with the traditional media and journalism on side, whatever government is in power in 2019 is likely to accept the ACCC’s recommendations and act;
  • internationally, regulators and governments have been watching the inquiry as the first of its kind, and they will certainly consider, and may follow, the ACCC’s recommendations.

The ACCC’s preliminary recommendations are in summary as follows.

  • Section 50(3) of the Competition and Consumer Act 2010 (CCA), which identifies the factors to be taken into account in assessing the likely competitive effects of a merger or acquisition, could be amended to make it clearer that relevant factors include the:
    • likelihood that an acquisition would result in the removal of a potential competitor; and
    • amount and nature of data which the acquirer would likely have access to as a result of the acquisition.
  • The ACCC intends asking large digital platforms such as Facebook and Google to provide:
    • advance notice of the acquisition of any business with activities in Australia; and
    • sufficient time to enable a thorough review of the likely competitive effects of the proposed acquisition.
  • The ACCC is considering recommending that:
    • suppliers of operating systems for mobile devices, computers and tablets be required to provide consumers with options for internet browsers (rather than providing a default browser), and
    • suppliers of internet browsers be required to provide consumers with options for search engines with no option pre-selected (rather than providing a default search engine).
  • A new regulatory authority should be tasked to monitor, investigate and report on whether vertically integrated digital platforms generating more than AU$100 million per annum from digital advertising in Australia, are engaging in discriminatory conduct by favouring their own business interests above those of advertisers or potentially competing businesses.
  • The regulatory authority could also monitor, investigate and report on the ranking of news and journalistic content by digital platforms and the provision of referral services to news media businesses. Enforcement mechanisms could follow.
  • The Government should conduct a separate, independent review to design a regulatory framework that is able to regulate effectively the conduct of all entities which perform comparable functions in the production and delivery of content in Australia, including news and journalistic content, whether they are publishers, broadcasters, other media businesses, or digital platforms.
  • The Australian Media and Communications Authority (ACMA) should determine a Mandatory Standard regarding digital platforms’ take-down procedures for copyright infringing content, to enable effective and timely take-down of copyright-infringing content. This may take the form of legislative amendments to the Telecommunications Act so that ACMA has the power to set a mandatory industry standard applicable to digital platforms under Part 6 of the Telecommunications Act.
  • The Privacy Act should be amended to better enable consumers to make informed decisions in relation to, and have greater control over, privacy and the collection of personal information by: 
    • strengthening notification requirements; 
    • introducing an independent third-party certification scheme;
    • requiring express, opt-in informed consent; 
    • enabling the erasure of personal information;
    • increasing the penalties for breach to at least mirror increased penalties for breaches of the Australian Consumer Law (ACL);
    • introducing direct rights of action for individuals; and
    • expanding resourcing for the Office of the Australian Information Commissioner (OAIC) to support further enforcement activities.
    • The OAIC should engage with key digital platforms operating in Australia to develop an enforceable code of practice under Part IIIB of the Privacy Act to provide Australians with greater transparency and control over how their personal information is collected, used and disclosed by digital platforms. 
  • The Government should adopt the Australian Law Reform Commission’s recommendation to introduce a statutory cause of action for serious invasions of privacy to increase the accountability of businesses for their data practices and give consumers greater control over their personal information.
  • Unfair contract terms should be illegal (not just voidable) under the ACL, and civil pecuniary penalties should apply to their use, to more effectively deter digital platforms from leveraging their bargaining power over consumers by using unfair contract terms in their terms of use or privacy policies.

The ACCC has also identified 9 areas where further analysis and assessment is required. 

Current ACCC digital platform investigations

The report also confirms that the ACCC is conducting ongoing investigations of the following conduct of certain digital platforms:

  • whether access restrictions imposed by a digital platform on a third-party app developer may raise issues under section 46 of the CCA;
  • whether a particular digital platform’s representations to users regarding the collection of particular types of data may have breached the ACL;
  • potential breaches of the ACL relating to changes to a digital platform’s privacy policy that may enable the digital platform to combine different sets of user data;
  • whether a particular digital platform may have breached the ACL by failing to adequately disclose changes to its terms and conditions which allowed it to share consumers’ user data with third parties; and
  • whether digital platforms’ terms of use and privacy policies may contain unfair contract terms under the ACL.