Google, Facebook (and other ‘internet giants’) under ACCC scrutiny
The ACCC commenced its inquiry into digital platforms on 4 December 2017 and is required to publish a preliminary report in early December 2018 and a final report by early June 2019. It is expected that the ACCC will release an issues paper early next year, which will outline the issues it will be considering in the inquiry, and call for public submissions. The ACCC also intends to conduct public and private hearings next year, with details yet to be finalised.
In this post, we provide an overview of the context and scope of the inquiry, the ACCC’s powers and mandate for the inquiry and the reception of the inquiry’s announcement to date (for further details and insights on this inquiry, see our alert).
What is the context and scope of the inquiry?
As stated by ACCC Chairman Rod Sims in a media release, as the media sector evolves, there are increasing concerns about the ability of traditional media to fund and develop content.
In this inquiry, the ACCC will examine the impact of digital “platform services” (such as Google and Facebook, which have disrupted advertising industries worldwide) on the state of competition in media and advertising services markets, in particular in relation to the supply of news and journalistic content, and the implications of this for media content creators, advertisers, and consumers.
Although the ACCC’s media release (and much of the other press) have used Facebook and Google as examples, “platform services” is defined broadly to include digital search engines, social media platforms, and other digital content aggregation platforms.
According to Venture capital firm, Kleiner Perkins Caufield Byers, Google and Facebook account for an 85% share of digital advertising growth in the United States, a share which is forecast to rise. It is believed that a similar trend is taking place in Australia.
The ACCC has indicated that it would also like to hear the perspectives of content creators, mainstream and smaller media operators, platform providers, advertisers, journalists, small business interest groups, and consumers.
What’s the ACCC’s mandate and what powers does it have?
The source of the ACCC’s power to conduct this inquiry is section 95H(1) of the Competition and Consumer Act 2010 (Cth) (Act). Under s 95H(1) of the Act, the Minister (the Treasurer, Hon Scott Morrison MP) may direct the ACCC, by written notice, to hold an inquiry into one or more specified matters.
The Treasurer has requested several other inquiries under this provision of the Act, particularly within the past year, including an inquiry into the competitiveness of prices, trading practices, and the supply chain in the Australian dairy industry; and more recently, an inquiry into the supply of retail electricity and the competitiveness of retail electricity prices in the National Electricity Market.
Under the terms of reference of the inquiry (as set out in the notice issued by the Treasurer), the ACCC must consider (non-exhaustively) a number of matters, being:
- the extent to which platform services providers are exercising market power in commercial dealings with creators of journalistic content and advertisers;
- the impact of platform services on the level of choice and quality of news and journalistic content for consumers;
- the impact of platform services providers on media and advertising markets;
- the impact of longer-term trends, including innovation and technological change, on competition in media and advertising markets; and
- the impact of information asymmetry between platform service providers, advertisers, and consumers and the effect on competition in media and advertising markets.
The ACCC has compulsory information gathering powers under the Act, which allow it to compel the production of documents, the furnishing of information, and to hold hearings to evaluate the matters it is considering in this inquiry. Although the ACCC does not have the power to change any laws or regulations at the end of the inquiry, it is able to make recommendations and may commence enforcement action against particular parties.
How have industry players received the announcement of the inquiry?
Representatives of Foxtel and Ten have welcomed the inquiry. Foxtel considers that “massive global players” are having a huge effect on the local market and also, in many cases, operating without the regulatory constraints that apply to local media companies and without the same commitment to supporting local content.
Facebook and Google have also publicly stated they “look forward” to the inquiry. In particular, a Facebook spokesperson said that “[w]hilst the sharing of news and entertainment content is only a small part of the content shared on our services, we take our role in the media ecosystem very seriously and invest significantly in products that support publishers”.