Australia stakes claim to world's first deep dive into Facebook, Google media impact

2 March 2018 10:24am
Opera House Sails

12 January 2018. By James Panichi and Mari Eccles.

The head of Australia’s competition watchdog is in no doubt that his agency’s newly announced inquiry into online platforms will be both thorough and a world first.

When Rod Sims hit the Australian interview circuit recently to talk up his government-mandated brief to examine the market power of Google and Facebook, he said his final report “will be the first review of its kind” when it’s handed down in 18 months.

Digital platforms may have faced some scrutiny in other jurisdictions, Sims told journalists, but what the Australian Competition and Consumer Commission is embarking on is the real deal: an investigation into the impact of the Internet platforms on competition in media and advertising.

This would be an inquiry focusing on “whether platforms are exercising market power in commercial dealings” that are “to the detriment of consumers, media advertisers and creators,” Sims said; it would go “to the heart” of the business model of Facebook and Google.

All of which adds up to a world first, the head of the ACCC opined, and will make it likely to garner plenty of attention.

It's a big claim — and one that is sure to raise eyebrows in those parts of the world where the sprawling presence of the platforms has already been widely discussed.

In Europe, online platforms have faced broad scrutiny at an EU level. And national competition authorities have been assertive in monitoring their rise.

Indeed, European regulators could argue that they were dealing with online competition issues when the Australians were still fumbling with their shoelaces.

National regulators have taken on individual cases against sellers of online goods, with some of those cases resulting in a broad look at online advertising. Germany’s competition watchdog has even started a unique probe of Facebook, suspecting privacy abuse may be linked to antitrust abuse.

But the biggest fight with an online platform has come from the European Commission, the EU’s executive arm. A long-running probe of Google has been, to date, the world’s most influential incursion into the running of online platforms — and the most controversial.

Europe’s regulatory strides are undeniable, but they don’t necessarily negate the ACCC’s claim that its root-and-branch review of competition concerns underpinning online platforms will be broader than those carried out elsewhere in the world.

If anything, the question facing the Australian regulator is whether its research will be overtaken by events before it has even been published.

From ‘zero to dominance’

The ACCC’s investigation won’t directly result in regulation: Sims isn’t promising fines or legal action. The watchdog is simply planning to put forward broad policy ideas where most other regulators have focused on dousing spot fires.

The inquiry’s terms of reference amount to a deep dive into future policy directions, and cover capital-C competition issues, including market power in advertising.

But the probe also tackles issues on the consumer-rights side of the spectrum, including the vexed issue of the right to “quality” news.

“When you have a change as big as Google and Facebook coming along — from zero to dominance of the advertising market — that does have implications for the way journalism has traditionally been funded,” Sims told the Australian edition of the Guardian newspaper.

While there are no country-specific data on the extent to which both Google and Facebook control the market, industry observers argue that global research suggesting the two platforms account for 85 percent of the advertising market also applies to Australia.

The inquiry isn't about picking winners, Sims said. The ACCC intends to examine the “interrelationships between players in the industry” to “assess the impact of these platforms on the state of competition in media and advertising markets.”

Inaction on ‘fake news’

The ACCC’s plans to shed light on Google and Facebook’s market power in Australia certainly offers greater scope than anything regulators and lawmakers have attempted so far in North America.

In the US, political pressure to tackle aspects of the platforms’ power hasn’t been matched by regulatory action.

The Federal Trade Commission, one of the US’s antitrust regulators, opened an investigation into Google’s dominance in online searches, but dropped its probe in 2013. Congressional hearings after the 2016 presidential election delivered more of the same.

Lawmakers challenged the platforms’ attempts to sidestep responsibility for the delivery of “fake news” during the election campaign — news stories that were often completely made up and appear to have been part of a concerted attempt to influence the election’s outcome.

Those hearings may have fed into a growing public backlash against the platforms. But they weren’t about broader regulatory concerns over Google and Facebook’s combined market power.

In Asia, there’s even less momentum for intervention, with most scrutiny coming from telecom watchdogs rather than competition authorities.

Keeping it national

It’s in Europe that Sims’s claim to be a regulatory ground-breaker is most likely to be put to the test.

The EU has spent the last three years exploring the appropriate policy response to the growing power of online platforms and has boiled its thinking down to a set of rules that are currently under negotiation.

These include a copyright levy on platforms, which would force the online giants to share some of the revenue acquired by disseminating news articles, and a separate proposal to force video platforms such as YouTube to distribute revenue to audiovisual rights holders.

These new provisions build on existing rules that have constrained online giants, including the “right to be forgotten” in online search results, and national laws and EU measures targeting the online spread of hate speech and illegal content.

Which is all good and well. But are these antitrust measures?

Observers in the Australian corner could point out that the EU’s response is being driven by the bloc’s digital division, not its antitrust officials. That’s not trivial, they would argue, it points to a very different regulatory emphasis.

That argument is supported by the fact that the EU is more than happy to allow national regulators to take the lead when specific competition concerns are leveled against online platforms, such as online hotel bookings or Germany’s concerns with Facebook.

Many of these national regulators have experience in the field. Yet, the lack of a centralized EU response and the authorities’ focus on their own hobby-horses — for example, France’s concerns about the impact on publishers — has arguably muted Europe’s response.

German pioneers

If Sims’s claims to be a global trend-setter sounds familiar, it’s because the head of Germany’s antitrust authority said something very similar in 2013.

At the time, Andreas Mundt said that the Bundeskartellamt was an “international pioneer” in the digital sector.

Within three years of that announcement, Mundt had launched a probe into Facebook, focusing on its contract terms for user data — a probe that saw a preliminary report released in December, just a few days after the ACCC’s announcement.

But the German investigation has a narrower focus than the review started by Canberra, because it sidesteps the advertising and media concerns that the ACCC has singled out for attention.

In fact, when it comes to media, the German authority has been hesitant to act. In 2014, it dismissed accusations that Google was breaching antitrust law by using copyright-protected news snippets.

Ditto for the probe opened by the French antitrust authority back in 2010, which targeted an online firmament in which Google had a “dominant position” in the advertising market linked to search engines.

In 2016, the French followed up this probe with a sectoral inquiry, the closest any other regulator has come to Australia’s deep dive.

This inquiry took aim at the online advertising market — indeed, Facebook and Google were both contacted as part of the study. But while France’s Competition Authority has sought views from media publishers, it isn’t looking specifically into the media industry.

Problems posed by platforms in the media industry, such as fake news, will instead be tackled by the national government — in short, it’s being kept out of the antitrust realm.

Ticking-clock scenario

There is some suggestion that the ACCC’s review may indeed set the agenda, prompting similar reviews in other jurisdictions.

Just this week, Israel’s antitrust regulator announced its own probe into online platforms, with the authority’s head, Michal Halperin, naming Facebook and Google during a parliamentary hearing and ticking the same boxes as the ACCC.

And the Dutch authority — typically seen as a “hands-off” regulator — has announced its own inquiry into platforms and their effect on the media.

Yet, even if the Australians’ claim to be leading the regulatory pack proves well founded, it may end up being a Pyrrhic victory. By the time the ACCC’s report is published, the world may have moved on.

Late last year, Fairfax Media — which publishes Melbourne paper the Age, the Sydney Morning Herald and the Australian Financial Review — announced that it has entered into “a partnership” with Google, covering “digital advertising, technology and product development.”

Other online media players have entered into similar deals, suggesting the companies are responding to the platforms’ gargantuan market share in whatever way they can, without waiting for regulators to step in.

This means that policy makers, including the Australian government, could be left playing catch-up — even with a ground-breaking, world-first report in its hands.

- Additional reporting by Magnus Franklin

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