ACCC doubles on digital platforms

The final report of the Australian Competition and Consumer Commission (ACCC) on its survey of digital platforms was released by the government late last week.

The survey focused on "the effect of digital search engines, social media platforms and other digital content aggregation platforms on competition in the markets of media and advertising services ".

The central questions for ACCC were: Do Google and Facebook hold substantial power in critical digital markets, and does that pose a risk to competitive processes?

In its final report published by the government, the ACCC correctly answered both questions with a resounding "yes".

The ACCC has not sought to determine whether one or the other of the companies had breached the rules of competition. This can only be determined as part of an investigation into specific conduct based on specific facts and evidence.

At least one of these investigations is ongoing and it seems that others will follow.

After identifying competitive risks, ACCC tried to determine how they could be controlled. His proposals are justifiably cautious, reflecting the complexity of digital markets and the difficulties in ensuring that any intervention protects the competitive process rather than individual competitors.

Market power of Google and Facebook

As noted by ACCC, the considerable power gained in serving the interests of consumers is not illegal, and it recognizes that Google and Facebook provide highly valued services to their users.

The report highlights the distinguishing characteristics of digital markets and platform business models that contribute to the power of these companies: extraordinary economies of scale, network effects, economies of scale, mbadive data accumulation and the use of digital technology. very sophisticated data badysis.

It is important to recognize that these features also reflect efficiencies that bring value to consumers.

However, when markets are highly concentrated, incumbents may be tempted to largely serve their own interests – rising prices, reducing quality and reducing consumer choice.

There are also risks that they use their power to prevent new entrants from offering a better offer and disadvantage other companies dependent on the services of the incumbent operator to serve consumers in their own markets.

ACCC has found that these risks abound in markets dominated by incumbent operators: general research and search-related advertising services in the case of Google, and social and advertising network advertising services. posting in the case of Facebook.

Despite claims by technology companies that they compete in larger markets, the ACCC's findings are consistent with international approaches.

Reduce risks for competition

What does ACCC propose to reduce risks? There is no quick fix or miracle solution.

The ACCC has rightly rejected the idea that the main platforms are divided. Given the highly interconnected nature of the markets in which the major platforms participate, the divestiture would not guarantee and could even harm the welfare of consumers.

Recognizing this complexity, the report's recommendations demonstrate ACCC's determination to strengthen its ability to aggressively enforce competition rules with respect to digital platforms and to actively review acquisitions that further strengthen the power of the digital media. market.

These are ambitious, long-term projects, but they are essential to protecting competitive processes.

The majority of the report's recommendations focus on regulation and other reforms to correct imbalances in information and bargaining power between platforms and business users, as well as between platforms and organizations. consumers in connection with the collection and use of personal data.

These initiatives also present challenges, particularly to avoid increasing the risks to competition.

Invest in the ability to run

ACCC proposes to create a new specialized branch to build and maintain the human and intellectual capital necessary to continue to study digital platforms and enforce the rules of competition and consumption in their markets.

It's a welcome initiative. It replicates similar capacity building initiatives in the United States and Europe.

The report is peppered with references to European cases in which Google has been subject to stiff fines for various abuse of dominance.

It also invokes the European mantra that powerful companies have a "special responsibility".

But the abuse of Australia's ban on market power does not reflect its European counterpart. European law is broader and more flexible than ours.

Certain types of unfair or exploitative behavior may constitute an abuse of dominant position in Europe. We have different laws for this type of behavior, including the prohibition of unfair contract terms and the refusal to make it abusive.

ACCC has proposed that these aspects of Australia's consumer law be strengthened and possibly expanded. Such reforms would not only apply to digital platforms and would be part of a larger project that has been under discussion for some time.

Article 46 recently amended the Competition and Consumer Law The year 2010 is not yet well launched and, in the digital context, its application will be complicated by the rapid pace of innovation and the fact that competition is more often "for" than for "on" the market. .

Strengthening merger control

It is recommended that the merger laws be amended to refer to potential competitors and data badets. This is a good start to ensure that the law reflects the unique characteristics of digital mergers.

It is also proposed that Google and Facebook voluntarily notify ACCC of any future acquisitions. This is a polite demand supported by a thinly veiled threat of repercussions in case of no membership.

However, the report also implies that none of these proposals will likely be sufficient.

It may be necessary to make further amendments to the merger law to convince judges that it is necessary to stem unhealthy levels of concentration in the Australian economy in general. It is also not long before we have a mandatory notification regime, triggered by a combination of turnover and transaction value thresholds, to ensure that incipient competitors are not stifled.

The ACCC must be able to engage with the government and other stakeholders.

Consider the portability and interoperability of data

The reference to the right to consumption as a measure to enhance competition, facilitate switching of suppliers and encourage new entries was an omission in the preliminary report.

The final report corrects the omission but, as ACCC points out, the arguments for portability (or interoperability) of data in relation to large platforms are weaker than in relation to major banks and large companies in the energy sector.

He placed these potential reforms on his list "possibly in the future".

Retain the regulation of transactions with business users

The Commission has moved away from its preliminary proposal to establish a regulator to monitor and oversee the commercial relationship between the platforms and their main business users, advertisers and media organizations.

Trading imbalances should only be regulated when it is clearly established that markets are bankrupt and that greater transparency and certainty are needed to protect incentives to invest and innovate.

ACCC was not convinced that the grievances of advertisers and media outlets constituted market failures justifying the invasive regulation that appeared to have been contemplated – at least not yet.

He may have also heard criticisms that the proposed regulation could benefit traditional players in troubled sectors more than consumers.

The advertising industry is highly fragmented, complex and constantly evolving. Evidence that opacity, verification and discrimination distorted competition was at best debatable.

In light of this, the proposal that the ACCC should conduct a thorough review of the dynamics of the ad tech supply chain before recommending a firm intervention intervention is commendable.

For the media sector, the tradeoff is that each platform will be forced to negotiate a code of conduct that will be overseen and enforced by the Australian Communications and Media Authority.

Whether this responds to the concerns of the media regarding advice on algorithmic changes, value appropriation and original content will largely depend on ACMA's skills and resources.

Reforming media regulation

Recognizing that platforms are deeply rooted in the media sector, the call for a complete overhaul of media regulation to level the playing field and remove regulatory barriers to competition is evident.

It seems to have been accepted by the government.

Update and extension of the protection of privacy

The need for an in-depth reform of our privacy laws to anchor them in the digital age should also not be controversial.

The platforms may complain about the proposal that they should be subject to additional privacy requirements, and the anticipated complaint about the absence of an international standard for such requirements deserves to be deserved.

But the proposed development of an enforceable code of conduct allows them at least to sit down at the bargaining table and ensure that the regulation is applicable.

In addition to the consumer protection aspect of the proposed reform, ACCC is correct in saying that giving consumers more control over their data could open the door to increased competition for privacy. This should also boost consumer confidence, essential to the digital economy.

However, from a competition point of view, the privacy reform process will face an urgent challenge: to ensure that cumbersome regulation does not disproportionately burden small and new businesses. Venus.

ACCC is right to suggest that it is involved in the process of preventing such a risk from materializing.

Road mapping

The ACCC's important work on digital platforms has just begun and the road is long and bumpy.

The government should give him the time and money to continue.

Caron Beaton-Wells is the host of the Lore Competition Podcast, explore politics and competition law in the digital age.

A version of this article also appears in The Conversation.

Banner: Paul Fletcher, Minister of Communications, Addresses Media Following the Release of the ACCC Report on its Digital Platform / AAP Survey