World watches as Morrison government takes on digital giants

There is a global tide of interest and concern among governments and regulators about the ever-increasing economic clout of digital giants such as Google and Facebook. There is, therefore, going to be intense offshore interest in the Morrison government’s approach to regulating in the digital age.

The government’s action plan was set out on Thursday in its response to the final report of the Australian Competition and Consumer Commission’s (ACCC) digital platforms inquiry that was tabled in July.

That 623-page report, with its 23 recommendations, is regarded as the broadest and most comprehensive investigation of the digital behemoths ever undertaken. That explains the worldwide interest in developments in a market that is almost insignificant to the technology companies that dominate the digital environment.

The government will ask the digital giants to develop voluntary codes of conduct.
The government will ask the digital giants to develop voluntary codes of conduct.Credit:AP

The competition regulator’s brief, and its recommendations, covered issues including reforms to traditional competition law, data privacy, the relationship between the big tech companies and traditional media, fake news, copyright enforcement and unfair trading practices.


Internationally, the big regulatory issues (tax is being dealt with as a separate and equally vexatious issue) have been data privacy, the impact of the tech companies on traditional media and the way the companies exploit their dominance.

The government supports, in principle, the ACCC recommendations that would strengthen digital privacy rights, giving consumers a greater ability to understand the nature of the personal data the companies are collecting from them and how it is being used before they consent to their data being exploited.

It supports, again in principle, the development of a voluntary code of conduct in response to the imbalance of bargaining power between digital platforms and news media businesses, with the threat of a mandatory code if the parties can’t reach agreement.

It has also endorsed a recommendation that media regulation should be reformed to produce a platform-neutral regulatory framework.

In a response to the prevalence of “fake news” on social media platforms, it will ask them to develop voluntary codes of conduct for “disinformation and news quality”, with a threat that there will be stronger action taken if the companies don’t produce satisfactory responses.

Rod Sims, chairman of the ACCC. The commission's inquiry into digital platforms was regarded as the most comprehensive undertaken anywhere in the world.
Rod Sims, chairman of the ACCC. The commission’s inquiry into digital platforms was regarded as the most comprehensive undertaken anywhere in the world.Credit:Alex Ellinghausen

A concern about the dominance that network effects provide companies such as Google and Facebook (the more users they have the more users and advertisers are attracted/compelled to join them) is that they might use that dominance to commercial advantage, favouring advertisers, businesses or services that are most profitable or disadvantaging competitors and the less-profitable users.

The government has agreed to an ACCC recommendation that a digital platforms branch should be created within the commission to examine the competition and consumer protection issues raised by the big digital platforms, providing funding of $27 million over four years.

“Data sovereignty” is the catch-phrase being used to describe the global pushback against the commercialisation of individuals’ data without proper informed consent. Generally, users of the platforms aren’t aware of how much of their data is being collected and being shared for profit with third parties.

Nor, given that the algorithms used by the platforms, can businesses be certain they aren’t being discriminated against or placed at a competitive disadvantage against the vertically-integrated platforms’ own services or those of its business partners. The proposed digital platforms branch will be charged with monitoring, investigating and policing those kinds of issues.

The use of voluntary codes, in the first instance at least, to rebalance the relationship between the traditional news media and the digital platforms and to address fake news illustrates how complex and difficult to legislate those issues are.

The platforms have decimated traditional media’s revenue bases and, by also cherry-picking their content and fragmenting their audiences, are eroding the foundations of conventional news media.

They also, however, deliver audiences and some revenue to traditional media, which makes the relationship somewhat more complicated than simply one of predator and prey.

The code, as the ACCC envisages it, will involve more sharing of the platform’s data with media companies; earlier notification of changes to the way it ranks and displays content and fairer negotiations over the sharing of revenue, or compensation payments, for profiting from media content.

In opting for codes over legislation, the ACCC and government would be very aware that, separate to the complexity of the relationships, trying to enforce an Australian legal regime – when the companies concerned have, relative to their operations elsewhere, only modest interests in this market – might be problematic.

The ACCC also recommended amendments to competition laws that, among less controversial items, would enable it to consider whether a proposed merger would remove a “potential competitor”.

That would significantly extend the ACCC’s merger powers and significantly lower the threshold for a successful commission action to stop an acquisition.

It isn’t surprising the ACCC would seek to use the inquiry to try to increase its power and reach. It has a history of arguing for more power and the extension sought is consistent with its attempts to use hypothetical markets and competitors when it opposes mergers.

The government, recognising that the legislation the commission is seeking would apply, not just to digital platforms but all businesses, noted that courts could already consider these matters while committing to a broad consultation process next year on the proposed amendments to merger laws.

That’s a consultation big non-digital businesses will take seriously and with some trepidation, as they should, given that they lost the debate when the ACCC successfully lobbied for the controversial introduction of an “effects’’ test for misuse of market power cases.

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