ACCC’s struggle to rein in Big Tech

The ACCC’s sidestepping of decisive recommendations takes a leaf out of the inquiry handbook.

Ten per cent of Google’s $3bn of Australia-based revenue would be enough to produce both the Financial Review and The Australian at least three times over.

When in doubt, recommend more codes.

The competition regulator’s mammoth investigation into Google and Facebook has produced a comprehensive, world-class dissection of the tech giants’ economic power, especially over traditional media and advertisers. But it took a leaf out of the inquiry handbook in recommending new or strengthened “codes”, sidestepping decisive recommendations that would have altered the legal and economic landscape.

A smidgen over 1000 pages (including a preliminary report), the final analysis left journalists struggling on Friday to write paragraphs that didn’t include “overhaul”, “shake-up” or “ongoing monitoring” — clues that not much was really happening.

There are no fewer than four new codes in the pipeline: a privacy code (recommendation 18), a code to “counter disinformation” (15), a “take-down code” (8), and a code of conduct to govern relationships with media companies (5) — let’s call this one a ‘‘treaty’’.

Then there are a couple of codes with different names: a new “minimum internal dispute resolution standard” (22), a “harmonised media regulatory frame­work” (6), alongside a new ombudsman (23), and a recom­mendation for another inquiry (into “adtech”) (5).

The code-writing teams at the big consulting firms will be licking their lips, but there’s not much that screams tectonic shift in the media or advertising landscape.

As for raising the regulatory bar for mergers (1), and requiring the tech giants to tell the ACCC if they plan on buying anything (2), that horse is in the next paddock already. No wonder, then, that the share prices of News Corp, Seven and Nine dipped on Friday.

The government has given itself give five months to even respond to the recommendations, let alone for the code drafters to get started, by which time more journalists might have been laid off, adding to the one-fifth who’ve lost their jobs in just four years to 2018.

Meanwhile in New York, Facebook’s and Google’s share prices flat-lined and surged, respectively, on the back of a $US9.9 billion ($14.3bn) global profit in the second quarter.

A handful of the 23 recommendations do, however, have the potential to improve an economic reality that has savaged traditional media. “Where the digital platform obtains value from content produced by news media, the digital platform will fairly negotiate with the news media businesses as to how that revenue should be shared,” the ACCC said.

How much is shared is going to be the sticking point. “Between 8 and 14 per cent of Google search results trigger a ‘top stories’ result, which typically includes reports from news media websites,” the report found.

Ten per cent of Google’s $3bn of Australia-based revenue would be nice (enough to produce both the Financial Review and The Australian at least three times over), but don’t expect the tech giant to co-operate. It’s more difficult to know how much benefit Facebook, the smaller of the two, which generated about $1.3bn in advertising revenue locally last year, obtains from news articles.

Facebook and Google benefit from having quality news articles on their searches and news feeds, yet the producers of such news obtain little in return.

The platforms will argue that they obtain no or negligible benefit from including news stories on their platforms.

News media can only hope they have a tough time convincing the Australian Communication and Media Authority, which will have the power to impose minimum treaty terms.

The ACCC has given Google six months to give new mobile phone and computer buyers a choice of internet browser and search engine, piggy-backing on substantive recommendations made in Europe recently.

That Google pays Apple $US12bn a year to ensure it remains the default search engine for Apple’s Safari browser underscores how much defaults matter.

“Google’s search engine is effectively the default search engine on over 95 per cent of Australian mobile devices,” the report revealed.

Also, a revamped Privacy Act (16) and a new tort for serious breaches of privacy (19) could pave the way for costly class actions against the tech giants, especially Facebook, which has been able to publish material without incurring the sort of risk-return trade-off traditional media firms face every day.

The ACCC was wise to step back from recommending another regulator, which would have been ripe for capture. As they have in finance, designated regulators tend to entrench the biggest players, even coming to act in their interests. Among the nation’s regulators, the ACCC has the best record of acting in the public interest.

Whatever the recommendations, the ACCC has provided the intellectual ammunition for sweeping changes in regulation of tech giants.

They clearly have immense market power in search, social media and over advertising. If there was ever a case for anti-trust action, this must be it.

Consider their ability to amass vast revenues without sharing any of it with consumers.

Is it not easy to imagine a world where Google or Facebook pay us, the users, a few dollars a month to use their platforms and provide our very valuable data?

Modern payments systems would make that easy, yet it doesn’t occur.

Powerful network effects — the increasing value of platforms as more use them, and zero marginal cost of production — make it all but impossible for competitors to dislodge Facebook and Google.

And if any showed signs of doing so they would be bought out.

Where advertising used to sustain investigations, specialist journalism and reporting that benefited society, now it enriches US shareholders and underpins addictive social media consumption, much of which has little public benefit.

Resuscitating this virtuous circle is a public policy imperative.  Trying to tame Google and Facebook from Australia, though, is akin to an ant biting an elephant’s toe. The two firms’ combined stockmarket value exceeds the entire Australian stockmarket.

In 2017, Google earned $US110bn, Facebook another $41bn. And beyond those vast cash flows and unprecedented reservoirs of information on us, they are popular with voters — a source of goodwill neither firm has yet actively begun to tap.

Enforcing the new codes and frameworks will be difficult. And there’s little chance the tech giants will make an oath to consider the public good.

Indeed they have every incentive to drag the chain, or even ignore regulators. The solution will need to be global, and US-led. Thankfully US President Donald Trump is far less well disposed to them (except for Twitter) than his predecessor.

Chris Mitchell is on leave..