Facebook and Google face clamp on customer data

The ACCC is proposing limits on how tech giants encroach into the persona­l lives of users by ­exploiting their data.

ACCC chair Rod Sims yesterday. Picture: Hollie Adams

The business model of tech giants Google and Facebook is under challenge, with the competition watchdog proposing limits on how they encroach into the persona­l lives of users by ­exploiting their data to deliver huge profits.

In a landmark review of ­Google’s and Facebook’s vast local operations, the Australian Competition & Consumer Commission has outlined 11 recommend­ations to hold digital platforms to account, including closer scrutiny of their activities by a government agency and tough new data collection rules.

ACCC chairman Rod Sims said five investigations were underway into potential misuse of market power and breaches of consumer law but he declined to provide who or what was being examined.

The ACCC’s Digital Platforms Inquiry preliminary report — the first of its kind in the world to ­assess the impact of tech giants on media and advertising markets — found the two companies had “substantial market power”.

The draft recommendations include a proposal that would preven­t Google’s internet browser Chrome being installed as a defaul­t on mobile phones, comput­ers and tablets.

It also wants Google’s search engine to stop being installed as a default on internet browsers.

The ACCC report, which was foreshadowed in The Australian yesterday, provides an insight into the growing dominance of the tech players and how they freely use personal data — often without the knowledge of users — to sell to advertisers.

The report also documents the often chilling way data has been stored and traded by players such as Facebook, including names and phone numbers taken from users’ mobile phones. There are also demands for the top-secret newsfeed rankings at the heart of their business model — their algorithms — to be more transparent.

Mr Sims said yesterday: “The strong market position of digital platforms like Google and Facebook justifies a greater level of regulatory ­oversight.”

The US tech giants have ­“significantly transformed” the way people communicate and ­access news and information, but are also “unavoidable business partners” for many local businesses, Mr Sims said.

“Google and Facebook perform a critical role in enabling businesses, including online news media businesses, to reach consumers. However, the operation of these platforms’ key algorithms determining the order in which content appears is not at all clear,” he said. “Organisations like Google and Facebook are more than mere distributors or pure intermediaries in the supply of news in Australia; they increasingly perform similar functions as media businesses, like selecting, curating and ranking content. Digital platforms face less regulation than many media businesse­s.”

Industry reaction to the ACCC’s preliminary recommend­ations was mixed.

A Google spokeswoman said the preliminary report examined “important topics”, but she declined to comment on the recommend­ations.

“As we put forward in our submission, we develop innovative products to the benefit of consumers, businesses and the economy, and we work closely with advertisers and publishers across Aust­ralia. We will continue to engage with the ACCC between now and the final report next year.”

A Facebook spokeswoman said the company would “remain committe­d to working with the commission as they review the contribution of all digital plat­form­s in Australia.”

The ACCC’s 378-page prelim­in­ary report found that tech giants’ extensive digital reach had hurt ­investment in Australian news and journalism.

“The reduction in journalist numbers is important given the critical role news and journalism perform in society,’’ the ACCC said. “Even those members of the public that do not read, watch or listen to the news benefit from the role journalism performs in ­exposing corruption, the creation of public debate and holding governments, corporations and individuals to account through their questioning and investigation.’’

Commercial media, in particular traditional print media, first suffered a major hit in advertising revenue with the unbundling of classified advertisements from newspapers. That led to a sharp drop in classified ad revenue to $200 million in 2016, from $2 billion in 2001.

At the same time, competition intensified from international sources and other media, both commercial and publicly funded.

News Corp, which has campaigned against the dominance and lack of transparency of Google and Facebook, welcomed the draft report.

News Corp Australia executive chairman Michael Miller said the group is “encouraged by its (the ACCC’s) concerns regarding the digital platforms’ market power, their impact on Australian businesse­s and the risk of that dominant power creating compet­iti­ve and consumer harm.”

“The report highlights the impact the digital platforms have as unavoidable business partners and gateways between news media businesses and both consumers and advertisers,” Mr Miller said.

The ACCC will hold talks with regulators in Europe and the US.

In a joint statement, Josh Fryden­berg, Attorney-General Christian Porter and Communications Minister Mitch Fifield said the draft report highlighted severa­l important issues, including market power and potential regul­atory adjustments.

Opposition communications spokeswoman Michelle Rowland said the report “canvasses a range of known issues, and makes a range of preliminary recommend­ations that deserve further consid­eration”.

“For example, the idea that a regulator should monitor the effect­s of algorithms on the prod­uction, ranking and display of news and journalistic content online is of key interest in Australia, given we have one of the most concentrated media markets in the world — a situation made worse by the Liberal government’s repeal of the two out of three cross-media control rule,” Ms Rowland said.

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The 11 recommendations

Consumers should have a choice of internet browsers and search engines on their mobile devices, computers and tablets, rather than just default options provided by the operating-system suppliers

Big digital platforms such as Facebook and Google should provide advance notice when taking over any business with activities in Australia, so that the acquisition can be reviewed

A watchdog should oversee digital platforms to check whether they favour their own businesses over advertisers or competitors

The watchdog could also monitor, investigate and report on how news stories and other journalism is ranked by digital platforms and how they refer on to news organisations. These measures would apply to platforms that generate revenue of more than $100 million a year. The watchdog could look at complaints and make investigations

A review of media regulation to cover all types of media content and delivery, whether by publishers, broadcasters, other media businesses or digital platforms

The Australian Communications and Media Authority to set a standard on taking down material that infringes copyright

The Privacy Act to be changed to strengthen control over the use of personal information. Consumers must be told in clear, plain language how their information is being used. Consumers must “opt in” to have their data collected and settings to allow data to be collected should be preselected to “off”

The Office of the Australian Information Commissioner to introduce a code of practice for digital platforms so that consumers know when and how their information is used

Changes to merger law to highlight the removal of a potential competitor company. The amount and kind of data to be acquired would also be relevant in assessing a takeover

The government to adopt the Australian Law Reform Commission’s recommendation to introduce a statutory cause of action for serious invasions of privacy

Unfair contract terms should be illegal under the Australian Consumer Law to stop digital platforms using unfair terms in their use and privacy policies