Yesterday, ACCC Chair Rod Sims delivered an address to the Melbourne Press Club about the Digital Platforms Inquiry.
Here are the key points of interest for fashion retailers using platforms such as Google and Facebook.
1. The consumer watchdog is watching market share
"Digital platforms have fundamentally changed the way we interact with each other, as we all know," Sims said.
"There is no doubt that platforms, like Google and Facebook, provide enormous social and economic benefits to consumers and businesses alike.
"Along with the benefits, however, come a number of concerns, which have attracted the attention of people and governments the world over."
Sims said this led the Australian Government to direct the ACCC to conduct an inquiry into digital platforms in December 2017, resulting in a 600 page final report.
It found that Google and Facebook have substantial market share, giving unparalleled access to Australian audiences. Each month, approximately:
- 19.2 million Australians use Google Search
- 17.3 million Australians access Facebook
- 17.6 million Australians watch YouTube (owned by Google)
- 11.2 million Australians access Instagram (owned by Facebook)
"These are not community based, not for profit, companies, no matter how much they seek to portray themselves as benevolent enablers of human interaction and knowledge sharing," Sims said.
"While they might provide a wide array of services to their customers, at zero monetary cost, like any other successful public company, their success is measured in shareholder returns."
2. Market share and a question of profits
The United States stock exchange does not indicate there is any sign that Google and Facebook’s market power is likely to erode in the short to medium term.
The ACCC's broad calculations, at the time of submitting the final report, indicate that approximately:
- 65–80 per cent of Facebook’s current share price can be attributed to expected future growth in returns and;
- in Google’s case, 40–60 per cent of their parent company Alphabet’s current share price can be attributed to such future growth.
"If their profits were simply expected to stay at current levels their share prices would plummet. Understandably they do not want such an outcome," Sims said.
"There’s nothing wrong with this. In a market economy we want all firms to seek to grow by providing more profitable services to users."
The law does not, however, allow companies to use their dominant position to handicap their rivals.
The dominance of Google and Facebook as a means of distribution has meant many businesses rely on their services to reach customers.
"The lack of transparency in Google’s and Facebook’s operations compounds this risk," Sims said.
"So while they might position themselves as ‘dumb pipes’, simply the messengers not the message, this portrayal is contradicted by their need to capture and monetise increasing amounts of user attention and data to continue to grow."
The behaviour of these tech giants has already provided us with evidence of those practices.
In March this year, the European Commission (EC) hit Google with a €1.5 billion fine for abusing their dominant position by forcing customers of its AdSense business to sign contracts stating that they would not accept advertising from rival search engines.
The EU’s competition commissioner stated when announcing the decision that their ‘conduct lasted over 10 years and denied other companies the possibility to compete on their merits and to innovate.’
This fine was the third levied against Google in as many years.
The cumulative amount of fines levied by the EC against Google now stands at EUR 8.2 billion. Or AUD $13.6 billion.
And last month, the Federal Trade Commission announced a record US $5 billion penalty for consumer privacy violations by Facebook that surfaced with the revelations of Cambridge Analytica’s use of Facebook user data in the US elections.
"The ACCC has also found that the current regulatory frameworks, governing media, communications and advertising, result in significant regulatory imbalance and distortion between digital platforms and some media businesses," Sims said.
3. The data dilemma
The collection of user data is central to the business model of Google and Facebook’s advertiser funded platforms as it allows them to offer highly targeted and personalised opportunities to advertisers.
The breadth and scale of the user data collected by Google and Facebook is relevant to both the assessment of their market power and user concerns, according to the ACCC.
Australians benefit from the many ‘free’ services offered by digital platforms, and most users now have at least some understanding that certain types of user data and personal information are collected in return for their use of a service.
However, the ACCC found that few consumers are fully informed of, nor can effectively control, how their data is collected, used and shared by digital platforms when they sign up for or use their services.
"Vague, long and complex privacy policies contribute to this substantial disconnect between how consumers think their data should be treated and how it is actually treated," Sims said.
Research from the ACCC inquiry showed that around 80 per cent of digital platform users considered that using their online behaviour to create profiles of them, and sharing their personal information with an unknown third party, to be a misuse of their personal information.
Digital platforms collect vast troves of data about consumers from ever-expanding sources, including countless third party apps and websites. And they have significant discretion over how this user data is used and disclosed to other businesses and organisations, both now and in the future.
"Consumers relinquish considerable control over how their uploaded content is used by digital platforms, usually without realising it," Sims said.
For example, an ACCC review of several large digital platforms’ terms of service found that each of the terms of service reviewed required a user to grant the digital platform a broad licence to store, display, or use any content uploaded by the user.
"Bundled agreements and take-it-or-leave-it terms remove consumer choice and control," Sims concluded.