Internet media giants Google and Facebook would be required to make it clearer to consumers how their private information is used, get proper consent and face significant penalties for breaching privacy laws, according to the consumer watchdog's preliminary report into their market dominance.

The Australian Competition and Consumer Commission (ACCC) said the digital platforms "favour their own business interests" through their market power and presence across multiple markets, and that a regulatory authority should be tasked to investigate and report on whether digital platforms are engaging in "discriminatory conduct".

In December last year, the Australian Government directed the ACCC to undertake a public inquiry into the impact of digital platforms on competition in media and advertising services markets, in particular in relation to the supply of news and journalistic content.

In its preliminary report, published on Monday, the ACCC made 11 preliminary recommendations and named eight areas for further analysis as the inquiry continues.

ACCC chairman Rod Sims said Google and Facebook had too much market power, but stopped short of calling for a break-up of the media giants.

"The ACCC considers that the strong market position of digital platforms like Google and Facebook justifies a greater level of regulatory oversight," Mr Sims said.

Mr Sims said there were five investigations underway into misuse of market power by digital players, which arose from this inquiry, but he could not elaborate further at this time.

Facebook, Google grow market share

The report notes the rapid growth of Facebook and Google in Australia.

Facebook, with a market value of $390 billion and more than 2.2 billion monthly active global users, launched its services in Australia in 2004.

It started showing advertisements on its sites in 2007, and earned $US13 billion in advertising revenue in the second quarter of 2018.

Facebook has by far the largest social media user base in Australia, with 17 million people accessing on a monthly basis. This equates to about 68 per cent of the Australian population accessing the Facebook platform every month.

Instagram, owned by Facebook, is the next most popular social media platform, with approximately 11 million monthly users.

Google's parent company, Alphabet, has a market capitalisation of about $US700 billion.

In 2017, Google accounted for 90 per cent of search traffic originating from Australian desktop computer users and more than 98 per cent of search traffic from Australian mobile users.



New regulator, tax deductions proposed

The report proposed a new or existing regulatory authority be given the task of investigating, monitoring and reporting on how large digital platforms rank and display advertisements and news content.

In the wake of the Cambridge Analytica scandal, it also recommends a Code of Practice for digital platforms that would give Australians greater transparency and control over how their personal information is collected, used and disclosed by digital platforms.

The ACCC also recommended the Federal Government adopt the Australian Law Reform Commission's recommendation to introduce a statutory cause of action for serious invasions of privacy.

To address the decline in consumers using traditional media outlets, the report suggests considering tax offsets for the costs incurred by news media organisations in producing journalism and subscriptions to news publications or services to be tax deductable for all Australians.

The report expresses concern about the extent and ease with which digital platforms such as Google and Facebook collect data on Australian consumers, and noted most do not facilitate a user to opt out of all targeted advertising entirely.

While not all online advertising revenue goes to digital platforms, a large proportion flows to Facebook and Google.

The total online advertising market in Australia grew by $3.1 billion between 2014 and 2017, and Google and Facebook accounted for 70 per cent of that growth.

The report proposes preventing Google's internet browser (Chrome) being installed as a default browser on mobile devices, computers and tablets and stopping Google's search engine being installed as a default search engine on internet browsers.

Call to amend the Privacy Act

Another major ACCC recommendation is to amend the Privacy Act to give consumers greater control over privacy and the collection of personal information.

This is similar to the European Union's General Data Protection Regulation (GDPR), which aims to protect the data and privacy of EU citizens by hitting tech companies in breach of the laws with hefty penalties.

The ACCC suggested changes to the Privacy Act, including that:

Any user data collected by a third party is, "accompanied by a notification of this collection that is concise, transparent, intelligible and easily accessible, written in clear and plain language [particularly if addressed to a child], and provided free of charge"

Any user data collected by a third party is, "accompanied by a notification of this collection that is concise, transparent, intelligible and easily accessible, written in clear and plain language [particularly if addressed to a child], and provided free of charge" The introduction of an independent, third-party certification scheme: businesses above a certain threshold that hold consumers' personal information would have to undergo external audits

The introduction of an independent, third-party certification scheme: businesses above a certain threshold that hold consumers' personal information would have to undergo external audits Consent requirements would be strengthened. Settings that enable data collection must be pre-selected to 'off'. The consent must also be given by an individual or an individual's guardian who has the capacity to understand and communicate their consent

Consent requirements would be strengthened. Settings that enable data collection must be pre-selected to 'off'. The consent must also be given by an individual or an individual's guardian who has the capacity to understand and communicate their consent Erasure of personal information would be easier

Erasure of personal information would be easier Increasing penalties for breaches of the Privacy Act to at least mirror the increased penalties for breaches of the Australian Consumer Law

Increasing penalties for breaches of the Privacy Act to at least mirror the increased penalties for breaches of the Australian Consumer Law Introducing direct rights of action for individuals: Give individual consumers a direct right to bring actions for breach of their privacy under the Privacy Act

Introducing direct rights of action for individuals: Give individual consumers a direct right to bring actions for breach of their privacy under the Privacy Act Expanding resourcing for the Office of the Australian Information Commissioner OAIC to support further enforcement activities

Should 'opt-out' be changed to 'opt-in'?

Currently, Facebook does not provide an option to opt out of targeted advertising on its site using data collected by Facebook.

The ACCC did not go as far as recommending a change, but suggested further scope for looking into an "opt-in targeted advertising".

The law could, "prohibit entities from collecting, using, or disclosing personal information of Australians for targeted advertising purposes unless consumers have provided express, opt-in consent", the report noted.

"Under such a proposal, consumers receiving advertising-funded services [including via a social media platform or search engine] could still be required by the platform to consent to view advertisements, but the user must not be required to consent to view targeted advertisements based on their user data or personal information in order to use the platform," it said.

It added that this differs from the proposed amendment in that it would not be limited to the Privacy Act, and could, "significantly decrease the bargaining power imbalance between consumers and digital platforms".