This article is more than 7 months old

This article is more than 7 months old

The competition watchdog will conduct two new inquiries into possible anti-competitive behaviour by digital platforms such as Facebook and Google, and services allowing online advertisers to target Australian internet users.

The treasurer, Josh Frydenberg, has instructed the Australian Competition and Consumer Commission to begin the new inquiries as part of ongoing scrutiny recommended by the digital platforms inquiry it conducted in 2019.

The original inquiry was set up to address concerns from traditional media companies that behemoths such as search engine Google and social media company Facebook were gathering an increasing share of advertising revenue, imperilling the business model of companies employing journalists and content creators.

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Frydenberg suggested the two new inquiries could help “improve the sustainability of the Australian media landscape” through “the proper functioning of markets and a fair approach to regulation” and would ensure Facebook and Google are “closely monitored”.

The digital platforms inquiry will be conducted by the new dedicated unit of the ACCC, set up in December, to give effect to the recommendation for “more consistent scrutiny of potentially anti-competitive behaviour and consumer harms”.

Armed with compulsory information gathering powers to collect data from digital platforms, the inquiry could lead to ACCC enforcement action as well as inform government policy. It will report by September 2020, with reports due every six months thereafter.

The ad-tech inquiry, to run until August 2021 with an interim report due by December, will focus on technologies that gather information about consumers and use it to target them with highly personalised advertising online.

These include Google products such as Google Ad Manager and their competitors AppNexus, MediaMath, Rubicon Project and The Trade Desk, but may exclude Facebook’s advertising service, which the ACCC found is “not considered to be an ad-tech service” because it “does not interconnect with other parts of the ad-tech supply chain”.

In its final report, the ACCC complained of a “lack of transparency” around pricing in the sector, with ad purchasers unsure how much is spent on ad-tech services as opposed to purchasing the advertising inventory.

Frydenberg said digital platforms “have fundamentally changed the way that media content is produced, distributed and consumed” and regulatory frameworks need to keep pace.

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“The government recognises that there is a need for reform to better protect consumers, improve transparency, address power imbalances and ensure that substantial market power is not used to lessen competition in media and advertising services markets,” he said.

“The government’s role is not to protect domestic businesses from digital competition, but rather to ensure the proper functioning of markets and a fair approach to regulation that ensures the rules of the physical world apply equally to the digital world.

“The reforms already agreed to by the government, together with these inquiries will strengthen competition and consumer protection and improve the sustainability of the Australian media landscape.

“With digital platforms collecting and using enormous volumes of personal information, consumers need to be properly informed about the data collected, how it is being used and by who.”

Frydenberg noted 98% of online searches on mobiles are with Google and Facebook has 17 million Australian users who spend on average half an hour each day on the platform.

“Given this incredible level of market concentration, it is critical that these companies continue to be closely monitored,” he said.

The ACCC chairman, Rod Sims, has said the market power enjoyed by the digital behemoths is weakening Australian media, with Google and Facebook estimated to have captured 80% of the growth in digital advertising in the past three years.

More than a quarter of traditional newspaper journalism jobs have disappeared, print advertising revenue has dried up, and for every $100 spent on online advertising, $47 goes to Google and $21 goes to Facebook.

In the digital platforms inquiry the ACCC called for new powers to compel information from Facebook and Google about how they adapt their algorithms – the machine-driven formulas that rank content and determine what users will see first – and to investigate whether they are favouring their own businesses ahead of other companies.

Media giant News Corp proposed that Google be broken up to restore a level playing field for media companies swamped by its “overwhelming” market power.