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Australia’s Digital Platforms Inquiry: the spotlight remains on digital platforms markets

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Angela Flannery

 

Background

For an 18-month period from late 2017, the Australian Competition and Consumer Commission (ACCC) undertook its ground breaking Digital Platforms Inquiry. Its terms of reference required the ACCC to investigate the impact of digital search engines, social media platforms and other aggregation platforms on the state of competition in Australia’s media and advertising markets. The ACCC was required to give particular consideration to the impact of those platform services on the supply of news content and the effects on stakeholders including content creators, advertisers and consumers.

The Australian Government published the ACCC’s Final Report from the Digital Platforms Inquiry in mid-2019 and, following a further round of public consultation, the government released its response in December 2019, which was titled ‘Regulation in the digital age Government Response and Implementation Roadmap for the Digital Platforms Inquiry’.[1]

The Australian Government largely adopted the recommendations of the ACCC from its Final Report. It included in its list of proposed ‘immediate’ actions that a new ACCC Digital Platforms Branch would be established to monitor digital platforms and that this Branch would also be directed to commence an adtech inquiry. Reflecting these two agreed actions, on 15 February 2020, the Australian Treasurer issued a media release announcing the Terms of Reference for the ACCC to undertake two separate inquiries: an inquiry into Australia’s adtech services markets and a second, longer-term, broader inquiry into Australia’s digital platform services markets.

The ACCC’s adtech inquiry

The terms of reference for the adtech inquiry are set out in the Competition and Consumer (Price Inquiry – Digital Advertising Services) Direction 2020 (Cth). It is being undertaken under section 95H of the Competition and Consumer Act 2010 (Cth) (CCA) which is the same process that applied for the Digital Platforms Inquiry. This means that, as with the Digital Platforms Inquiry, the ACCC will have compulsory powers requiring parties to provide information in response to its inquiry-related questions.

The ACCC is due to release the interim report from the adtech inquiry by 31 December 2020 and the final report must be provided to the government by 31 August 2021. The ACCC’s first Issues Paper will be released in March 2020. This will indicate the areas of focus for the inquiry and the ACCC will then consult in relation to this Issues Paper.

The adtech inquiry will, obviously, look at digital display advertising services, digital advertising technology services and digital advertising agency services. Notwithstanding that the Direction setting out the Terms of Reference includes in its title ‘Price Inquiry’, this inquiry is not limited to considering pricing. The key issues that the ACCC is required to look at in the adtech inquiry are:

• the competitiveness and efficiency of markets for the supply of digital advertising technology services and digital advertising agency services;

• how competition in the markets referred to in subparagraph 1 affects competition in the market for the supply of digital display advertising services;

• the availability to advertisers, publishers and other market participants of information on activities in the markets referred to in subparagraph 1;

• the distribution of digital display advertising expenditure between publishers, digital advertising technology services providers and advertising agencies;

• the concentration of power in the markets referred to in subparagraph 1 and the digital display advertising services market;

• auction and bidding processes undertaken in digital display advertising services;

• the impact of mergers and acquisitions in the markets referred to in subparagraph 1;

• the behaviour of suppliers in the markets referred to in subparagraph 1, including in particular the services offered and the terms (including pricing) on which those services are offered;

• whether the corporate structures of suppliers, or contractual arrangements between suppliers and customers, in the markets referred to in subparagraph 1 and the digital display advertising market have a negative effect on competition or informed decision making in those markets; and

• whether all of these services are being performed to the satisfaction of all market participants.

Digital platforms services inquiry 2020–2025

The ACCC has also been directed to undertake a five-year inquiry into digital platforms to look more broadly at potentially anti-competitive behaviour. The Terms of Reference for the ACCC’s digital platforms services inquiry are contained in the Competition and Consumer (Price Inquiry – Digital Platforms) Direction 2020 (Cth).

The first report for this inquiry is due to be provided by the ACCC to the Australian Government on 30 September 2020. The ACCC is required to report to the government every six months thereafter with the final report due to be given to the Treasurer by 31 March 2025.

This inquiry will also be undertaken under section 95H of the CCA, again meaning the ACCC will have compulsory powers to require parties to provide information in response to its inquiry-related questions. Given the broad scope of the inquiry, as discussed below, and its five-year duration, the granting of these compulsory powers has been seen as somewhat controversial.

This inquiry will primarily look at the following categories of digital platform services:

• internet search engine services, not limited only to Google Search but to cover all general search services and other specialised search services;

• social media services;

• online private messaging services (text, audio and visual messaging);

• digital content aggregation platform services;

• media referral services provided in the course of providing one or more of the services listed above; and

• electronic marketplace services (this covers any internet service that facilitates the supply of goods or services between suppliers and consumers, but excludes telecoms carriage services and payment processing services).

This five-year inquiry will also consider digital advertising services provided by the suppliers of these digital platform services and data collection, storage, supply, processing and analysis services provided either by suppliers of digital platforms services or ‘data brokers’, with data broker being defined as a supplier who collects personal or other information on persons and sells this information to, or shares this information with, others.

Matters to be considered by the inquiry include:

1. the intensity of competition in markets for the supply of digital platform services, with particular regard to the concentration of power, the behaviour of suppliers, mergers and acquisitions, barriers to entry or expansion and changes in the range of services offered by suppliers of digital platform services;

2. the practices of individual suppliers in digital platform services markets which may result in consumer harm including supplier policies relating to privacy and data collection, management and disclosure;

3. market trends that may affect the degree of market power, and its durability, held by suppliers of digital platform services;

4. changes over time in the nature of, and characteristics and quality of, digital platform services arising from innovation and technical change; and

5. developments in markets for the supply of digital platform services outside Australia.

The ACCC has not yet released details of how it will undertake this five-year inquiry although, together with the adtech inquiry, it is assumed this will be the focus of the ACCC’s new Digital Platforms Branch.

Ongoing focus on digital platforms

Like the Digital Platforms Inquiry itself, it would be expected that these inquiries would not be limited only to a consideration of competition issues. The ACCC Chair, Rod Sims, has made it clear that the ACCC considers there is a connection between competition, consumer protection and privacy regulation in digital platforms markets and that it is not possible to consider any of these regulatory areas in isolation. The Terms of Reference that the ACCC has been given for both inquiries certainly allow the ACCC a wide scope to consider concerns beyond strictly competition issues.

As a consequence of the information it obtained from the Digital Platforms Inquiry, the ACCC has already commenced action against Google for misleading and deceptive conduct in relation to its location data collection practices and it is widely expected that more cases will be commenced against one or both of Facebook and Google arising from that earlier inquiry. The powers the ACCC has been given in undertaking these two additional inquiries will provide it with an opportunity to take further action in response to any breaches of the CCA that the inquiries reveal.

As applies in both the European Union and the United States (among other jurisdictions), the fact that the Australian Government has tasked the ACCC to undertake these two new inquiries demonstrates that the practices of digital platforms remains an area of concern and that the behaviour of digital platforms, not limited only to Google and Facebook, will be an area of focus of both the ACCC and the Australian Government for a long period of time.



Note

[1] Australian Government, ‘Regulating in the digital age: Government Response and Implementation Roadmap for the Digital Platforms Inquiry’, 2019, available at: https://treasury.gov.au/sites/default/files/2019-12/Government-Response-p2019-41708.pdf, last accessed 5 March 2020.