The ACCC was not tasked with determining whether or not either company had violated the rules of competition. This can only be determined by an investigation into specific conduct based on facts and evidence.
This report lists six investigations that are currently underway.
The ACCC set out to identify the risks and determine what could be done about them.
The proposals of the Commission are cautious and reflect the complexity of the digital market. It is also difficult to ensure that any intervention will protect the competition process rather than the individual competitors.
Market power brings dangers.
The ACCC notes that it is legal to gain substantial power by serving consumers.
Google and Facebook are valued services, according to the report.
It also highlights the unique features of digital markets that contribute to the power of these markets: economies of scale, network effects, and massive data accumulations, as well as the use of highly sophisticated analytic techniques.
These features allow Google to dominate the internet search market and advertising, while Facebook is able to dominate social networks as well as display advertising.
They can also be used to compete with new businesses that offer better deals and other businesses that rely on Google or Facebook to provide services to their customers.
The ACCC is trying to reduce risks.
There are no easy fixes. The ACCC rejected the idea of dividing platforms like Google and Facebook.
Divestment would not ensure consumer welfare, given the complex and highly interconnected nature of the markets where the major platforms are involved, but could in fact be harmful.
The report suggests instead that the ACCC should be given more power to enforce competition laws and review any acquisitions which would increase the market dominance of dominant players.
The other recommendations aim to reduce the imbalances of information and bargaining powers between platforms and users of business platforms, as well as between platforms and consumers regarding the collection and usage of personal data.
Read more: Consumer watchdog calls for new measures to combat Facebook and Google’s digital dominance
Implementing these recommendations presents challenges, not the least of which is to ensure they don’t themselves damage competition.
Find out the abuses…
The ACCC proposes a new specialist division within the ACCC in order to develop and maintain the skills required to continue to study digital platforms and enforce their competition and consumer laws.
This is an excellent initiative. This initiative is similar to those in the United States and Europe.
The report contains references to European cases where Google was subjected to thunderous fines due to various abuses of dominance. The report also invokes European doctrine that powerful companies are under “special responsibility”.
The Australian prohibition on the misuse of market dominance may not be as flexible as that in Europe. The ACCC recommended that the unfair trading laws be widened to give it more flexibility and not just for digital platforms.
The newly amended section46 will play a part, but its implementation will be complicated in a digital context by the pace of innovation in digital markets.
And scrutinise mergers…
The ACCC acknowledges that digital merges differ from traditional mergers and wants to make sure the merger laws take into account mergers between actual and potential competitors as well as mergers between data owners.
Also, it wants Google and Facebook voluntarily to notify it about any future acquisitions. It is a polite demand backed up by a thinly-veiled threat of consequences.
The report suggests that these two proposals might not be enough.
More changes to the merger laws may be required to convince judges that the Australian economy needs to be freed from unhealthy concentration.
Australia needs to implement a mandatory notification system, which is triggered by a combination of thresholds for turnover and transaction values. This will ensure that nascent competition does not die out.
Read more: AC wants to curb digital platform power – but enforcement is tricky
Both of these are bigger conversations that the Commission needs to engage government and business in.
While not offering much to legacy media…
In its preliminaries report, the Commission backed away from a suggestion that there should be a regulator special to supervise relationships between platforms and major media organisations, advertisers and significant business users.
The government could have taken into account the criticisms that this proposal would be more beneficial to traditional players than consumers.
Advertising is a highly fragmented and complex industry that is constantly changing. It is difficult to prove that new platforms distort the competition in the advertising industry. The ACCC, in a sensible move, has suggested that it should thoroughly examine dynamics within the ad-tech supply chain before making any recommendations.
The compromise for the media industry is that each platform must negotiate a code to be monitored and enforced by Australian Communications and Media Authority.
It remains to be determined if this will help media to address their concerns regarding the appropriation and short notice period for algorithmic changes, which can make their products difficult to find.
Read more: Digital platforms. Why the ACCC’s proposals for Google and Facebook matter big time
But, recognising that the platforms are themselves knee-deep in the media business, the ACCC has called for a wholesale overhaul of media regulation to level the playing field and remove regulatory impediments to competition, an idea the government seems to have accepted .