The diverse digital world of present time has undergone a tremendous transformation in the past few years. Amid the contemporary times, is a platform which is synonymous with connectivity, communication and information. Businesses of the digital platforms have surpassed changes, both good and bad. Competition, consumers and society have had their share of consequences driven by the functionality and a degree of changes that the digital world has unfolded with time and continues to do so.
Google, Facebook, Instagram, YouTube, Tumbler and Yahoo are everyday must mention in conversations and have a vital role to play in everybody’s lives. The impact has triggered government and regulatory authorities, both to keep a close watch over these platforms, to ensure the security and apt usage of the digital platforms. The recent times has been a phase of inquisitiveness about the impact and role of digital business in Australia and other jurisdictions. With growth in the business and broadening of the technological spectrum, competition, security of privacy, copyright concerns, data content and the role of media have all been burning aspects that have led the governments and regulatory bodies to delve into the digital world and draw conclusions, which can be further scrutinised and implemented, as and when found necessary.
Aspects of Digital Businesses (Source: ACCC Report, Digital Platforms Inquiry)
Digital Platforms Inquiry Report
The Australian Competition and Consumer Commission (ACCC), is an independent regulatory and consumer law authority of the Australian (presently Morrison) government. After commencement in December 2017 and post a preliminary submission a year later in December 2018, on 26 July 2019, it released its final report titled “Digital Platforms Inquiry” wherein it presented the inferences from its 18-month investigation into Facebook and Google's virtual supremacy and the effect on other digital forums. The release of the report would be followed by a 12-week consultation process, as the Morrison government agrees with ACCC’s conclusion that reform is the need of the hour. The final government report is expected to be furnished and released by the end of 2019. Apart from its inferences, the ACCC has outlined 23 recommendations, that revolve around competition law, consumer protection, media regulation and privacy concerns.
Daily use of Digital Platforms in 2018 in Australia (Source: ACCC Report, Digital Platforms Inquiry)
Facebook and Google in Australia
In particular, Facebook and Google, two of the largest digital platforms in Australia, are anxious about the steps that the government would undertake post the report’s release and analysis of recommendations. Before we understand these recommendations, let us get attuned to the digital dominance of these two powerhouses in the country:
Australians’ time spent online (Source: ACCC Report, Digital Platforms Inquiry)
The above graph needs no clarity about the fact that Google and Facebook rule Australia’s virtual world, outperforming any other digital platform. Australians spend the majority of their time on the various dimensions that are offered exclusively by these two platforms. Hence, it is important to notice two aspects- firstly, both these platforms have a major influence on the daily lives of people and businesses that are hunting Australian users and secondly, the user engagement on these two platforms shows no sign of a slowdown.
ACCC’s Findings About Facebook and Google in Australia
Google and Facebook are multi-sided platforms but cater consumers with different services. The commonality between the two platforms is the fact that they generate a major chunk of their revenue through advertisements, even though they offer services to users at zilch monetary price in order to obtain consumers’ attention and data, which they eventually monetise.
Also, ACCC stated that Google is the market lead in the supply of general search services and advertising search services. In Australia, it has the bargaining power to deal with the domestic news media businesses. Facebook, on the other hand, benefiting from significant economies of scale, enjoys market power in the supply of social media services, display advertising services and is in concurrence with Google in the bargaining power to deal with the domestic news media businesses.
Australian advertising expenditure by media format and digital platform (Source: ACCC Report, Digital Platforms Inquiry)
According to the ACCC, the dominance of Google and Facebook is vastly driven by the fact that they acquire potential competitors and create economies of scope by controlling data sets.
The recommendations made towards Facebook and Google in Australia
In its report, the ACCC stated that it was not against the digital platforms pursuing growth and profitability. Its concern is centred around the belief that policy makers, and society must be wary of the fact that the actions of digital platforms, like all businesses, is backed by a profit motive. Even though digital platforms do not intend to cause issues to the society or their users, they are succumbed to do so within their profit models. This is the brink where policy makers and regulators should consider and set limits, curtailing the distribution of information, ensuring security by appropriate collection of personal data and business’ interaction propaganda with consumers online.
Let us look at the major recommendations that the ACCC had made, that is making headwinds amidst the Google and Facebook business and market participants in Australia:
- ACCC does not recommend the divestment/ structural break-up of Google. It does not approve that Google should sell/ separate its search engine from its advertising business.
- Media houses and digital platforms share an interdependent relationship. ACCC believes that digital platforms should contribute to a fund of approximately A$50 million annually, that would support the production of original local and regional journalism. This recommendation is supported by a recent concern arising out of media houses that Google and Facebook, being digital dominators, take profits off the media companies that employ them.
- Both the players would remain tagged as technology companies, and not media companies.
- Perhaps the most significant recommendation in the ACCC report centred around collection of data by Google and Facebook. The ACCC feels that being transparent and collecting data would be a better reform, respecting the privacy and safety of consumer’s data that is collected by the two powerhouses. Consumers should have the right of “data portability”, which would allow them to have control over the presence, use and transfer of their personal data in the virtual world.
- According to the ACCC, Australians should have the liberty to custom select and set the search engine of their choice, rather than having Google Chrome as their default search browser, a facility that already prevails in Europe. Moreover, of this amendment does not go live in the next six-months, the ACCC would urge the intervention of the government towards the recommendation.
- A specialist digital platforms branch has been suggested to be formed to look after the anti-competitive behaviour of the digital business world, and take necessary actions related to consumer law. Besides this, the ACCC has called for an independent Ombudsman which would solely cater to the consumer complaints.
- A 5-year public inquiry, in the interest of transparency in the advertising tech market has been duly suggested.
- There is a saying with regard to digital platforms- One can be anyone from behind their screens. Adhering to the threat that this statement carries within, the ACCC recommended that the Australian Communications and Media Authority (ACMA) should be handed the baton of enforcing the code to cease the spreading of disinformation/ fake news/ false information on virtual forums and enforce codes that would ensure that tech companies are not impeding news media businesses, while negotiating fairly with the media. The ACCC recommends a period of nine months for these companies to form these codes and get in touch with media companies.
It would be interesting to witness the changes that Facebook, and Google undergo post these recommendations, and how well are these channelized for the companies, users and the virtual world.
Also, read about the digital platforms inquiry here.
This website is a service of Kalkine Media Pty. Ltd. A.C.N. 629 651 672. The website has been prepared for informational purposes only and is not intended to be used as a complete source of information on any particular company. Kalkine Media does not in any way endorse or recommend individuals, products or services that may be discussed on this site. Our publications are NOT a solicitation or recommendation to buy, sell or hold. We are neither licensed nor qualified to provide investment advice.
There is no investor left unperturbed with the ongoing trade conflicts between US-China and the devastating bushfire in Australia.
Are you wondering if the year 2020 might not have taken the right start? Dividend stocks could be the answer to that question.
As interest rates in Australia are already at record low levels, find out which dividend stocks are viewed as the most attractive investment opportunity in the current scenario in our report.