Deputy Chair Delia Rickard discusses the ACCC's inquiry into digital platforms, and their impact on the media and advertising markets.
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Good afternoon everybody, and thank you for the invitation to speak and for putting together such a terrific event.
Occasionally when I talk about some areas of the ACCC’s work, eyes can glaze over but never when discussing our inquiry into digital platforms and their impact on the media and advertising markets. It is an inquiry that goes to the heart of hugely important issues and one that everyone has a view about and an interest in.
The ACCC’s traditional role in media has been to review the competition implications of mergers and acquisitions, including Seven West Media’s acquisition of The Sunday Times from News Limited1. News Corporation’s acquisition of APN News Media’s Australian Regional Media Division2, and Lachlan Murdoch and Bruce Gordon’s joint bid for interests in the Ten Network last year. All of which we looked at closely but none of which we opposed3.
In recent times however, the ACCC has had a focus on the development of pro-consumer competition around the technologies of tomorrow, especially those which affect media – a term which is becoming broader with each passing year.
The ACCC’s Digital Platforms inquiry, of which I am a board member, is a perfect example.
Yesterday the ACCC commenced public consultation for this Inquiry with the release of the issues paper, which will be the focus of my speech today,
As part of its public inquiry into the impact of digital platforms on media and advertising markets in Australia, the ACCC is seeking feedback on:
- The extent to which digital platforms have impacted media organisations’ ability to fund and produce quality news and journalistic content for Australians
- How technological change and digital platforms have changed the media and advertising services markets
- How the use of algorithms affects the curation of news for digital platform users
- To what extent consumers understand what data is being collected about them by digital platforms, and how this information is used, and
- Whether digital platforms have bargaining power in their dealings with media content creators, advertisers or consumers and the implications of that bargaining power.
In this Inquiry, we aim to better understand the way that digital platforms operate and the evolving nature of their influence on the supply of news in Australia.
Relevant digital platforms are likely to include those that provide media content or search functionality in order to attract consumers, and sell access to these consumers to advertisers. This includes Google, Facebook, Twitter, Snapchat, Instagram and Apple News.
We are particularly interested in the extent to which digital platforms curate the news and journalistic content supplied to Australians.
The long-term impacts of digital platforms and the ability of traditional media to remain financially viable will also be essential to understanding the media and advertising markets.
Broadly speaking, the ACCC’s mandate is to promote competition and fair trade in markets to benefit consumers, businesses and the community4.
While technological changes and innovation provide many benefits and opportunities to companies and consumers they also raise competition issues and the potential for widespread community harm; in particular, to the supply of news and journalistic content.
For this reason our definition of ‘news’ is broad: the ACCC will consider both well-established news providers and publishers, as well as newer online-only suppliers of news and journalistic content, including podcasts.
Specialist news suppliers and opinion-led blogs and commentary, as well as general news suppliers, may also be relevant.
It is also important to understand that we appreciate that not all news is created equal.
‘Quality’ matters. It isn’t cheap.
An original investigative piece may take months of research and hundreds of hours of ‘legalling’. But it may result in just a handful of printed pages or 40 minutes of screen time. Yet it could cost hundreds of thousands of dollars.
On the other hand, an update on a reality TV episode costs cents per word and is essentially disposable.
Not all news is ‘good’ news.
But it is essential to a well-functioning democracy.
Factors impacting quality might include:
- The funds available for investment in news gathering, fact checking and reporting
- The level of competition between news providers, and
- The extent of externalities or market imperfections in the supply of news and journalistic content that may prevent competition alone from delivering an optimal outcome for Australian consumers
A macro analysis of industry financials exposes the enormous challenge facing traditional media.
Historically, and this is not news to anyone here today, media companies, especially print media, have relied on advertising as their major source of revenue.
Digitisation has transformed the way news and journalistic content is produced and delivered to Australian consumers.
Consumers can now access news online, either directly from news organisations or indirectly via digital platforms such as search engines, social media and aggregators.
And Australian consumers are increasingly accessing their news online. Some sources estimate that between 50 and 70 per cent of Australians get their news online (including from social media) while only 33 to 36 per cent get their news from print and 36 per cent from radio. TV is estimated to remain the main source of news for Australians.
The emergence of digital platforms such as Google and Facebook has contributed to a sharp shift in advertising revenue as platforms become the leading providers of digital advertising opportunities.
We will examine the nature of this shift and its impact on the profitability of all traditional media companies, not just print.
We will also examine any corresponding impacts on the ability of media and content creators to produce quality news and journalistic content for Australian consumers.
The ACMA reports that print media’s share of advertising has decreased from 46 to 13 per cent while the share of online advertising has increased from 15 to 48 per cent from 2009 to 2016.
In dollar terms this impact is enormous.
Analysis by Venture Insights suggests that from 2011-2015 Australian newspaper and magazine publishers lost $1.5 billion and $349 million respectively in physical print advertising revenue but only gained $54 million and $44 million in digital advertising5.
Within the online segment, digital platforms (particularly Google and Facebook) have taken an increasingly large share of advertising revenue.
Research by Morgan Stanley in 2016 estimated that digital platforms such as Google and Facebook would take up to 40 per cent of total Australian advertising revenue for the year6.
This equates to around three-quarters of the total Australian online advertising expenditure for 20167.
A figure that may now be conservative with The Australian today reporting that Google and Facebook receive 85 cents in every dollar spent on digital advertising globally.
This is the revenue base meant to sustain a vibrant and competitive media.
As the competition regulator, we endorse a competitive environment and vigorous competition “to benefit consumers, businesses and the community”.
But as the issues paper explained, we will be considering the extent to which digital platforms are exercising market power in commercial dealings with the creators of journalistic content and advertisers.
To consider this issue, it is necessary to assess the degree of market power of digital platforms (if any), identify any sources of that market power, and identify the users of digital platforms most at risk from the exercise of any market power.
The implications from the Inquiry will be long lasting for the media sector. And far reaching.
It will question whether the algorithms used by digital platforms are impacting the diversity of content reaching consumers and whether consumers understand that these algorithms may be determining the news they read and see. Is a ‘filter bubble’ or ‘an echo chamber’ being created?
The alternative perspective is that digital platforms have broadened our access to news and a diversity of views.
Access to data is critical to the ability of media companies and advertisers to compete in the online environment.
It is also an important issue for consumers who give platforms access to their data in exchange for access to the free services provided by platforms. Or, to put it another way, who pay for these free services with their data.
Related to this, we will consider how digital platforms collect and use the data of consumers, content creators and advertisers.
For that reason, the ACCC needs to hear from relevant groups of users, including consumers, advertisers and media content creators to assess the market power of digital platforms.
We need to hear from you as the inquiry’s success will depend on the quality of the engagement we have with stakeholders.
For anyone here who may want to make a submission, the closing date is 3 April 2018.
Other important dates are 3 December 2018 when the ACCC is due to present its preliminary report to the Treasurer and 3 June 2019 when we are due to provide our final report to the Treasurer.
In addition to seeking submissions, the ACCC is also engaging with key stakeholders. This includes meeting with, and seeking information from, key market participants.
As the inquiry was initiated under section 95H(1) of the Competition and Consumer Act 2010, the ACCC also has the power to compulsorily obtain information during the course of the inquiry
Consistent with the approach taken with other ACCC inquiries, we use our compulsory powers to form a more complete understanding of the industries we analyse.
This inquiry is a first in terms of the breadth of its focus on the impact of digital platforms on the media, quality journalism and advertising markets. It is not, though, the first inquiry into digital platforms – it is not even the first inquiry into digital platforms to be held in Australia.
The Senate Select Committee inquiry into the Future of Public Interest Journalism recently highlighted the impact of digital platforms on the Australian news media landscape, and demonstrated a real appetite for engagement on the viability and quality of public discourse in the age of digital platforms.
The Select Committee’s final report, presented on 5 February 20188, considered the interaction between digital search engines and social media platforms on the one hand, and traditional news media players on the other.
It is well worth reading and is a useful complement to a suite of global investigations into digital platforms.
You are likely aware that on February 6 this year the UK Government announced an expert panel review of the sustainability of the press in the UK.
The review seeks to preserve the future of high quality national and local newspapers.
The Panel will focus on the overall state of news media at local, regional and national levels; an assessment of the impact on consumers of a reduction in high quality news provision; and a review of the role of digital platforms and the digital advertising supply chain in the health of the news media, including whether advertising revenues are being unfairly diverted away from content producers9.
In October 2017, after a year-long assessment of digital platforms which included an independent study on platform-to-business relations, the European Commission found that the dependency of businesses on digital platforms creates an imbalance of bargaining power and provides the platforms with scope to engage in unfair behaviour.
This finding led the Commission to identify three potential options to regulate digital platforms, from “soft” action intended to spur industry-led intervention, to a detailed regulatory framework10.
The European Commission has also investigated competition issues arising from the operation of digital platforms.
The Google shopping investigation resulted in the EC fining Google €2.42 billion in June 2017 for abusing market dominance as a search engine by giving illegal advantage to its own comparison shopping service11.
The EC is also conducting investigations into Google Adsense and Google Android products.
In 2016, the French and German anti-trust regulators conducted a study of big data and competition law, and considered issues such as data as a source of market power and data-related anticompetitive conduct12.
The study found that the collection and use of data by digital platforms may raise barriers to entry and constitute a source of market power in sectors that are already particularly concentrated13.
Each participant initiated national investigations into issues such as the processing of personal data for advertising purposes, the quality of information provided to users and the validity of user consent14.
In May 2017, France, Belgium and the Netherlands found that Facebook had violated national data protection law.
The German anti-trust regulator’s abuse of dominance case against Facebook regarding data collection from third-party sources15 highlights the vast quantities of information Facebook collects from third-party apps and websites outside the Facebook social network, and merges with users’ Facebook profile data to target advertising, potentially without the effective consent of those users.
In January Israel’s anti-trust regulator commenced an investigation into Facebook and Google. It’s considering whether the platforms are abusing their market dominance, including in relation to advertising16.
And as recently as 15 February the European Commission was urging social media companies to do more to respond to requests to comply with EU consumer rules in relation to EU consumer rights and complaint handling17.
The Digital Platforms Inquiry will almost certainly generate increased information about the level of competition in the online news and advertising supply chain, and provide greater transparency around advertising, news and journalistic content on digital platforms.
In addition, it may lead to the ACCC making findings about structural, competitive or behavioural issues relevant to digital platforms, media and advertising markets, or practical recommendations being made to industry and government.
Potentially, the ACCC may take action to address any behaviour that raises concerns under the Competition and Consumer Act 2010.
In the past few years the ACCC has conducted a number of market studies and inquiries.
These inquiries matter, and have a history of being powerful drivers of change. As does the application of competition law globally.
I would like to take this opportunity to recall the recent words of ACCC Chairman Rod Sims when he announced the ACCC’s 2018 Enforcement and Compliance Priorities on 20 February. In reference to ACCC market studies and inquiries, he said that the ACCC’s:
… market studies are the start of a process, not the end. We don’t write reports to then leave them in a drawer … They provide us with essential knowledge, they put an industry on notice, and they provide a framework for future action18.
In terms of the ACCC’s Digital Platforms inquiry, we are at a preliminary stage, but we are not only well advanced in our thinking about this issue, but also appreciate the consequences of this work.
I thank you for your time, this afternoon … and I look forward to reading your submissions to the Platforms inquiry.