The Google logo is seen on a sign outside of Google Inc. headquarters in Mountain View, CA. (Photographer: Erin Lubin/Bloomberg News)

Google, Facebook Face Australia Crackdown Over Market Power

(Bloomberg) -- Google and Facebook Inc. face a regulatory crackdown in Australia after the nation’s competition watchdog joined a chorus of international criticism over their use of data and the market power they wield across news and advertising.

In a preliminary report released Monday, the Australian Competition and Consumer Commission said a new or existing watchdog should investigate and monitor how large digital platforms rank and display adverts and news. It also expressed concern about a lack of transparency in how their key algorithms work.

“The ACCC considers that the strong market position of digital platforms like Google and Facebook justifies a greater level of regulatory oversight,” Chairman Rod Sims said in a statement. The report contains 11 preliminary recommendations and eight areas for further analysis as the inquiry continues.

The tech giants have come under increased scrutiny internationally amid concern about the dissemination of fake news and their potential to dominate online advertising. U.S. lawmakers have lambasted Facebook for failing to stop a flood of Russian propaganda during the 2016 election, while European regulators are looking at the advertising practices of digital platforms.

“This is a sign that Australia is looking to follow Europe’s lead in putting some sort of restrictions on these two companies’ enormous sway in the market,” said Andrew Hughes, a lecturer in marketing at the Australian National University. “It’s hard to think that this will curtail their dominance, but at least it’s a start in drawing a line and saying there needs to be more oversight.”

Echoing concerns in Europe, the ACCC said Google and Facebook had become the “dominant gateways between news media businesses and audiences,” leading to a loss of advertising revenue and ultimately cuts in the number of journalists who could play an important role in “exposing corruption and holding governments, companies, powerful individuals and institutions to account.”

The competition watchdog said its “preliminary view is that consumers face a potential risk of filter bubbles, or echo chambers, and less reliable news on digital platforms.”

A lack of transparency in key algorithms makes it difficult to know if the tech giants are favoring their own business interests over advertisers using the platforms, the ACCC said.

Google said in a response to questions about the report that “we develop innovative products to the benefit of consumers, businesses and the economy, and we work closely with advertisers and publishers across Australia.” Facebook said it remains “committed to working with the commission as they review the contribution of all digital platforms in Australia.”

The government isn’t expected to act on the ACCC’s recommendations until the final report is issued in June.

“Digital platforms have changed the way media content is produced, distributed and consumed,” Treasurer Josh Frydenberg said in a statement on Monday. “To make the most of opportunities that digital platforms bring, and to provide the right safeguards for the community, it is important that the regulatory environment remains fit-for-purpose.”

The ACCC’s preliminary report comes days after Australia’s parliament passed some of the world’s toughest anti-encryption legislation to force tech companies to help decode messages on services such as WhatsApp when they are used in terrorism and organized crime.

Other recommendations in the report included --

  • Preventing Google’s internet browser Chrome from being installed as a default browser on mobile devices, computers and tables
  • Preventing Google’s search engine from being installed as a default search engine on internet browsers
  • Strengthening laws relating to mergers, copyright, and take-down orders
  • Changing the Privacy Act to enable consumers to make informed decisions and installing a code of practice for digital platforms’ data collection to improve consumers’ bargaining power

©2018 Bloomberg L.P.