Google and Facebook have become ubiquitous in contemporary society.
However, concerns have arisen regarding the potentially harmful effects they may have on traditional Australian media.1
This highlights the need for competition law to balance competitive tension in the markets in which Google and Facebook operate with freemarket principles that encourage innovation.
On 4 December 2017, pursuant to subsection 95H(1) of the Competition and
Consumer Act 2010 (the Act), then Treasurer Scott Morrison issued a ministerial direction to the Australian Competition and Consumer Commission (ACCC) requesting a public inquiry into the impact of digital search engines, social media platforms and other digital content aggregation platforms on the state of competition in media and advertising
On 26 July 2019, the ACCC released its final report in response to the inquiry, which particularly focused on the impact of Google and Facebook.3
Terms of reference
The Act does not prohibit a corporation from possessing a substantial degree of market power.
Rather, section 46(1) of the Act states that a corporation that has a substantial degree of power in a market:
“…must not engage in conduct that has the purpose, or has or is likely to have the effect, of substantially lessening competition.”
Significantly, the ACCC stated in the final report that:
“…the Terms of Reference…do not require the ACCC to focus on whether digital platforms have misused their market power.”4
Accordingly, the ACCC’s analysis in the final report considered whether Google and Facebook have market power within the meaning of the Act, but did not determine whether Google or Facebook had contravened section 46(1) of the Act.
The final report concluded that:
- Google and Facebook both have substantial market power in their dealings with news media businesses in Australia,5 and
- digital platforms are both rivals to, and essential business partners of, news media businesses in the supply of digital advertising opportunities.6
The ACCC expressed concern in the final report that there was significant potential for Google and Facebook to substantially lessen competition because they each:
- have incentive to favour their own related businesses, or those with which they have an existing relationship (and through which additional revenue may be generated)
- have the capability to advantage their own related businesses, due to operating as gateways to their respective platforms, and
- operate utilising key algorithms, the workings of which are not transparent to third parties.7
On 12 December 2019, the Federal Government responded to the final report by tasking the ACCC with developing a voluntary code of conduct to which Google and Facebook will be bound in their dealings with Australian media businesses.8
The code is to address revenue sharing between Google, Facebook and Australian media businesses, as well as create transparency regarding online algorithms.9
The ACCC must now finalise the voluntary code in consultation with Google, Facebook and Australian media stakeholders by no later than November 2020, failing which, the Australian Federal Government has threatened to impose a mandatory code.10
The approach of the Australian Federal Government can be contrasted with that adopted by the United States Government in United States v Microsoft Corporation, 253 F.3d 34 (DCCir. 2001).
In that case, Microsoft Corporation was accused of illegally maintaining its monopoly in the personal computers market through restrictions it placed on manufacturers from uninstalling Microsoft programs (primarily
Internet Explorer) in favour of third-party software (such as Netscape and Java).11
At trial, the US District Court determined that Microsoft’s conduct breached section 2 of the Sherman Antitrust Act of 189012 and that, as a remedy, Microsoft had to be divided into two separate business units.13
On appeal, a settlement was reached whereby Microsoft would continue as one entity, subject to sharing its application programming interfaces with third-party companies and appointing a panel with oversight of Microsoft’s systems, records and source code for five years.14
Critics of the decision have concluded that the outcome was not sufficient to discourage Microsoft from continuing to exploit its monopoly position and that Microsoft continues to stifle competitors.15
The circumstances in United States v Microsoft are not wholly analogous to the position of Google and Facebook in Australia. However, it demonstrates the inherent difficulty in regulating prominent technology-based platforms using conventional anti-trust and competition laws.
In what the Federal Government has touted as a world-first approach,16 it has attempted to circumvent this difficulty by:
- re-domiciling the misuse of market power assessment of Google and Facebook to a function of the executive (the ACCC), rather than before the Federal Court of Australia, and
- presupposing that the incentive and means to misuse market power is sufficient basis to impose the voluntary code.
- erodes the separation between judicial and executive functions, and
- adopts a per se liability approach which disregards the “substantially lessening of competition” test which must be applied to make out a contravention of section 46(1) of the Act.
Nonetheless, should the approach prove successful, it may set a precedent approach which could carry weight internationally and be implemented in other jurisdictions.
1 Australian Competition and Consumer Commission, Department of Treasury, ‘Digital Platforms Inquiry’ (Final report, June 2019), p1.
2 Treasurer (Cth), ‘Inquiry into Digital Platforms’ (4 December 2017).
3 Above n1, p4.
4 Ibid, p10.
5 Ibid, pp8 and 9.
6 Ibid, p15.
7 Ibid, p12.
8 Australian Government, ‘Regulating in the digital age’ (12 December 2019), p7.
9 Eryk Bagshaw, Fergus Bagshaw and Jennifer Duke, ‘We are not going to put up with this’: Tech giants warned on tax, (12 December 2019) Sydney Morning Herald (online), (accessed 27 January 2020).
10 Above n1, p8.
11 United States v Microsoft Corporation, at .
12 United States v. Microsoft Corp., 97 F. Supp. 2d 59 (DDC 2000), at .
13 Ibid, at .
14 United States v Microsoft Corp., 98-CV-1232 (DDC Nov. 12, 2002), pp9, 13, 15.
15 Gregory T Jenkins, Robert W Bing, ‘Microsoft’s Monopoly: Anti-Competitive Behavior, Predatory Tactics, And The Failure Of Governmental Will’ (2007) Journal of Business & Economic Research (JBER) 5.10.19030/jber.v5i1.2508.
16 Fergus Hunter and Jennifer Duke, ‘Not messing around’: Government unveils ‘world-leading’ regulation of tech giants (December 12, 2019) Sydney
Morning Herald (online), (accessed 27 January 2020).
Daniel Owen is a Queensland Executive Member of The Legal Forecast (TLF). Thanks to Michael Bidwell and Lauren Michael for their technical and editing assistance. TLF aims to advance legal practice through technology and innovation. TLF is a not-for-profit run by early career professionals passionate about disruptive thinking and access to justice.
This story was originally published in Proctor April 2020.