What you need to know:

• ACCC aiming to gauge whether Facebook/Meta’s significant market power has changed since its 2019 report as it works towards regulating digital platforms.
• Industry divided. Many say Meta remains only game in town, but Youtube should also now be “core focus” of regulatory efforts.
• Nine wants TikTok included in media bargaining code as well as Youtube.
• But Free TV, which represents Seven, Nine and Ten plus affiliates, says Meta’s dominance unchanged, TikTok “fundamentally different”.
• ADMA says TikTok should be brought into scope, because sooner or later it will have significant market power, though said Meta has entrenched market power due to huge data advantages.
• Those advantages afford the Facebook owner an unassailable lead per other social platforms. TikTok, Pinterest and Twitter urge ACCC not to regulate them, and keep Meta firmly in the frame, or risk damaging competition.
• But TV networks, peak advertising bodies, think tanks aligned on urgent regulation to force platforms to tackle scams, fraud and mis/disinformation.
• ACMA says fraud is shifting from telco – calls and texts – into social media. It has launched and enforced $250k penalties per breach on telcos for failing to detect, trace and block scam calls. Now it wants the same to apply to social media scams and fake ads.
• Even influencer body AiMCO says platforms are too slow and too hard to contact to deal with scams and fraud.
• Meta claims it no longer has significant market power - and says government needs to share responsibility for policing fraud.
• Twitter and Pinterest worried that cost of content moderation could blow their business models, entrenching Facebook's power. Twitter wants bigger rivals to be forced to share moderation tech and underpinning data.

Unfortunate conflict of evidence

The ACCC is entering the next phase of its multi-faceted plan to rein-in digital platforms. In its first report in 2019, it found Facebook held “significant market power” within social media services. In August, it asked industry whether the landscape has now changed before filing a report and recommendations to Treasury in March next year.

In submissions published last week, Meta goes to significant lengths in a bid to prove that the regulator’s review is now outdated, and that its grip on the market has been loosened by the likes of TikTok with other social platforms and broader media companies – including Netflix, Apple, Microsoft, Twitch, Roblox, Fortnite and Strava as well as private messaging apps – increasing competition for audiences and ad dollars. Meta also wants Youtube to be brought into the frame and classed as a social media service.

The social media giant found an unlikely ally in Nine, which said TikTok has become an “unavoidable business partner” alongside Meta’s Facebook and Instagram and Google’s Youtube. Nine wants the Bytedance-owned platform to be designated under the news media bargaining code and compelled to pay for carrying its content. Nine also wants Youtube to be brought under the same legislation. In its latest financials, Nine reported a bottom line boost of $35m thanks to deals with Facebook and Google under the news media bargaining code.

But rival TV networks disagree. Free TV, which represents Nine, Seven and Ten as well as regional affiliates, has urged the regulator to keep the focus squarely on Meta.

Free TV: Get Meta

“There is no evidence to suggest that Meta’s dominance in this market is not continuing at the current time,” per Free TV’s submission. It said TikTok has made inroads into the Australian market only because it has the backing of Bytedance, a $300bn company with resources other competitors cannot match. “Even then, neither Facebook nor Instagram’s user numbers have been reduced in the Australian market as a result of this new entrant.”

Free TV stated TikTok had amassed an Australian audience-base of 8.3m as of February 2022 versus Facebook’s 17.5m users. Facebook’s audience has not declined since 2019, while Instagram’s Australian audience has increased by 23 per cent to 13.8m. “Users are not deserting Facebook to use TikTok, but are using that service in addition to Facebook,” per Free TV.

It said the ACCC should double down on curbing Meta’s market dominance as it remains an “unavoidable business partner”. While stopping short of calling for Youtube to be classified as a social platform, the TV networks urged regulatory intervention over Google’s broader digital ad market power:  Google restricts access to Youtube exclusively via its own demand side platform (DSP), DV360, which former ACCC chair Rod Sims flagged could be forced open to encourage more competition. Sims predicted it would take a year for Youtube to be opened up. Google itself made a similar offer in Europe, per Reuters. 

While Nine's separate submission calls for TikTok to be designated under the news media bargaining code, Free TV disagrees. It said TikTok was “fundamentally different” service to Meta as it does not provide referrals for video content to TV networks – but also hedged its bets, calling for TikTok to be subject to the incoming regulatory regime in future, should it continue to grow its audience and ad capabilities.

All the networks want the big platforms to give them advanced warning of algorithm changes – which can have a material impact on audiences and revenue – implying that failure to do so is further evidence of market power distortions.

ADMA: Regulate TikTok

Digital advertiser body ADMA called for TikTok to face the same regulations that the ACCC will eventually apply to Facebook, backing Meta’s arguments that the world has changed since the initial Digital Platforms Inquiry report was published in late 2019.

Flagging TikTok’s rapid growth, it argued any legislation must cover those on a “trajectory” likely to lead to significant market power, though it backed Free TV’s argument that TikTok has only achieved scale through heavy spending.

But ADMA diverged from Meta on whether there is adequate competition for small business ad dollars, which make up the vast majority of Facebook’s advertiser pool. Meta argues there are plenty of social advertising choices for smaller businesses. ADMA said that may be true, but big platforms like Meta have entrenched power:

“Data is often walled and siloed within a platform, meaning advertisers cannot readily use insights about their customers on another platform. There are also data economies of scale, where AI/Machine Learning means that platforms that are sub-scale, will remain sub-scale in the absence of sufficient data to train and improve their algorithms.”

It urged the regulator to get cracking on “regulatory tools” so that platforms have to enable data portability, and suggested the government’s Consumer Data Right (CDR) scheme – could form a blueprint. CDR means a consumer can require incumbents to give accredited third parties access to data about the consumer, to give the consumer comparisons, analysis, better offers and easier switching. It only applies to banking and energy so far, with telco likely to follow next.

Across the piste, ADMA called for the digital economy to be brought in line with the traditional economy under updates to Australian Consumer Law to curb anti-competitive behaviour and head-off consumer harm before it happens, i.e. ending the once-prevalent digital wisdom that it is better to seek forgiveness than ask permission.

“Left unchecked, advertising on social media can present significant competition and consumer risks,” stated ADMA, though the association warned that without adequate resource and policing, the whole regulatory overhaul risks becoming a waste of time.

‘No other platform comes even close to YouTube and Facebook’

The Centre for Responsible Technology (CRT), backed by influential think tank the Australia Institute, urged regulators not to be fooled by Facebook’s arguments. It also called for Youtube to be treated as a dominant social media platform – and for influencers to face the same rules as all other mainstream advertising.

It said Facebook’s 2021 decision to go nuclear and shut down news in protest at the news media bargaining code had backfired, with resulting traffic drops to news sites and removal of access to other services caught in the crossfire underlining its dominance and undermining arguments to the contrary. The Centre countered Facebook’s view that TikTok is eating share by pointing out that TikTok skews heavily to under-25s.

“There is little by way of alternative platforms which consumers can substitute [Facebook] with, and millions of Australians continue to use the platform,” said CRT.

But it agreed with Meta that Youtube should be bought into scope as a “key focus … If Youtube is considered then it would be even more influential and dominant than Facebook,” states the submission. “No other platform comes even close to Youtube and Facebook.”

CRT urged Australia’s regulators to launch local versions of global anti-trust cases, with Meta facing action in the US and Google in Europe, with the latter’s indication that it may open up Youtube video inventory a signal that the platform is “worried”.

“Facebook and YouTube’s dominant and anti-competitive status is being challenged globally, and Australia should consider similar actions, as the platforms continue to enjoy an uncontested share of Australia’s social media landscape, despite many recent scandals and new entrants to market.”

New digital watchdog required

Another influential think-tank, the Consumer Policy Research Centre directed most of its submission to ensure regulators curb ‘dark patterns’, i.e. manipulating consumers into agreeing to services and use of their data.

But it also called for a new digital ombudsman, in line with industries such as telco and energy, so that people and businesses can seek adequate redress – and platforms are penalised for failing to act.

AANA: Open up on measurement, pay for Ad Standards

Peak advertiser body the AANA said the need to pay separately for third party verification across individual walled gardens remains an ongoing challenge for advertisers to make informed investment choices across social media platforms – because they can’t easily compare performance. ADMA made the same point, as did the Australian Influencer Marketing Council (AiMCO).

The AANA also said influencer advertising is a growing problem, with Ad Standards receiving “a surge in complaints”, up seven fold in 2021 on 2020, about paid endorsements being indistinguishable from genuine user-generated posts.

It pointed out that social platforms were not paying their fair share to fund Ad Standards, which takes a small levy on all media traded through agencies in order to cover its costs. But where advertisers go direct to social platforms, i.e. the vast bulk by volume, “no levy is collected”.

“The AANA is in preliminary discussions with the large social media platforms as to how advertisers dealing directly with the social media platforms can assist in the funding of the self-regulatory system,” said the AANA.

Influencer body AiMCO, however, suggested Ad Standards may be overmatched, given the vast resource required to police social platforms and rogue influencer content. It suggested social media advertising could make up as much as 40 per cent of the $13bn digital ad market, equating to $5.2bn.

Scam: All parties say problem is out of control, seek fines, regulation

TV networks, advertiser and influencer bodies, think-tanks and regulators are universally aligned on one aspect: Scam and the lack of action by platforms to tackle it.

ACMA: $250k fines per breach?

Communications and media regulator ACMA said fraud is migrating from telco – robo and scam calls – into social media as criminals follow the money and attempt to evade regulation. ACMA in 2020 used powers under the Telecommunications Act to curb scam calls, making telcos detect, trace and block scam calls or face $250,000 for every breach. While that has led to an explosion of scam texts, the regulator in July brought in equivalent telco penalties for failing to tackle SMS fraud. Now it wants similar regulations to apply to social media.

“The nature of scam activity means that as it becomes harder for scammers to use calls and texts to perpetrate fraud, they will look to exploit other channels, this will include social media services … There is already strong evidence scammers are moving to these channels, with Scamwatch reported losses to scams in 2022 on social networks expected to rise approximately 20 per cent and on mobile apps by approximately 164 per cent,” per ACMA’s submission to its fellow regulator.

“The ACMA supports work to further explore the relationship between phone and online channels used by scammers and the potential for the introduction of scam disruption measures on social media platforms.”

AiMCO: Make ‘slow’ platforms accountable for fraud/fake accounts

Influencer marketing body AiMCO said very few consumers would know where to report misleading and deceptive conduct, even if they could actually recognise it,  “and so the platforms play a huge role in this … there should be a robust, timely means of the platforms also being accountable and facilitating this process”.

It said the sheer volume of content being posted means it is “very hard for platforms to police potentially misleading/fraudulent content” and “no single platform has nailed this yet”, while Ad Standards has no power to issue fines and the ACCC yet to take action on influencers.

“Platform action is not timely,” per AiMCO’s submission. “Fake accounts can be live for months even with the account being reported by multiple people. The platforms make it hard to communicate to them – no phone number, no direct contact to report to … this is an area they need to address and ensure prompt actions are taken to investigate”.

ADMA: Pre-emptive strikes required

Digital marketer body ADMA called for large social media platforms to be made to implement systems that proactively identify potential scams instead of waiting until harm has occurred, as well as “active pursuit by law enforcement” and a “properly funded regulator”. It said unfair trading practices via social platforms should be banned via updates to Australian Consumer Law.

Centre for Responsible Technology: Apply same rules as mainstream media

The Centre for Responsible Technology said social media and influencer advertising should simply be brought in line with mainstream media advertising, “with social media services being subject to the same rules, governing bodies, codes of conduct, limitations, enforcement mechanisms and penalties”.

It also called for a ban on influencers being able to advertise in any sector that requires qualification or certification, such as health and finance.

TV networks: Regulate “persistently slow” platforms over “damaging, defamatory” fake ads

TV networks said “inadequate” takedown processes for scam ads by Meta and others are damaging broadcasters’ reputations, and that of individual presenters and media personalities regularly being “misrepresented”.

Free TV Australia’s submission shows fake ads on Facebook suggesting newsreader Georgie Gardner endorses an app called ‘Mayan Diamonds’ (which reviews on Apple’s App Store suggest is a scam); a fake Instagram account using Today Show  presenter Allison Langdon as bait to take people off platform and request their bank account details; and an Instagram post using Karl Stefanovic to “give the misleading and deceptive impression that Karl endorses cryptocurrency”

Meanwhile Seven has been subject to a “persistent scam where Facebook pages impersonating Seven official program pages seek out personal information, including credit card information, on the pretence that the request is coming from Seven. The most recent example of this includes Seven’s Sydney Weekender Facebook page”.

Earlier this year Sunrise David Koch was also “used by by fraudsters to scam social media users to invest in cryptocurrencies… His image was used as one of many fake celebrity endorsements that baited and lured users into scam Bitcoin investments,” per Free TV.

“Notwithstanding the significant consumer harm from these scams, in addition to the reputational harm to Seven, Facebook is persistently slow in responding to Seven’s takedown requests.”

The TV networks said social platforms “should be required to ensure that material which they control is not fake, damaging, misleading or defamatory” and urged regulatory intervention to hold platforms accountable for the ads they distribute.

Social platform responses

Meta: Dominance? What dominance?

Meta went to detailed lengths in a bid to prove the market has shifted significantly since the ACCC launched its inquiry – and that it no longer holds significant market power to the detriment of would-be competitors. It said the ACCC should re-examine its initial findings and take aim at a much broader competitive set.

“Assumptions about size, network effects and barriers to entry are misplaced,” said the firm. “Our services continue to be very popular with users and advertisers. However, this success cannot simply be attributed to barriers to entry or weak competitive constraints as was the basis of the ACCC findings in 2019. Rather, the intense competition that Meta has faced [since the inquiry launched] demonstrates the exact opposite: that Meta does not have enduring market power and faces strong competitive constraints from various products and services in the multi-sided landscape in which we operate.”

Meta argued that Youtube should also be classed as a social platform and subject to any incoming regulation, and argues TikTok’s growth also makes it a major player.

“Across iOS and Android, TikTok is now the most downloaded ‘social’ app, both worldwide and across a number of key Asia-Pacific jurisdictions, including Australia in 2021. Not only is TikTok’s monthly time spent per Australian user growing rapidly … but TikTok also overtook the likes of Google, Facebook, Apple, Amazon and Netflix to become the most popular website last year,” said Meta.

In addition to TikTok, Meta suggested “YouTube, Snapchat, Twitter, Reddit, Discord and Pinterest have experienced sustained growth, including in Australia”, while citing the emergence of minnows such “BeReal, Clubhouse, Poparazzi, Locket Widget, Yubo, WeAre8 and Dispo” as evidence that competition is practically flourishing.

Meta devoted a significant proportion of its submission to scam. It argued platforms alone cannot take responsibility for an issue now rampant across their sites and apps.

“Government, regulators and users themselves – alongside digital platforms – all have a role to play in creating a safe online environment … content review is only part of the solution,” per Meta. “An effective response to online scams must also include “off platform” measures, such as pursuing bad actors to prevent them from perpetrating the behaviour, and educating consumers to be alert to the risk of scams, whatever form they appear in.”

Twitter: Content moderation the killer

Twitter suggested the ACCC focus its attention on the likes of Meta and not apply a “one-size-fits-all approach” to avoid entrenching market power. It is also deeply concerned about content moderation regulation, suggesting it could backfire and harm competition due to the costs imposed.

“In general, we consider that any proposed interventions should be targeted only to those market participants whose dominant position undermines the competitive process, creates or entrenches barriers to entry or expansion, or gives rise to consumer harm,” it stated.

“Rules or requirements introduced to manage self-preferencing, conflicts of interest, and/or interoperability should be directed and only applicable to firms which the ACCC considers to have a market dominance or power and that engage in problematic or anticompetitive conduct.”

Twitter wants clear government guidelines on content moderation, and for policymakers to force the larger networks to open up their content moderation technology and underpinning data.

It argued that forcing “significant administrative penalties” on platforms for individual pieces of content and strict time limits for removal risks creating “a significant corporate incentive to over-remove content … This would more acutely impact small companies and new services that have more limited resources to litigate or pay fines”.

Pinterest: Comply and die?

Pinterest took a similar line to Twitter. Describing itself as a “small or medium sized” platform it stated that other smaller networks face “multiple barriers to market entry” and scale. These could be exacerbated by being regulated, reckons Pinterest. “For example, compliance obligations related to data processing or content moderation can make it significantly more expensive for a new or smaller market entrant to operate in the space, further entrenching dominant players’ positions”.

The platform fears that the data advantages and network effects harnessed by large players are now so big and entrenched they cannot be caught:

“This scale is self-reinforcing, making these platforms a “must-have” for advertisers. Thus they collect an increasingly greater share of data, and by extension strengthen their position in the digital advertising market. As a result, new entrants and small to medium-sized platforms have a greater challenge in providing advertisers with a compelling, measurement-based reason to shift their budgets.”

Pinterest stated the larger platforms stifle competition by also acting as gatekeepers:

“These harms include platforms self-preferencing their own downstream services by making them more discoverable to users via web search results, app store search results, app store rankings, and pre-installation and default settings in operating systems; as well as causing disruptions to smaller developers’ business plans and product launches due to unexpected rejections of app updates in the app review process.

“Furthermore, since we allow users to access our service through SSO (single sign-on) tools provided by larger platforms, our user growth or engagement could be impacted if these third parties discontinue these tools or change the terms on which they are offered,” per the submission.

“Accordingly, larger platforms’ dual role as competitors and gatekeepers represents a possible barrier to entry or expansion, as the largest platforms possess the ability to reduce or eliminate the value of existing social media products, or to impede market penetration by new platforms or features.”

TikTok: Let us eat cake

TikTok appears to play it both ways.

On one hand it stated there are “no doubt structural challenges for new entrants wishing to compete against large and established platforms like Meta’s Facebook”, citing that advertisers seek audience scale before investing and users want to connect with lots of other people before joining a social network.

On the other, it said: “We have, nevertheless, seen that it is possible for new entrants to establish themselves relatively quickly and to effectively compete based on the quality and innovation of their product and service offerings, as the recent growth of TikTok has shown.”

Despite its rapid growth and self-confessed ability to compete, the Bytedance owned platform wants to avoid being pulled into regulation:

“TikTok wishes to continue presenting new and disruptive competition to incumbent platforms. Many of these platforms have market power across broad app ecosystems, which they can leverage into new services in a way challenger firms (such as TikTok) cannot. It is critical that TikTok and other new entrants maintain their ability to build out and diversify their offerings to provide important new competition.”

Just in case, the firm positioned itself as broader than a social media platform, stating its competitive set includes just about any entertainment or media player: “TikTok focuses on entertaining and inspiring content, regardless of whether it originates from a social connection.”

The ACCC will now weigh up the submissions and evidence presented, before reporting to Treasury with recommendations on next steps and eventually, actual regulatory interventions.

See all of the submissions here.