ACCC head warns Facebook and Google over merger activities ahead of final Digital Platforms report

Chair of the Australian Competition and Consumer Commission, Rod Sims, has flagged closer global scrutiny of mergers and acquisitions by digital platforms as one of the key recommendations of its digital platforms review due to be handed down next month.

The ACCC head said Facebook’s US$1bn acquisition of Instagram in 2012 was an example of how global digital platforms shut down threats to their market dominance by buying disruptive competitors.

ACCC chair, Rod Sims, speaking at a Sydney media conference in late 2018

“There is a growing debate, both in Australia and overseas, as to whether the process of competition for the market is adequately protected by the forward-looking substantial lessening of competition test applied to mergers,” Sims said.

“We have examined this issue in our Digital Platforms Inquiry. In our view, Google and Facebook have commercial incentives to strategically acquire nascent firms even if the chance of these firms ultimately posing a competitive threat is small.

“Arguably, Facebook’s acquisition of Instagram eliminated the threat of a substantial potential competitor.

“Over the past 12 years, Facebook has acquired 66 companies for a value of US$23 billion.

“Over the period 2004 to 2014, Google acquired 145 companies for a value of US$23 billion.”

While there have been no Australian companies acquired by Google and Facebook in recent years, up until recently the ACCC has been relaxed about mergers between major media operators who also have substantial digital footprints in the media and marketing industry.

Sims also told the conference one of the challenges for competition regulators was the complexity of digital platforms as industries become increasingly interdependent and digitised.

“Broadcast TV is an attention-based platform. It creates value by offering TV programs consumers are interested in watching and selling the attention of those consumers to advertisers,” Sims said.

“Online travel agents such as Expedia or are matching or exchange-based platforms. They create value by matching buyers and sellers of travel booking services.

“Payment card schemes, such as Visa, MasterCard and American Express, are transaction-based platforms. They create value by facilitating transactions between consumers and merchants.

“The digitisation of commerce has turbocharged the growth of platforms and the value of economic activity they govern. The multi-sided platforms gaining the most attention of anti-trust authorities and policymakers more broadly are Google and Facebook. Google Search and Facebook are also attention-based platforms.”

Sims also repeated calls for regulators to have a broader industry overview: “Given that data is a critical input in a myriad of markets in the digital economy, privacy protections have an integral role in maintaining the consumer trust necessary to enable businesses to innovate with data, and the continued economic and social benefits that come with this.

“A final point. Just as all digital platform issues cannot be addressed by competition law and policy, so digital platform issues cannot be addressed by taking a siloed approach. There is considerable value in bringing together competition law and policy, consumer law and policy and a wider lens covering, for example, privacy and media content policy, as we are doing in our Inquiry.”


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