Facebook claims the ACCC’s Digital Platforms Report relied on ‘speculative analysis’ and conflated Facebook and Google

In its response to the Australian Competition and Consumer Commission’s (ACCC) Digital Platforms Report, Facebook has criticised “speculative analysis” and conflation of the two platforms primarily implicated in the report: Facebook and Google.

Facebook took particular issue with the ACCC’s suggestion that there is a power imbalance in the relationship between the social media company and news companies such as News Corp, Nine and Seven West Media, claiming that, in fact, Facebook’s terms are favourable to local publishers.

“It is hard to imagine that such influential companies require the assistance of the Australian government to negotiate commercial terms with Facebook, especially in light of the lack of evidence or findings of unfair trading on our part. The analysis does not reflect our experience and is not supported by evidence of our daily commercial interactions, feedback or engagement with Australian publishers,” Facebook said, noting that News Corp, for example, cites the same monthly audience as Facebook of 16m.

“However, there is no consistent and clear evidence in the Final Report that there is an imbalance of bargaining power between media publishers and Facebook, and therefore no basis for the Australian government to interfere in the commercial arrangement between large companies such as News Corp, Nine, Seven West Media, etc, and Facebook, all of whom are competitors for advertising revenue.

“Facebook accounts for only a small proportion of news referral traffic. Publishers control whether and how their content is accessed on Facebook. We provide tools that publishers can use, free of charge, to distribute their content, grow their audiences and cost-free opportunities to monetise their content on- and off-platform. We also provide key metrics to publishers. The Final Report also contains unsupported assumptions that loss of referrals will result in a substantial reduction in revenue for publishers.”

Despite this, the industry, including bosses from News Corp, Nine, and Seven West Media, welcomed the report and its findings. Facebook, however, is adamant it supports the local news industry, such as through its recent exclusive content deals with major publishers.

The submission goes so far as to request corrections to the report regarding these issues, and points out that Facebook has not engaged in anti-competitive conduct and therefore should not be penalised.

“In fact, the Final Report buries the lede: after an exhaustive review of our business, there is no finding of anti-competitive conduct by Facebook. In response to this 18-month inquiry, we produced over 1,608 documents (over 14,500 pages) and dedicated teams who spent over 10,000 hours to respond to the ACCC’s requests,” it said.

“Despite this lengthy inquiry and review of our business, the ACCC makes no finding that Facebook engaged in anti-competitive conduct. The Final Report instead concludes that significant remedies are warranted, even in the absence of any finding of anti-competitive conduct.”

The report was handed down in July

The 623-page ACCC report contains 23 recommendations and a total of 29 areas of action when subparts are included. Of those 29 action points, Facebook supports 15, supports a further five “in principle”, opposes five and notes four. Regarding those it supports or supports in principle, the social media platform said in its submission to the Treasury that “the devil is in the detail in how these are implemented”, but that it “commends” the government for consulting with the platforms.

Facebook’s issue with a number of the recommendations stems from a conflation between itself and Google, “a competitor with a very different business structure and suite of products”, and a belief that much of the analysis was “speculative”.

“Designing regulatory solutions that conflate two very different companies will not address the challenges facing the Australian news ecosystem. Rather than having a pro-competitive effect, such regulation risks backing powerful global media businesses, to the disadvantage of consumers, advertisers and small business.”

The five recommendations Facebook rejects include advance notice of acquisitions, – “not supported by evidence of any existing gap in, or problem with, Australia’s merger laws or processes” – the introduction of a mandatory code to assist copyright enforcement – although Facebook supports “initiatives aimed at achieving a streamlined approach to copyright” in principle – and a privacy code for digital platforms, dubbing it “not necessary and potentially unhelpful for consumers”.

The company noted that the report seemed to take issue with its acquisition of Instagram seven years ago, but said that the acquisition benefitted Instagram and allowed Facebook to
“compete more strongly with Google, and be a stronger price constraint on Google, in the supply of advertising services”.

“At the time of the acquisition, Facebook’s global share of advertising was approximately 4 %, and Google had 45%. Instagram’s post-merger success is therefore proof that the transaction was a success—that it was good for consumers,” Facebook said, adding that Australia’s merger process should not be designed based on two companies.

Facebook’s response to the report took issues with the ACCC allegedly conflating Facebook and Google

Facebook does, however, support the ACCC’s recommendation that an inquiry into “opaque” media agencies take place in order to decode the “black box”-like process of media buying.

“We believe it will assist the ACCC in further developing its knowledge and understanding of the commercial realities and the many developments that have taken place in the online advertising industry,” the company said.

The social media company also referenced a number of allegations against the platform that are currently being tested in courts in both the UK and Australia. These cases were mentioned in the ACCC’s report, which Facebook said was “not appropriate”.

“It is not appropriate to base any findings in the Final Report—or recommendations for regulatory oversight—on mere allegations raised by third parties, or on the mere fact that proceedings have been commenced by a third party either in Australia or in another jurisdiction when they have not been adjudicated or finally determined,” it said.

In recent months, Facebook has faced controversy over its My Screen report in partnership with PwC, and was fined US$5bn over Cambridge Analytica privacy violations, one of the biggest fines in history. Following the fine, it reached an agreement with the Federal Trade Commission which will require the social media platform to change the way it works and put more responsibility on those building new products. A privacy review of every new product or service will be required, which must be submitted to a third-party assessor every quarter.

As for the ACCC report, the government will hand down its response by the end of the year. At the time of the release of the report in July, Treasurer Josh Frydenberg said the report was “groundbreaking” and a “world-first”.


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