JOSH FRYDENBERG:
Well, good morning. It's a great pleasure to be here with my colleague and friend, the Minister for Communications, Paul Fletcher, as we release the ACCC Digital Platforms report. I'll make an opening statement, Paul will make some comments, and then we're happy to take some questions.
After an eighteen month inquiry, the ACCC has released a ground-breaking report into digital platforms. It is truly a world first, looking at the impact on competition, privacy and consumer outcomes arising from the significant market power of the leading search engines and social media platforms. In particular, Google and Facebook and their influence on the media and advertising market. Make no mistake; these companies are among the most powerful and valuable in the world and they need to be held to account and their activities need to be more transparent. This report comes days after the US Federal Trade Commission fined Facebook over $7 billion for misleading consumers about the use of their data.
The market power of these companies is immense. For every $100 spent by advertisers on online advertising, excluding classifieds, $47 dollars goes to Google, $24 dollars to Facebook, and $29 dollars to other participants. This market is worth nearly $9 billion annually, and has increased more than eight fold since 2005.
The report finds that over 98 per cent of online searches on mobile devices are with Google, while Facebook has approximately seventeen million Australian users who use on average half an hour a day on that platform. This is an incredible level of market concentration that has grown rapidly over time.
The nature of the services offered by Google and Facebook allow them to collect an unprecedented amount of personal data, which is then monetised by providing advertisers with highly targeted opportunities. This data can include shopping patterns, browsing history, location, and personal data like the size of one's family or one's personal relationship status. The world has never before seen so much commercially sensitive and personal data collected and aggregated in just two companies.
Our legislative and regulatory framework could not and did not anticipate such a new paradigm; a paradigm which poses a real challenge to regulatory authorities the world over. Confronted with this new reality and equipped with critical information obtained from sixty statutory notices, public hearings and written submissions, the ACCC has made twenty-three recommendations. They fall into three categories.
The first, consumer outcomes. A new unfair practices provision for Australian consumer law is recommended along the lines of what exists in the United States, the United Kingdom, Singapore, Canada and the European Union.
The ACCC also recommend that unfair contract terms also be made illegal and that the Privacy Act be strengthened. A code is envisioned for digital platforms so that consumers can know and control what data is collected and how it is used. An ombudsman scheme would also be established to resolve complaints and disputes consumers and businesses may have with digital platforms.
Second, competition. The ACCC recommends that merger laws be updated, and that the ACCC establish a new, a new digital markets branch with information gathering powers to provide regular reports to Government.
Third, media. In the words of the ACCC, there is "an imbalance of bargaining power between Google and media businesses, and between Facebook and media businesses." Whether it be print, radio or television, content generated by journalists and owned by media companies is being displayed on social media and search engines often without a negotiated agreement covering how data and content is monetised and shared.
What the ACCC recommend is that codes of conduct be developed to govern the relationship between Google and Facebook and media businesses. These codes of conduct would require regulatory signoff, and provide "media businesses with access to platforms on a fair, consistent, and transparent basis."
At the heart of this important ACCC report is a focus on delivering better consumer and commercial outcomes and ensuring a viable media landscape because news and journalism is a public good. It is a time of rapid technological change and Australians need a regulatory framework that is fit for purpose and better protects and informs Australian consumers.
The Government accepts the ACCC's overriding conclusion that there is a need for reform. The release of this report and a twelve week consultation process that will follow are designed to achieve this very end. The Government will provide its final response to the Report's recommendation before year's end.
I would like to thank the ACCC Chairman Rod Sims, and Kate Reader, and Morag Bond, who led the Digital Platforms team within the ACCC and who will continue their good work informing the consultation process.
PAUL FLETCHER:
Well thank you, Treasurer, and I'm very pleased to be here with you to release this landmark report. Of course, the phenomenal digital innovation of the past twenty five years has delivered many benefits, and it's fundamentally changed the way that media content is produced, distributed and consumed. The numbers are quite extraordinary; 19.2 million Australians use Google every month, 17.6 million use YouTube which is owned by Google, 17.3 use Facebook, 11.2 million use Instagram which is owned by Facebook. What this report confirms is that regulation in a wide range of areas has not kept pace with the rise of digital platforms and the way that new technology now provides many different ways for Australians to get their news, information and content. On the core competition policy question that the ACCC finds is that Google and Facebook have substantial market power and that they are effectively unavoidable trading partners for many media businesses in Australia, with a high proportion of traffic to the websites of the media organisations coming from Google and Facebook.
As the Treasurer has said though, the twenty-three recommendations range across many policy areas. Not just competition policy, but consumer protection issues, data privacy issues and a range of media policy issues such as the impact on journalism.
The Report contains very detailed analysis of the existing regulatory framework and the differing requirements on traditional media businesses such as free to air television and on businesses which compete with them such as internet based platforms. For example, free to air television networks face regulatory obligations to show a certain amount of Australian content, and of course, to pay for that, as do subscription platforms, but there are no such obligations on internet based video based streaming services.
The ACCC recommends that there is a need to develop a harmonised media regulatory framework to deal with these issues, and this is something the Government accepts. As the ACCC notes, this will be a major exercise and it will need to be carried out in stages, and that work, of course, will form part of the way forward that the Treasurer has announced in considering how we respond to all twenty three recommendations, which will first involve a public consultation process. We need to hear from interested stakeholders and we also need to consider how the ACCC's recommendations sit with work the Government already has underway, such as for example, the measures announced in March this year to greatly strengthen regulations to protect Australians' online privacy. And as the Treasurer has said, the Government intends to finalise its response to the report by the end of the year.
I'd like to just make three quick observations before we come to questions. Firstly, although this report details with new technology, the competition policy issues that it deals with are in many ways timeless. When a business has 95 per cent market share, as Google does in search in Australia, that raises questions about whether other businesses are able to compete effectively, and in turn, what are the implications for consumers.
Secondly, I'd make the point that over the years, Governments in Australia and elsewhere have come a long way in our approach to regulating the internet. As the report shows, internet based businesses are used by many millions of Australians and they need to be subject to the rule of law. If you look at, for example, the global automotive business, companies that may be based in Germany, in Japan, or in Korea, if they're supplying cars into the Australian market, they need to comply with the Australian design rules in Australian law. And similarly, global internet businesses offering services to Australian consumers need to comply with Australian law.
The last point I'd make is that media regulation in Australia has always considered not just economic policy issues, but also the importance of Australia's cultural identity and that underpins for example, requirements in relation to Australian content on television. As this six hundred page report highlights in numerous ways, the rise of the digital platforms presents new complexities in relation to that cultural identity objective but it by no means changes the importance of that objective.
JOSH FRYDENBERG:
Thank you. Questions.
QUESTION:
Treasurer, has the Government's and government regulation (inaudible).
JOSH FRYDENBERG:
Not at all. As I indicated in the opening statement, these digital platforms have grown rapidly and are posing challenges to authorities the world over. The world has never seen so much data collected and aggregated among two companies. So it's about now ensuring that our regulatory and legislative framework is fit for purpose. That is why this report is so ground-breaking, because it's used forty statutory notices to lift the veil, so to speak, to get behind the fronts of these companies and understand how the algorithms are used, how the data is collected, how the data is monetised. There's been immense consultation with stakeholders. There's been submissions, there has been public hearings and there's been the use of those compulsory information-gathering powers.
QUESTION:
The statement was made that regulation has not kept pace with the growth of these giants. Does that mean there either needs to be a new regulator or does the ACCC need to be boosted, maybe in terms of financial means? How is that going to keep pace?
JOSH FRYDENBERG:
Well, the ACCC make clear in this report that their preferred approach is to strengthen the laws behind the existing and the resourcing behind the existing regulators.
QUESTION:
So when you say…
JOSH FRYDENBERG:
So that in the interim report they left open the possibility of a new regulatory body in this final report. They suggest the most effective way, and indeed the quickest way to deliver results for consumers is through a strengthened legislative and regulatory framework and beefing up the resources of the ACCC. And, as I indicated, the ACCC will now have a standing office within that organisation focusing on digital platforms, having people there who are experienced and with expertise in data collection, in the relevant legal issues and with the media. But, Paul…
PAUL FLETCHER:
And, indeed, what the ACCC has also recommended is a harmonised media regulatory framework. So there has been an emphasis there on the regulatory framework. And what we will be doing over the consultation period and as the Government finalises its response, which we'll release before the end of the year, is working through the recommendations, determining the Government's approach to them.
Obviously, the Treasurer and I have announced a high-level response in terms of the need for reform and accepting that overall thrust from the ACCC. But what we need to now do is work through the detail, get the views of stakeholders and then, from that, will follow any implications in terms of the particular work for particular regulators.
QUESTION:
Minister, is it just too late to protect privacy in this in this issue? We're talking about the eagerness, really, of the public to embrace these platforms? How are you going to (inaudible).
JOSH FRYDENBERG:
There is no option other than to put in place the right regulatory and legislative regime to protect the public's privacy because what this report finds is that so much personal data is being collected without informed consent. It's an extremely serious issue, and what we've seen play out in the US with Facebook being fined that record amount, over $7 billion, is a reflection of how people's personal data is being used, often without their knowledge.
So this report shines a very bright light on the use by Facebook and Google of people's personal data. And the privacy regime and the other legislative and regulatory framework, parts of the framework, need to be updated to ensure that they are fit for purpose.
PAUL FLETCHER:
Yeah, the report really has a lot of granular detail and analysis about the importance of consumer data to the business propositions of the digital platforms, and there's a strong emphasis on consumers being aware of how their data is collected and how it is used. And that is a very strong theme in this report. Of course, it's a matter for consumers to make the choices they choose to make, but they need to have the information available to them. That's a strong theme in this report.
QUESTION:
Treasurer, will you force Google to give you access to their algorithm which is used to preference their products ahead of other companies?
JOSH FRYDENBERG:
Well, one of the purposes behind this new ACCC branch is to actually better understand the use of these algorithms to ensure that they're not being used for misleading or deceptive or anticompetitive conduct. So this particular branch of the ACCC will be able to be approached by various companies who believe that the algorithms have been misused in that particular way and it is the ACCC itself which will focus on those algorithms and ensure that they are used in a way that is compliant with the law.
QUESTION:
Treasurer, do you mind, I just need to get a question in relation to timing…
JOSH FRYDENBERG:
Before we do that, I'm sure there's a few more on
QUESTION:
I do need to dash though.
JOSH FRYDENBERG:
Oh, right. So we will indulge you. Okay, sure.
QUESTION:
That would be amazing, if you could, Treasurer. Just in relation to that review, you're writing the terms of that review at the moment, there is a new report out today saying that essentially a large number of Australians on average do not have what they need in their superannuation currently to live a comfortable lifestyle. You've got backbenchers saying that we should pause the increase to compulsory superannuation amount that we're paying. Is this all looking like, do you have concerns that we have a serious problem with superannuation in Australia?
JOSH FRYDENBERG:
Well, superannuation is growing rapidly. It's 2.8 trillion dollars today, one of the largest pool of funds in the world, and it actually contributes to people having security, economic security, in retirement. That's the purpose of superannuation. So it does serve our economy and our community well.
That being said, with such growth in that pool of, of savings, it's important to ensure the best possible outcomes.
That's why the Productivity Commission was tasked to do a significant report with a number of recommendations that came out of that, and the government's actually been taking action on those recommendations. For example, we have legislation before the Parliament to ensure that people under the age of twenty five can opt in to insurance in their super so that they don't have unwanted insurance policy that eats away at their balances. We've done, past legislation to cap fees, to ban exit fees, to ensure that both trustees and directors of super funds are held to account and that there are proper penalties in place.
So the Government is taking considered and concerted action across a number of fronts in relation to superannuation and, as the Prime Minister said yesterday, we will be doing a retirement incomes review. That was one of the recommendations out of the Royal Commission. That will be a report to government as opposed to a report of government, and we will consider, without pre-empting those recommendations at the appropriate time.
QUESTION:
This press conference was called before the report was actually released. So I'm sure that this is in that report. Firstly, can you please ask, or…
JOSH FRYDENBERG:
It's over six hundred pages so there will be plenty of time to read through what is a very detailed report.
QUESTION:
Okay. So, given that I haven't seen it, is there any, anything in that report that supports the breaking up of Google or Facebook or separation of details? So perhaps search versus advertising or is there any cases for that to happen?
JOSH FRYDENBERG:
So the report doesn't go down the path of divestment. That is an important point to make. What the ACCC recommend is that the legislative and regulatory framework be strengthened to ensure greater accountability and transparency of those particular organisations.
QUESTION:
How would a code of conduct deal with the commercial imbalances between media companies, Facebook and Google, as one thing is gripes of media companies is not getting fairly paid for their content.
JOSH FRYDENBERG:
Sure.
QUESTION:
Whereas Facebook and Google can make a lot of money.
JOSH FRYDENBERG:
Well, the whole idea of this code of conduct is to provide a framework around the collection and use of data but also how that data is monetised. So that is the work and that will be done in this particular space and there's lots of detail on that in the report and…
QUESTION:
Will there be an arbitrator.
JOSH FRYDENBERG:
Well, this is a key point that you raise. The code of conduct can only exist if it is approved by the regulator, and if the regulator is not satisfied, they can impose a code of conduct. And so this is a very important point. The digital platforms can't write their own code of conduct and that be the end of it. It must be a code of conduct that is actually approved by the regulator or, indeed, if they're not satisfied, put in place by the regulator.
PAUL FLETCHER:
And, of course, it's worth making the point that that recommendation along with all of the other twenty three recommendations will be the subject of stakeholder feedback during the consultation process.
JOSH FRYDENBERG:
Yeah.
PAUL FLETCHER:
A lot of details in this area, a very complex area, we want to hear from both the platforms and, of course, Australian media businesses in terms of what the ACCC has proposed so that the recommendations can be fully considered by Government.
QUESTION:
So are you actually saying that the Google and Facebook are publishers and broadcasters; is that what you're saying?
PAUL FLETCHER:
What the report says across twenty three recommendations is a range of specific things that are proposed, including a code in relation to the negotiation process essentially between Australian media businesses and the platforms in relation to the content of those businesses that is on the platforms. Other than that, I will let you have a look at the report in terms of those, those issues of detail.
QUESTION:
Thank you.
QUESTION:
Are there any other recommendations in terms of protecting local media?
JOSH FRYDENBERG:
There are. Paul.
PAUL FLETCHER:
Yes. There's a number of recommendations which are put forward in terms of protecting local media. There's a suggestion or a recommendation in terms of a specific funding for local journalism and a range of other specific recommendations. There are some recommendations about digital media literacy and encouraging digital media literacy amongst Australians.
So I think those recommendations again will be the subject of consultation. The government is interested to see what views stakeholders will have about those.
JOSH FRYDENBERG:
And also a bit of an emphasis too on regional journalism.
PAUL FLETCHER:
That is certainly true.
JOSH FRYDENBERG:
Because the numbers are quite startling as to how many local papers have, have disappeared in this digital age.
PAUL FLETCHER:
And, of course, we already have a $60 million package in place for innovative regional journalism.
QUESTION:
Are there any recommendations that you disagree with? I mean, I'm thinking here about the Hayne recommendations, you endorsed all of them from the outset.
JOSH FRYDENBERG:
Well, as Paul and I have said, we agree with the overriding conclusion of the ACCC, that there is a need for reform. As you will see, there is great detail among these twenty three recommendations.
Indeed, the Prime Minister is very familiar with this area because it was he, as Treasurer, that commissioned this report from the ACCC. So Paul and myself, the Attorney-General, because obviously the privacy issues are real, the Prime Minister and other members of Cabinet will work through the detail of these recommendations, bearing in mind there were ten recommendations in the interim report, now there are twenty three. A lot of them have been elaborated on and expanded. Those recommendations will be worked through and, in terms of the exact nature and form of, of those changes that we make, they will follow a consultation process, as you would expect with such a sensitive area and such a complex area, and one which is critical not just to media companies but to all Australians who use these, these platforms every single day. Last question.
QUESTION:
How are you going to enforce this?
QUESTION:
Treasurer, along with the findings of this report, will the Government also take a look at how much tax Google and Facebook pay?
JOSH FRYDENBERG:
Well, the issue of tax is a different one that wasn't looked at in this report. And, as you know, we're working on this issue of a digital tax through the OECD, it's otherwise known as BEPS2.0, base erosion profit, shifting reforms that we have implemented.
But now this is the second stage of that and the Prime Minister and I have been engaged through the G20 process on these issues and we've put already a number of policies in place, legislative changes through the Parliament, to ensure the integrity of our tax system. But the issue of a digital tax is not one that was covered in this report but certainly is one that the government remains very much focused on. Thank you.