ACCC prepares second assault on Facebook, Google

Aaron Patrick, Senior correspondent

The failure of a landmark anti-monopoly case against Facebook by the US Federal Trade Commission will not stop global regulators from waging an aggressive campaign against the social media giant over the next two years, Australian Competition and Consumer Commission chairman Rod Sims has said.

Rod Sims says Facebook and Google have breached the legal test in Australia of holding “a substantial degree of power”.  Dominic Lorrimer

Following last week’s court decision in Washington, which pushed Facebook’s market value above $US1 trillion ($1.33 trillion), Mr Sims said Facebook and Google’s power was as big a problem as the millionaire Rockefeller family’s control of the global oil refining market a century ago, which was ultimately ruled an illegal monopoly by the US Supreme Court.

He said the ACCC was gathering evidence of market power abuses by the American companies and planned to use two current inquiries to launch a new assault on them in conjunction with counterparts in Europe, Britain, the US and Canada.

“In the next six to 18 months, a lot will change in terms of how those abuses are dealt with,” Mr Sims said in an interview. “There is an extraordinary amount of market power: self preferencing, markets that aren’t transparent, very high charges and rent extraction.

“Then there is the whole issue of reducing innovation, which is more of a productivity issue.”

Facebook’s dominance over social media – it has 2 billion regular users – was not enough to convince a US district court last week that its purchases of Instagram in 2012 and WhatsApp in 2014 made it so powerful that it had become a social networking monopoly.

Facebook, which doesn’t charge the public for its network, said it would continue to “compete fairly” every day to provide services to consumers and businesses.

We’re working very closely with international colleagues. It’s a very important bit of work.

— Rod Sims, ACCC chairman

The Federal Trade Commission, which originally approved the deals, and a coalition of states could have sought the break-up of the company if they had been successful. They have 30 days to refile their lawsuit.

Mr Sims said Facebook and Google, which has between 60 and 95 per cent of the Australian internet search market depending on how it is defined, had breached the legal test in Australia of holding “a substantial degree of power”.

But suing the companies to reverse the acquisitions that made them so big would take too long and be too unpredictable, he said.

Instead, the ACCC will use a digital advertising services inquiry, which is due to be submitted to the government by August 31, and a digital platform services inquiry, which is due by September 30, to start to limit the companies’ ability to exploit their market power.

A Google spokesman declined to comment but the company has previously said it is willing to work constructively with regulators.

One area of focus is payments by Google, which the ACCC estimates at $8 billion to $12 billion a year, to be the default search engine on Apple mobile phones. The ACCC is examining whether the arrangement limits competition.

The inquiries are likely to find that Facebook and Google have a dangerous degree of control over online advertising, Apple and Google exercise too much control over the software application market and Google has too much power over search.

Once the reports have been made public this year, the ACCC will concentrate on working out what action to take against the companies, including whether new laws are necessary to curtail their power.

“All options are open,” Mr Sims said. “We can take enforcement action or make recommendations to government about what legislation might be needed. We’re working very closely with international colleagues. It’s a very important bit of work.”

Last year, the ACCC led a successful push – with the help of Treasurer Josh Frydenberg, who commissioned both current ACCC inquiries into the industry – to force Google and Facebook to pay established media outlets for their articles.