Tech giants Google and Facebook have accused the Australian competition watchdog of going beyond its remit in its 18-month inquiry into digital platforms, and warned that its recommendations will lead to “unintended consequences,” that stifle innovation and damage the local tech industry.
The Digital Industry Group Inc (DIGI), whose founding members include Facebook, Google and Twitter, has rejected a number of the most significant recommendations from the Australian Competition and Consumer Commission’s (ACCC) Digital Platform Inquiry into the impact of digital platforms on media and advertising markets.
The ACCC’s final report was released in July, and included 23 recommendations to government for “significant, holistic reform” to curb the market dominance of the likes of Google and Facebook.
But DIGI said the ACCC has gone too far and that many of its recommendations to government would damage the already struggling local tech sector and economy in general.
“We are concerned that the final recommendations have unintended consequences for a wide range of digital service providers, organisations that rely upon digital services to market goods and services, consumers of online services and for the Australian economy,” DIGI managing director Sunita Bose said in a submission to government.
“We therefore urge the Australian government to fully consider these unintended consequences and undertaken necessary broader consultation with the digital industry, as well as other affected industries before any major reform is announced,” Ms Bose said.
The ACCC report recommended a series of major reforms focusing on competition law, consumer protection, media regulation and privacy law that it said are needed to curb the market dominance of Google and Facebook and protect the data of users.
Throughout the submission, DIGI referenced an AlphaBeta report it commissioned (and released last week), that painted a dire picture of the Australian tech sector. The report found that Australia’s ICT sector ranked second to last as a proportion of GDP among OECD peers.
The group argued that many of the ACCC’s suggestions would be “innovation-stifling red tape”, and that the government should remember the importance of the digital economy before implementing them.
The tech giants took particular issue with recommendations to reform merger laws, strengthen the protection of data, changes to privacy laws and new codes of conduct for digital platforms.
In the submission, DIGI said it was “disappointed” that the ACCC had stuck by its recommendation that merger laws should be updated to consider whether an acquisition would result in the removal of a potential competitor, and how much data would change hands.
This could be a disincentive for innovation and discourage entrepreneurs from starting a company in Australia, the group said.
“Such proposed regulations serve as a deterrent to global companies from investing or expanding operations in the Australian market,” it said.
“A thriving technology sector in Australia means creating a supportive environment for large and small companies, local and global companies, and therefore an ecosystem where the calibre of employees improves, and the networking, mentorship and business opportunities increase.”
“Ensuring that startups can successfully exit their venture, through acquisition from large technology companies, is key to ensuring growth and development of Australia’s technology sector.”
In its report, the competition watchdog had raised concerns of “problematic data practices with the potential to cause consumer harm”, and made a series of recommendations to strengthen the Privacy Act, reform the Australian privacy law framework, introduce a privacy code of practice and a statutory tort for serious privacy violations.
But according to Google and Facebook, these recommendations are based on the potential for harm and the report does not include enough evidence of it.
“The result is many recommendations that are arguably premature and lack an evidence base. We, therefore, urge the Australian government to fully consider these unintended consequences and undertake necessary broader consultation with the digital industry, as well as other affected industries and stakeholders, before any major reform is announced,” the DIGI submission said.
The recommended reforms to Australian privacy law would lead to a “GDPR-plus” style privacy regulation that Australia “simply cannot afford”, the DIGI submission said.
“If compliance becomes overly complex and results in declining conversion rates and revenue, global companies and startups may withdraw or not develop products and services for the Australian market,” it said.
“Extremely strict privacy regulation in Australia could ultimately have detrimental effects on consumer choice and access to digital products and services.”
The ACCC also recommended that tech companies be banned from bundling consent for data use from consumers, but this would place a “huge burden on the average consumer” that is impractical, DIGI said.
The group also rejected the ACCC’s call for digital platforms to produce a code of conduct for its relationships with media businesses, saying this would put companies at a “commercial disadvantage in a rapidly shifting digital advertising market”.
The ACCC also recommended a mandatory ACMA take-down notice scheme for copyright-infringing content hosted by the digital platforms, but this would be a “significant departure” from global norms, DIGI said.
This would disadvantage smaller tech companies that cannot afford to develop technology to identify this material, and would make platforms slower for users, it said.
DIGI also warned against calls for digital platforms to comply with internal dispute resolution requirements and for targeted advertising to be turned off by default.
The alliance of large tech firms was broadly supportive of most of the other recommendations included in the ACCC report.
Submissions to the government on the final report close on Thursday, with the Coalition, expected to reveal its full response by the end of the year.