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The new regulatory environment for data capture

Dennis Martin

09 Sep 2019

Topics

  • Business Law
  • Government Advisory
  • Intellectual Property
  • Regulatory

In this article Dennis Martin discusses some of the recent developments in the area of internet giants, particularly in light of the recent Australian Competition and Consumer Commission (ACCC) report on its Digital Platforms Inquiry, which was published on 26 July 2019.

Background

The commentariat is increasingly expressing concern that the internet behemoths – Google, Facebook, Microsoft, Amazon and their ilk – have too much power, don’t pay their way and, some even suggest, have become unaccountable.

It’s almost too fantastic to imagine that the imposing of multi-billion-dollar fines is treated like no more than a tiny line item of expenditure by the owners of these internet giants. Their share prices continue to rise, and their behaviours seem unaffected.

The internet, with all the advantages it brings to society, is also the means of controlling it through data capture.

The behemoth

It’s important to understand the meaning of ‘behemoth’ in this context.

Google is worth US $1.1 trillion and Facebook US $824 billion: together this is nearly as much as the combined Australia’s ASX – AU $2.1 trillion.

The revenues of some of these companies exceed the GDPs of certain countries.

There are 21 million Australians over 13 years old that are rusted on users of one of these products. Every month:

  • 19.2 million Australians use Google search
  • 17.3 million access Facebook
  • 17.6 million watch YouTube (owned by Google)
  • 11.2 million access Instagram (owned by Facebook).

The dissection of online advertising, worth AU $9 billion, tells the same story. For every AU $100 spend, Google gets $47, Facebook gets $24, and other media share the remaining $21. Revenue growth has increased 8 times since 2005, when much before that went to traditional media.

That’s what a behemoth looks and smells like.

Australia’s response

In December 2017, the ACCC began an inquiry into the effect digital platforms have on competition in media and advertising services markets. A large part of this inquiry concentrated on Facebook and Google and how they capture data.

The ACCC published its final report on 26 July 2019 and this report was the centrepiece for tech bosses at the AFR Innovation Summit in Sydney on 29 July.

The ability to do bring about change in this area depends on bipartisanship of the main parties in every country, a decisive mandate for change from the citizens, and acceptance of the world-wide framework treaty. A solo Australian regulatory response would be futile. An international response is needed.

International response and world risk

The power of the behemoths is so great that it corrupts the ability of governments to function. In fact, some assert that by their very nature, which preys on consumer ignorance by controlling the use of personal data for financial gain, the behemoths could be the undoing of democracy itself.

One thing is certain – there will be no self-regulation amongst the internet giants, no matter how many multi-billion-dollar fines are imposed.

The great economies of the world must unite to rebalance the regulatory framework.  Treaties are needed to control how businesses  operate – regardless of how big those businesses are.

By use of their enormous resources, revenue streams are syphoned beyond the reach and investigation of traditional treasuries, thus bloating the already fantastic wealth of their owners.

Every country in the world where these giants do business receives only token payments in tax.

National security and national agencies and infrastructure are also at risk from hacking.Their data capture is by stealth and is not transparent.  Through an intricate web (excuse the pun) advertisers get access to users’ names, emails, accounts and preferences. The list goes on.

What is evident is that the ‘Empire is fighting back’ and seeking to push the regulatory pendulum back to the centre.

How to level the playing field

Most evident in the attempts to level the playing field is the actions of the European Union (EU) and United States (US) regulators.

The EU has imposed multi-billion-euro fines and forced Google in Europe to give its users the freedom to use a search engine and browser of their choice e.g. Samsung, Huawei, Google.

‘Till then, EU users were forced to use Google’s embedded default search engine and Chrome browser.

In the US, Google has paid a US $5 billion fine for violating a privacy deal previously agreed with the (anti-trust) Federal Trade Commission. This related to the unauthroised sale of private data to Cambridge Analytica in relation to the US 2016 election.

Pursuit of the behemoths is ongoing, though Microsoft seems to be flying under the radar (having self-regulated after the Windows dominance was checked).

ACCC recommendations

The ACCC’s report included 23 recommendations. These aim to affect competition, consumer, media, copyright and privacy regulation across three types of digital platforms:

  1. online search engines
  2. social media platforms
  3. other digital content aggregation platforms.

The recommendations were designed to be dynamic, and to help prepare governments and communities for new issues that may arise arise. Some of the most relevant recommendations are discussed below.

Recommendation 15: A digital platforms code of conduct to govern the relationships with news media, including the commitments to share data and negotiate fairly how to share revenue where the digital platform obtains value from content produced by news media.

Recommendation 16: The ACCC recommended that protections provided for in the Privacy Act be strengthened, including updating the definition of ‘personal information’ so that it’s clear that ‘personal information’ include IP addresses, device identifiers, location data and other online identifiers. 

Recommendation 18: The Office of the Information Commissioner (OAIC)  is tasked with developing an enforceable privacy code of practice for digital platforms, with emphasis on real consent (clear affirmation of consent, freely given, specific, unambiguous and informed). 

Recommendation 21: The ACCC recommends that the Competition and Consumer ACT 2010 be amended to prohibit certain unfair trading practices.

Code to deal with ‘fake news’ complaints

The ACCC wants to follow the EU to ensure Google loses its default status of its search engine and browser on Android devices, and has two important qualifications:

  1. Google should not be broken up.
  2. Digital platforms should be governed differently from media businesses.

 

Response from the tech heads

There was broad agreement to regulate privacy and level the playing field.

Pro

  • Data privacy is a fundamental human right that requires protection, said Richard White, CEO Wise Tech.
  • A person has the right to know if personal data is used for you, against you or for another purpose.
  • Use of private data by a tech should only be on a clear ‘opt in’ basis.
  • Tech companies should have the onus and obligation to tell you when they use your data, what for and when they monetise (and for how much) if this was never disclosed [at the ‘opt in’ stage].
  • Bill Ferris, former Chair of Innovation and Science Australia, said government and business need to develop regulation with collaboration so as not to kill the positive impacts of big tech investment in new ideas while smoothing out excesses.  Where behaviour doesn’t change, that is where you need regulation.

Anti

  • The big techs say regulators should not worry about dominance and concentrate on reform of data laws that allowed them to dominate in the first place.
  • Definitely no break ups, which would be fought in the courts across many years.
  • Throwing super regulation to fix the problem won’t work (nor it seems will multi-billion-dollar fines).

The future

There is little doubt that the excesses of the past are being called out.

If all that comes of it is private data protection, sharing of money made from its sale to advertisers and the payment of proper taxes to governments where big techs operate (i.e. everywhere) then we will likely put up with the squillionaire owners for the foreseeable future.