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By Rob Taylor
CANBERRA, Australia--Tech giants Facebook Inc. and Alphabet Inc.'s Google could have their secretive algorithms policed by a beefed-up watchdog, under what Australia describes as world-first limits to the power that they wield over news and advertising markets.
The recommended changes--which include strengthening privacy safeguards with steep penalties of up to 10% of annual domestic turnover for the misuse of data--are made in a report by the national competition regulator after a year-and-a-half investigation into the impact such companies have had on the country.
It comes after Facebook was hit with a $5 billion fine in the U.S. this week after a Federal Trade Commission investigation found the company had repeatedly used deceptive disclosures and account settings to lure users into sharing personal information, undermining their actual privacy preferences.
The report by the Australian Competition and Consumer Commission, released Friday, concluded U.S. tech giants wielded too much influence over Australia's news and advertising markets, stifling competition. It also found many instances where companies had deprived consumers of control over their personal information.
The Australian government directed the commission in late 2017 to hold the inquiry, with a mind to modernize the country's media and privacy laws.
"Make no mistake, these companies are among the most powerful and valuable in the world. They need to be held to account and their activities need to be more transparent," Treasurer Josh Frydenberg said. "The world has never seen so much commercially sensitive data collected and aggregated among two companies."
Among the 23 recommendations is a call for the government to set up an office in the commission to scrutinize the algorithms used by Google and Facebook to rank news and advertising. The report said the office would have the power to order Facebook, Google and other tech giants to hand information over to regulators.
"This particular branch of the [commission] will be able to be approached by various companies who believe that the algorithms have been misused," Mr. Frydenberg said. He promised the government would "lift the veil" on how tech firms made money out of user data they collect.
Other recommendations include: a change to merger-and-acquisition laws to prevent large tech companies siphoning up smaller rivals; the removal of Google as the default search option on Android devices; and, a harmonized regulatory framework covering digital markets--though the commission stopped short of calls to break up Google and Facebook, or force them to pay for news content.
In Europe, Google has been fined $5 billion for antitrust violations for abusing the market dominance of its Android phone system.
Facebook didn't immediately respond to the Australian regulator's report. A spokeswoman for Google said the company had worked closely with the commission throughout its investigation and would "continue to engage with the government on the recommendations."
Digital-industry group DIGI--which represents Google, Facebook, Twitter and Verizon Media--said lawmakers need to think carefully about unintended consequences that could affect competition and the range of products available to Australian consumers.
Mr. Frydenberg said the government would hold a three-month consultation before deciding later this year how it will respond to the recommendations.
Since the Australian regulator launched its investigation, the U.K. Parliament released a report calling for tighter regulation of the digital world, warning of a "democratic crisis" being created by the spread of misinformation, while the U.S. FTC launched a task force in February to monitor technology markets, including reviewing tech mergers.
Media organizations including News Corp have called for more regulation of digital platforms to help to stem a decline in advertising revenue and the loss of subscriptions. News Corp owns Dow Jones & Co., publisher of The Wall Street Journal.
Campbell Reid, News Corp Australia's director of corporate affairs, said Friday the commission had exposed the impact of tech giants on Australia's media landscape, with Facebook and its photo-sharing platform Instagram accounting for about 46% of Australian advertising revenue.
"It's clear the government is going to do something about this," Mr. Reid said. "I think Google and Facebook in particular should listen very carefully."
Write to Rob Taylor at firstname.lastname@example.org
(END) Dow Jones Newswires
July 26, 2019 05:56 ET (09:56 GMT)
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