The Australian Competition and Consumer Commission (ACCC) is concerned about the market power held by Google and Facebook, their impact on businesses and the extent to which consumers’ data is collected and used to enable targeted advertising.

In a preliminary report into Google and Facebook, the nation’s competition watchdog released 11 preliminary recommendations and eight areas for further analysis as the inquiry continues.

The ACCC has reached the view that Google has substantial market power in online search, search advertising and news referral, and Facebook has substantial market power in markets for social media, display advertising and online news referral.

The report outlines the ACCC's concerns regarding the market power held by these key platforms, including their impact on Australian businesses and, in particular, on the ability of media businesses to monetise their content. The report also outlines concerns regarding the extent to which consumers’ data is collected and used to enable targeted advertising.

"Digital platforms have significantly transformed our lives, the way we communicate with each other and access news and information. We appreciate that many of these changes have been positive for consumers in relation to the way they access news and information and how they interact with each other and with businesses," ACCC Chair Rod Sims said.

"But digital platforms are also unavoidable business partners for many Australian businesses. Google and Facebook perform a critical role in enabling businesses, including online news media businesses, to reach consumers. However, the operation of these platforms’ key algorithms, in determining the order in which content appears, is not at all clear."

Google and Facebook are now the dominant gateways between news media businesses and audiences and this "can reduce the brand value and recognition of media businesses," according to the report. In addition traditional media businesses and in particular, traditional print media businesses, have lost advertising revenue to digital platforms. "This has threatened the viability of business models of the print media and their ability to monetise journalism," ACCC says.

The inquiry has also considered questions about the range and reliability of news available via Google and Facebook. The ACCC’s preliminary view is that consumers face a potential risk of filter bubbles, or echo chambers, and less reliable news on digital platforms. While the evidence of filter bubbles arising on digital platforms in Australia is not yet strong, ACCC says that the importance of this issue means it requires close scrutiny.

The ACCC is further concerned with the large amount and variety of data which digital platforms such as Google and Facebook collect on Australian consumers, which go beyond the data which users actively provide when using the digital platform.

Research commissioned as part of the inquiry indicates consumers are concerned about the extent and range of information collected by digital platforms. The ACCC is in particular concerned about the length, complexity and ambiguity of online terms of service and privacy policies, including click-wrap agreements with take-it-or-leave-it terms.

"Without adequate information and with limited choice, consumers are unable to make informed decisions, which can both harm consumers and impede competition," ACCC says.

The report found that key digital platforms, Google and Facebook, had both the ability and incentive to favour related businesses or those businesses with which they may have an existing commercial relationship. The platforms’ algorithms rank and display advertising and news content in a way that lacks transparency to advertisers and news organisations.

"The ACCC considers that the strong market position of digital platforms like Google and Facebook justifies a greater level of regulatory oversight," Mr Sims said.

“Australian law does not prohibit a business from possessing significant market power or using its efficiencies or skills to ‘out compete’ its rivals. But when their dominant position is at risk of creating competitive or consumer harm, governments should stay ahead of the game and act to protect consumers and businesses through regulation.”

The report makes preliminary recommendations aiming to address Google and Facebook’s market power and promote increased consumer choice, including a proposal that would prevent Google’s internet browser (Chrome) being installed as a default browser on mobile devices, computers and tablets and Google’s search engine being installed as a default search engine on internet browsers.

The ACCC also proposes that a new or existing regulatory authority be given the task of investigating, monitoring and reporting on how large digital platforms rank and display advertisements and news content. Other preliminary recommendations suggest ways to strengthen merger laws.

Additional preliminary recommendations deal with copyright, and take-down orders, and the review of existing, disparate media regulations.

The ACCC also notes that consumers will be better off if they can make informed and genuine choices as to how digital platforms collect and use their data, and proposes changes to the Privacy Act to enable consumers to make informed decisions.

The ACCC is further considering a recommendation for a specific code of practice for digital platforms’ data collection to better inform consumers and improve their bargaining power.

The ACCC is seeking feedback on its preliminary recommendations, and the eight proposed areas for further analysis and assessment.

Google said in a response to questions about the report that “we develop innovative products to the benefit of consumers, businesses and the economy, and we work closely with advertisers and publishers across Australia.” Facebook said it remains “committed to working with the commission as they review the contribution of all digital platforms in Australia.”

The Australian government isn’t expected to act on the ACCC’s recommendations until the final report is issued in June.