Published on the 26/10/2018 | Written by Heather Wright

Algorithms and data gathering under scrutiny by regulator…

The ACCC has reiterated its focus on the data economy and outlined how consumer data rights could be extended to social media and other digital platforms.

Speaking at a Gilbert & Tobin seminar this month, ACCC chair Rod Sims (pictured) said data was an increasingly important issue, with the ACCC gearing up to tackle the potential issues.

The competition watchdog has previously signalled that matters involving data and algorithms were a priority.

“Imagine if someone had asked you to predict in 2008 how Facebook would operate in the market in the future.”

Sims says the organisation has invested in an internal team, the Strategic Data Analysis Unit, to assist with investigations and assessments, analysing data and algorithms across investigations in both the competition and consumer area – including the recent Trivago action.

“Beyond algorithms, we are also on the record as having an interest in and looking at the gathering and use of data by platforms and others online,” Sims says.

“On the gathering front, we are looking at instances in which firms may have failed to disclose the extent of gathering, changed their position on gathering or use of data and not adequately informed or obtained consent.”

Concerns around potential unfair contract terms are also being looked into, along with the competition effects by businesses that share commercially sensitive data directly or indirectly through a third party. “Huge amounts of data can now be shared very efficiently on a real time basis. Often such sharing can make markets operate more efficiently,” he says, noting though that the nature of information share, who it is shared with and the conditions and impact of sharing is being looked at closely.

However, he acknowledged that the issue of digitisation and the data economy wasn’t an easy one to regulate for, with difficulties in understanding the impact on access to data on market competition.

“The value of data, big data, is only beginning to become apparent. The factual and the counterfactual in all dynamic fast-moving markets, however, are difficult for regulators to predict, particularly when the overlap from the consumers’ side of the market is not immediate or obvious,” Sims says.

“As the UK’s Competition and Markets Authority pointed out recently in a submission to the OECD, one of the key challenges with cases in digital markets relates to assessing what may be a small possibility of a large reduction in competition and that this may require the competition authority to consider the possible future development paths of digital markets, for which there are unlikely to be precedent or historical data.

“That is a difficult task indeed. Imagine if someone had asked you to predict in 2008 how Facebook would operate in the market in the future, for example.”

He noted a number of acquisitions, including Facebook’s purchase of Instagram in 2012, saying that at the time the competitive impact was difficult to establish, with Instagram at the time having no revenue and only 13 employees.

“It would be extremely difficult to predict what was going to happen in social media in the last five years, including whether in the absence of the acquisition by Facebook, Instagram would have grown and become an independent challenger to Facebook,” he says.

“We do, however, know where we are now: Instagram is the second largest social media platform in Australia, next to Facebook”

The ACCC’s preliminary report in the Digital Platforms Inquiry is due to be submitted to the Treasurer by 3 December. It’s an issue governments around the world are grappling with. In the UK a panel has been set up to look at whether data collection is damaging startups and the impact of AI and machine learning on competition, particularly whether prices set algorithmically can operate in ways that would disadvantage consumers.

Sims noted that there is the possibility for the CDR to be extended to social media or other digital platforms, providing an access regime for data, but that the option came with issues, including whether consumers would have an incentive to port their data when the service being provided is ‘zero-priced’, and which data would be ported – that valuable to the consumer, or that valuable to prospective advertisers and therefore to rival platforms.

“Extending the CDR is clearly not the only option, but any data sharing obligation runs into the same issue: privacy concerns and in particular whether it is in consumers’ interests for their personal information, even if de-identified or aggregated, to be shared with other businesses,” Sims says.

“The merits of any kind of access regime or data sharing obligation would depend on the extent to which access to data is necessary for effective competition. Data is an important part of the business models of digital platforms and we are looking closely at the role it plays. But we acknowledge that data does not display the same characteristics as essential facilities type infrastructure; data can easily be duplicated.”

He notes data is also only one source of a digital platforms’ market power.

Sims comments came a week after the one of Facebook’s most senior US lawyers, Samantha Knox reportedly visited Australia to meet with the company’s local legal team.