Australia’s top consumer cop is gunning for Google and Facebook and experts believe the world will be looking on to see if the Australian Consumer and Competition Commission’s, Rod Sims, can cut these digital dragons down to size.
The implications of what Rod actually achieves could impact on other digital giants such Amazon, Uber and Airbnb, who flagrantly break laws, have tax-paying question marks over them and seemingly are lucky enough to see governments of the world turn a blind eye to it.
The standout feature of these great digital businesses is that they have broken with conventional business protocols and compared to their more bricks and mortar business rivals they break laws as well!
And while, why governments lack the guts to bring these law-breaking businesses to book, is primarily because most governments fail when they try it. The biggest challenge for public policy is that consumers love the lower prices these huge, multinational companies deliver.
A story in Fairfax press today says Google and Facebook is “expected to capture 84% of global advertising spending this year.” If you can believe the research work from media buying agency GroupM!
On this criteria these two outfits will pretty well absorb the growth of the entire industry! And because of this, the ACCC has started an investigation into the impact of these giants on competitiveness in the ad industry. This testing of the waters by the competition watchdog - just what the likes of Google and Facebook are up to, was backed by the Turnbull Government and the Parliament when media reforms were passed earlier this year.
Let’s face it, free-to-air TV in particular, has lost a fortune in advertising and the likes of Google and Facebook have been the big winners in capturing the eyes and ears of consumers. Eyes and ears — I understand eyes but why ears, you might be asking?
Well, Google not only captures our eyes via search, it bought YouTube in 2006 for $US1.65 billion. YouTube’s success in capturing consumers’ eyes and ears is demonstrated by the fact that it is now valued over $US70 billion!
In the past, virtual monopolies have come in for plenty of government attention but the mystique and the consumer love for these companies have helped them dodge the critical eye of regulators.
London recently shocked the world by banning Uber and the tide might be turning on these tech companies and Rod Sims could end up being the trailblazer that could encourage many governments around the world to force these companies to play ball by the book. But governments didn’t always lack guts. In 1890 the Yanks passed the Sherman Antitrust Act to bust up the likes of Standard Oil.
In 1870, John D. Rockefeller established Standard Oil which, by the early 1880s, controlled some 90% of U.S. refineries and pipelines. Critics accused Rockefeller of engaging in unethical practices, such as predatory pricing and colluding with railroads to eliminate his competitors, in order to gain a monopoly in the industry.
The behaviour of the modern day digital giants is far better than Rockefeller but Amazon for example, is killing businesses by not making profits and charging prices that smaller businesses just can’t compete with.
If China dumps cheap steel in Europe it's an international crime against local business and jobs but if Amazon dumps cheap products that consumers love then that’s OK.
One famous clothing company is said to break the law on ignoring intellectual property rights in copying the cuts of high-end brands but the law seems disinterested in pursuing this company.
It’s like governments will crack down on a small restaurant having too many chairs outside on the footpath but bringing big businesses to book, if they make consumers/voters happy is just too hard.
The world will be watching Rod’s investigation but my only problem is that he’s got 12-18 months to make his recommendations and in that time these big business killers could do a lot of damage. And then we have to hope our Government will have the rocks to do something about these suckers when the reform recommendations come in.
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