Australian watchdog wants a regulator for Google and Facebook

Australia’s competition watchdog on Monday recommended tougher scrutiny and a new regulatory body to check the dominance of tech giants Facebook Inc and Alphabet Inc’s Google in the country’s online advertising and news markets.

The recommendation, in a preliminary report on the U.S. firms’ market power, is being closely watched around the world as lawmakers wrestle with the powerful tech firms’ large and growing influence in public life, from privacy to publishing.

It comes days after Australia passed laws forcing tech companies to help police access private user data, and amid growing concern from authorities worldwide about the giants’ commercial behavior and distribution of so-called “fake news”.

“When you get to a certain stage and you get market power, which both Google and Facebook have, with that comes special responsibilities and that means, also, additional scrutiny,” Australian Competition and Consumer Commission (ACCC) Chairman Rod Sims told reporters in Sydney.

He said the companies’ enormous market share - Google has a 94 percent share of web searches in Australia - and opaque methods for ranking advertisements gave the firms the ability and incentive to favor their businesses over advertisers’.

“The idea of the regulator role would be to keep an eye on that and proactively bring some transparency,” he said, adding the two firms also had outsized influence over news distribution.

Drafting the report had also spurred five investigations into possible consumer or privacy law breaches in Australia, Sims said, without disclosing which firms they concerned.

Facebook had no immediate response to the ACCC report, though in a submission to the regulator had said that its platform offers advertisers cheaper access to a big audience.

A Google spokeswoman said in an emailed statement that the company will continue to work with the ACCC while the regulator prepares its final report due next June.

The ACCC has said its recommendations are subject to change, but suggests handing the new regulator investigative powers to examine how the companies rank advertisements and news articles.

“It is potentially a game changer,” Margaret Simons, an associate professor of media at Monash University in Melbourne, said by phone, since it would bring the tech companies under a regulatory framework more typically applied to media firms.

“With the ‘if’ being whether or not governments act,” she said, adding that the ACCC’s work was being closely watched internationally.

Australia’s government, which ordered the probe into the firms’ influence a year ago as part of wider media reforms said it would consider the ACCC’s final recommendations in June.

Traditional media companies in Australia including Nine Entertainment Co Holdings Ltd and News Corp’s local arm - already squeezed by online rivals - welcomed the ACCC suggestions in separate statements on Monday.

Reporting by Tom Westbrook in SYDNEY; Additional reporting by Devika Syamnath in BENGALURU; Editing by Stephen Coates and Christopher Cushing