The Australian Competition and Consumer Commission (ACCC) has painted a damning picture of social media in Australia. Its latest report reveals excessive data collection, unfair trading conditions and a prevalence of scams as the norm.

The report is the sixth from the ACCC’s Digital Platform Services Inquiry and highlights how a lack of competition is harming consumers and small businesses utilising social media.

Issues uncovered in the report include a lack of transparency from advertisers; influencers and brands failing to disclose sponsored content, and ineffective dispute resolutions, for both consumers and brands alike, when interacting on social media.

“Social media services are an essential part of our daily lives and have provided many benefits to society, says ACCC Chair Gina Cass-Gottlieb.

“But we are concerned about the level of influence social media platforms hold over users and their position as critical intermediaries for businesses to reach customers. Limited competition in these services can lead to poorer outcomes for consumers and small businesses.”

The ACCC’s findings strengthen the call for reform to existing social media laws, which currently shed little protection for users from scammers or unfair competition.

Cass-Gottlieb suggests mandatory processes need to be applied to allow consumers and businesses to report scams and for platforms to be able to act against things like scams, harmful apps and fake reviewers. To facilitate this, the ACCC is calling for the introduction of an external Digital Ombudsman Scheme.

The high cost of social scams

Social media scams are on the rise across the globe and many Australians have fallen victim to scams originating on social platforms. Aussies reported losses of over $80 million to scammers on social media in 2022 – an increase from $56 million in 2021 and $27 million in 2020. However, Cass-Gottleib warns the real figure is likely to be much higher, as many users fail to report their losses.

“It is clear that social media companies are not doing enough to stop their own users from falling victim to scammers on their platforms,” Cass-Gottlieb said.

Influencers under the microscope

Earlier this year the ACCC launched a sweep calling for the public to dob in influencers that were failing to disclose branded content. Following the tip-offs, the ACCC investigated over 100 influencers for misleading consumers – and the new report highlights continued concern over undisclosed sponsored posts made by influencers.

“Consumers are unable to make informed choices about purchases when endorsements and sponsored posts are not clearly disclosed,” Cass-Gottlieb said.

“These harms to consumers and small businesses are exacerbated when coupled with what many users consider a lack of effective dispute resolution mechanisms with social media platforms.” Cass-Gottlieb said.

Social media market power

Social media platforms have also come under fire for a lack of transparency. While Meta, (the parent company of Facebook and Instagram) has been called out for its significant market power – despite the growth of alternate platforms such as TikTok – with the ACCC suggesting there are few competitive constraints. The ACCC suggests this means users are more likely to accept conditions they otherwise would reject if there was greater choice.

Australian businesses rely on social media platforms to advertise their products and engage with consumers. Small and medium businesses are increasingly reliant on platforms like Facebook and Instagram for targeted, easy-to-use and cost-effective advertising solutions.

“Advertisers have raised concerns about being unable to choose the best services to suit their needs because of the lack of transparency and accuracy of advertising performance data provided to them by social media platforms,” Cass-Gottlieb said.

Cass-Gottlieb said this creates a ‘take-it-or-leave-it’ situation.

“[This] can result in consumers accepting unwanted collection and use of their data. Markets can be less dynamic and the quality of services lower due to market power. Consumers can also “pay more”, where the price they pay is exposure to higher levels of advertising and data collection.”

Cass-Gottlieb said the ACCC will continue to support reforms to address the harms observed in the report.

“These include an economy-wide prohibition against unfair trading practices, targeted consumer protections and service-specific codes of conduct that would apply to designated digital platforms.”

The suggested reforms would bring Australia in line with Europe whose Digital Markets Act is set to apply in 2024 and the UK Digital Markets, Competition and Consumers Bill being introduced to parliament.

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