Social media has provided many benefits to society but the level of influence as a way for businesses to reach customers is of concern, according to the ACCC's sixth digital platform services inquiry report.
The competition watchdog's report highlights excessive data collection practices, lack of effective dispute resolution options, prevalence of scams, lack of transparency for advertisers and inadequate disclosure of sponsored content by influencers and brands.
ACCC chair Gina Cass-Gottlieb said limited competition can lead to poorer outcomes for consumers and small businesses.
“This report reinforces the need for reform, including specific mandatory processes for consumers and businesses to report and social media platforms to remove scams, harmful apps and fake reviews, and establishing an external Digital Ombuds Scheme," she said.
In 2022, Australians reported losses of over $80 million to scams initiated on social media alone. This is up from reported losses of $56 million in 2021 and $27 million in 2020.
“It is clear that social media companies are not doing enough to stop their own users from falling victim to scammers on their platforms, especially as we understand only a fraction of people scammed ever report it,” Cass-Gottlieb said.
Lack of transparency
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.
The report also highlights the growth of the influencer marketing industry and raises concerns about inadequate disclosure of sponsored posts by influencers and brands.
“Consumers are unable to make informed choices about purchases when endorsements and sponsored posts are not clearly disclosed,” Cass-Gottlieb said.
The ACCC launched a sweep earlier this year to identify misleading testimonials and endorsements by social media influencers. The ACCC examined content from more than 100 influencers after receiving over 150 tip-offs from consumers about potentially misleading posts.
“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.
The ACCC considers that limited competition among social media platforms means users are more likely to accept conditions they otherwise would reject if there was greater choice.
“Where there are few comparable alternatives available, consumers feel compelled to use a service because their social, family or work networks are on them,” Cass-Gottlieb said.
“This creates a ‘take-it-or-leave-it' situation which 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.”
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