Social media report calls for reforms to address concerns from consumers and businesses

A new report highlights the need for reforms to protect consumers and businesses on social media platforms.

The report by the Australian Competition and Consumer Commission (ACCC) has highlighted a range of harms to consumers and businesses occurring across social media services, including 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.

While social media services have undoubtedly provided numerous benefits to society and have become an essential part of our daily lives, the ACCC is increasingly concerned about the level of influence that these platforms hold over users and their position as critical intermediaries for businesses to reach customers.

“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,” ACCC Chair Gina Cass-Gottlieb 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. 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,” Ms Cass-Gottlieb said.

The ACCC’s report highlights the significant market power of Meta in social media services, despite the entry of TikTok and smaller platforms such as BeReal. Australians continue to spend more time on Facebook and Instagram combined than any other social media platform, and Meta’s services have the most Australian users and advertisers.

Barriers to entry also remain high, and Meta’s users can face high switching costs as Meta’s platforms (particularly Facebook) have attracted and retained many users for a significant period of time who have invested in uploading material and building a large network of social contacts. While younger Australians are more likely to use multiple social media services, including new platforms like TikTok and BeReal, older Australians use fewer platforms and still rely heavily on Facebook and Instagram.

“Where there are few comparable alternatives available, consumers feel compelled to use a service because their social, family or work networks are on them. 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,” Ms 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, according to ACCC Chair Gina Cass-Gottlieb. The ACCC launched a sweep earlier this year to identify misleading testimonials and endorsements by social media influencers, examining content from more than 100 influencers after receiving over 150 tip-offs from consumers about potentially misleading posts.

The ACCC has recommended a range of reforms to address the harms observed, including an economy-wide prohibition against unfair trading practices, targeted consumer protections, and service-specific codes of conduct that would apply to designated digital platforms.

“Globally, similar reforms continue to be progressed. For example, the European Digital Markets Act obligations due to apply in March 2024, and the UK Digital Markets, Competition and Consumers Bill being recently introduced to parliament,” noted Ms Cass-Gottlieb.