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Social media terms disadvantage small business and are potentially unfair, report finds

Maja Garaca Djurdjevic
Maja Garaca Djurdjevic
23 October 2020 2 minute readShare
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Small businesses are becoming increasingly reliant on social media as a means of advertising to, and communicating with, consumers, but agreements put in place by the various platforms may be disadvantaging business, a new report has found.

Small businesses are increasingly switching to social media to target consumers and access a broader audience at a low cost, ACCC’s first Digital Platform Services Inquiry interim report has revealed.

However, the watchdog found that the platforms’ terms and conditions relevant to small businesses, which must be accepted by default, often leave businesses at a significant disadvantage and could be unfair.

So, while the ability to advertise and create relationships with customers is beneficial to business, the power imbalance between the platforms and small businesses may result in harmful consequences, the ACCC warned.

For example, some of these terms give platforms broad discretion to remove content, suspend or terminate accounts, and vary terms without notice.

“We continue to advocate for effective dispute resolution mechanisms to address complaints and disputes between platforms and businesses. This would also benefit consumers who fall victim to scammers using social media or messaging services,” ACCC chair Rod Sims said.

“We also continue to advocate for a prohibition of unfair contract terms (with penalties applying to their use) and a prohibition of certain unfair trading practices.”

Growing prevalence of messaging services

The ACCC report also revealed the overwhelming reliance of Aussies on online private messaging services, noting that Facebook Messenger alone had an estimated 14.7 million monthly active users in Australia in June this year.

Its other service, WhatsApp, had an estimated 8 million monthly active users.

“Australians have embraced the use of online private messaging apps, especially during the COVID-19 pandemic. Many Australian consumers use a range of messaging services during the day,” Mr Sims said.

“Consumers commonly choose to use the biggest providers in part because their friends, family, colleagues and acquaintances are also more likely to use them, and because most online messaging services don’t allow consumers to send or receive messages to users of different services.”

However, the ACCC warned that many digital platforms, including online private messaging providers, are in fact able to extensively track users’ activities online and on mobile apps.

The watchdog also examined the terms and policies of online private messaging services, and found most included broad statements allowing for the collection of extensive information about users, but provide little clarity about how a user’s data would be collected, used or shared with others.

“As large platforms continue to collect vast amounts of consumer information, they are also expanding into new sectors, growing their ‘ecosystems’ and, with it, their market power and ability to draw in, and lock in, consumers,” Mr Sims said.

“These expanded services can deliver benefits to consumers, but the impacts on competition and consumer choice need to be closely monitored and considered.”

Warning about increasing scam activity on digital platforms, the ACCC revealed that in the period January 2018 to June 2020, social media and online private messaging platforms resulted in reported losses of $87 million.

Noting that all platforms should do more to remove scam activity, the ACCC reiterated calls for the establishment of an independent ombudsman to address these harms.

Social media terms disadvantage small business and are potentially unfair, report finds
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Maja Garaca Djurdjevic
Maja Garaca Djurdjevic

Maja Garaca Djurdjevic is the editor of My Business. 

Maja has a decade-long career in journalism across finance, business and politics. Now a well-versed reporter in the SME and accounting arena, prior to joining Momentum Media, Maja reported for several established news outlets in Southeast Europe, scrutinising key processes in post-conflict societies and enabling citizens to influence decision-making.

You can email Maja on [email protected] 

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