The latest ACCC report on digital platform services examined competition between social media services in Australia and how consumers and businesses interact with social media services: Interim report 6: Report on social media services (released on 28 April 2023)

The report outlines the benefits and highlights a range of harms to consumers and small 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. See ACCC Media release 43/23

This article contains extracts from the report, with the reference pages noted. It is followed by marketing commentary: The Double-Edged Sword of Social Media.

The benefits to small businesses from using social media

These extracts are from Chapter 1: Social media platforms – overview and trends:

  • According to a survey conduct by Meta, approximately 83% of Australian new small and medium enterprises used Facebook to help start their business. (p 9)
  • Businesses of all sizes have benefited from the capacity to establish an online presence through business profiles on social media platforms, allowing them to engage directly with customers. (p 30)
  • The Facebook platform is particularly beneficial to small businesses. Facebook facilitates targeted advertising based on demographics, interests or other profile information captured through engagement data. Small businesses can use this tool to target campaigns to a particular demographic. Given the capacity to target campaigns a large advertising spend is not required, hence why advertising costs on Facebook are substantially lower with those associated with traditional media. (p 34)
  • Businesses can also purchase targeted display advertising opportunities and engage in partnerships with ‘brand ambassadors’ (often influencers) to appear in sponsored posts. This can benefit small businesses, which can identify influencers most likely to capture their target or niche audience and strengthen their brand awareness. (p 39)

Harms to consumers and small businesses and recommendations

These extracts are from Chapter 4: Harms to consumers and small business:

Key Findings (p 137)

  • Scams on social media platforms continue to be of significant concern. If accepted by the Government, the recommendations made in the ACCC’s Regulatory Reform Report for mandatory processes to prevent and remove scams, would, in conjunction with the future work of the National Anti-Scam Centre, better address harmful scam conduct.
  • Excessive data collection and data use by social media platforms can result in consumer harm, particularly for children and vulnerable groups, whose data may be used to target them with inappropriate advertising.
  • The use of dark patterns by social media platforms can make it difficult for users to express their actual preferences, or nudge users to take certain actions that may not be in their best interests.
  • A lack of transparency in social media advertising, including the inability of parents to review the advertisements served to children, can result in young people being exposed to inappropriate material.
  • Other consumer harms arising from the use of algorithms by social media platforms have been identified, including the potential for manipulation of users and user responses, and the creation of ‘echo chambers’ for users who spend time engaging with potentially harmful conduct.

Recommendations to address these harms have been made in prior reports, particularly for scams, fake ratings and reviews and unfair trading practices.

Two more recommendations are made (p 137 – 138):

Recommendation 1 The ACCC continues to recommend the introduction of new and expanded economy-wide consumer measures, including an economy-wide prohibition against unfair trading practices.

Recommendation 2 The ACCC recommends additional targeted measures to protect users of digital platforms, which should apply to all relevant digital platform services, including:

  • Mandatory processes to prevent and remove scams, harmful apps and fake reviews including:

− a notice-and-action mechanism

− verification of certain business users

− additional verification of advertisers of financial services and products

– improved review verification disclosures – public reporting on mitigation efforts

  • Mandatory internal dispute resolution standards that ensure accessibility, timeliness, accountability, the ability to escalate to a human representative and transparency.
  • Ensuring consumers and small business have access to an independent external Digital Ombuds Scheme.

Marketing Commentary by Michael Field from EvettField Partners

The Double-Edged Sword of Social Media

The Interim report 6: Report on social media services, released by the ACCC, highlights the potential harm that social media platforms present to consumers and small businesses.

The report also indicates that small businesses can benefit from social media platforms by helping them to establish an online presence and engage with customers through low-cost, targeted advertising and partnerships with influencers.

The Double-Edged Sword

Social media platforms such as Facebook and Instagram, (operated by Meta) and short form video platforms such as Tik Tok give small businesses simple and low-cost options to launch a new business or stay in touch with existing customers by establishing an online presence and providng a platform for them to engage with customers through low-cost, targeted advertising and partnerships with influencers.

However, this is a double-edged sword. Using social media platforms as the primary channel to attract new customers and connect with existing customers, introduces a range of risks that many small business owners have not considered, or feel powerless to address.

Risk, impact and mitigation

So, what are the risks to small business owners who rely on social media platforms, the impact, and the mitigation measures available.?

What is most at-risk is consumer trust due to a lack of transparency by the platforms.

Business owners, managers and their marketing agencies should take the ACCC’s report as a warning to improve transparency and disclosure of sponsored content, and make sure they comply with mandatory processes to prevent and remove scams and fake reviews.