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One of the most pressing challenges for governments around the
world is how to effectively regulate to prevent conduct by large
digital platforms such as Google and Facebook which is harmful to
competition and to consumers.
In February 2020, the Australian Government directed the ACCC to
conduct a five year inquiry into markets for the supply of digital
platform services. The Inquiry is examining consumer and
competition issues related to digital platforms, including a
consideration of whether Australia’s current competition and
consumer laws are sufficient to address identified issues.
The ACCC has so far published five interim reports. The fifth
report, which was released in November last year, focuses on
regulatory reform and provides recommendations on competition and
consumer issues identified by the ACCC since 2017, not only in the
current Digital Platform Services Inquiry but also in the earlier
Digital Advertising Services Inquiry (known as the Ad tech Inquiry)
and the ground-breaking Digital Platforms Inquiry.
Anti-competitive conduct
The ACCC’s most recent interim report, like other reports
that the ACCC has issued, notes that the large digital platforms
have substantial market power and significant financial resources.
For example, as at April 2022, the market value of both Apple and
Alphabet (the parent company of Google) each exceeded the total
annual gross domestic product of Australia in 2021.
Digital platform markets are typically characterised by one or
two firms dominating the market and high barriers to entry and
expansion. This means that dominant digital platform firms have the
ability and incentive to protect their market power, including
through exclusionary conduct and by acquiring potential rivals.
Conduct observed by the ACCC which is interfering with
competition includes self-preferencing, tying, exclusivity
arrangements, impeding switching, denying interoperability, and
withholding access to important hardware, software, and data
inputs. The ACCC is also concerned about a lack of transparency,
and the ability of digital platforms with market power to degrade
the quality of the services they offer, including the terms on
which services are provided to business users.
In addition, the ACCC notes the hundreds of acquisitions which
have been made by platforms such as Google, Meta, Apple, Microsoft
and Amazon, many involving emerging or potential competitors.
Inadequate consumer and small business protections
The ACCC interim report, again, consistent with other reports it
has issued since it commenced its Digital Platforms Inquiry in
2017, identifies the following potential harms to users of digital
platform services:
- A range of unfair trading practices, including presenting
choices to consumers in a manner that exploits consumers’
behavioural biases and undermines consumer choice; - A significant and sustained increase in scams on digital
platforms; - Harms from inappropriate and fraudulent apps that are made
available on app stores; - The practice of creating, buying and selling fake reviews and
otherwise engaging in review manipulation which distorts
competition in related markets and undermines trust in digital
platforms; - A lack of avenues for redress and dispute resolution.
New measures to protect consumers
The ACCC concluded that existing Australian competition and
consumer laws are not well-suited to addressing the range and scale
of consumer and competition harms it has identified in digital
platform markets. It recommends legislative reform to better
protect consumers and small businesses, and to promote trust and
confidence in the digital economy, as follows:
- Economy-wide consumer measures, including a prohibition against
unfair trading practices and unfair contract terms (though noting
that the recommendations on unfair contract terms have largely
already been implemented by the Australian Government). - Consumer measures specific to digital platforms, including
mandating internal and external dispute resolution processes, and
obligations on platforms to prevent and remove scams, harmful apps
and fake reviews. - A new competition framework which would subject designated
digital platforms to mandatory codes applying to the services they
provide. - Targeted competition obligations for designated digital
platforms to be included in the proposed new framework and codes,
to address harms such as anti-competitive self-preferencing.
Governance
The Treasury Consultation Paper also raises the issue of
governance and states that appropriate governance arrangements are
critical to any new regulatory framework. It is important that
responsibilities are allocated to the correct entities, taking into
account their expertise and accountabilities, and that the various
aspects of the regulatory process are subject to appropriate
oversight.
This raises the interesting issue as to the appropriate division
of roles between the ACCC, an industry-specific regulator such as
the Australian Communications and Media Authority, and Government
Ministers who are accountable to Parliament.
Consistency with international approaches
In the past, Australia has taken world-leading and innovative
action in the regulation of digital platforms, through the
implementation of the Mandatory News Media Bargaining Code,
requiring digital platforms to pay for news content. For the
proposed new regulation, the approach ultimately adopted by the
Australian Government is more likely to follow international models
than break new ground.
The European Union has adopted the Digital Markets Act, which
will address competition harms similar to those identified by the
ACCC, and the Digital Services Act, to address consumer protection
issues. The approach recommended by the ACCC is however based more
closely on the proposed UK model, which is intended to include
legislation as well as provide flexibility through the introduction
of binding conduct requirements and by enabling the UK regulator,
the Competition and Markets Authority, to implement pro-competitive
interventions, such as mandating interoperability requirements.
Guidance from the US would be helpful, given that most of the
dominant global platforms are incorporated there. To date,
notwithstanding a plethora of investigations and some enforcement
action taken by the Department of Justice and the Federal Trade
Commission, there has been no legislation passed by the US Congress
to specifically address digital platform competition and consumer
harms. As recently as 11 January 2023, President Biden urged the US
Congress to find common ground to regulate not only online privacy
but also to protect against harmful online content and to foster
tech sector competition.
The Treasury
Consultation Paper can be found here. Submissions close on 15
February 2023.
If you have any questions, please get in touch with
Ian Robertson and
Angela Flannery. Ian and Angela are Technology, Media and
Telecommunications partners of Holding Redlich, with extensive
regulatory and policy experience of Australia’s media and
communications industries.
This publication does not deal with every important topic or
change in law and is not intended to be relied upon as a substitute
for legal or other advice that may be relevant to the reader’s
specific circumstances. If you have found this publication of
interest and would like to know more or wish to obtain legal advice
relevant to your circumstances please contact one of the named
individuals listed.
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