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Australia antitrust regulator calls for new competition law for digital platforms

This is the seventh report published by ACCC as part of its five-year inquiry into markets for the supply of digital platform services in Australia.

The Australian Competition and Consumer Commission (ACCC) on November 27 called for new competition laws in response to the expansion of digital platforms like Amazon, Apple, Google, Meta and Microsoft into emerging technologies and other markets.

The competition regulator made this recommendation based on findings in its latest report on digital platform services. “The report examines the strategies of the five biggest digital platforms and finds that their expanding reach into our daily lives and livelihoods – via multiple interconnected products and services – is exacerbating risks of harms to competition and consumers,” the regulator noted.

This is the seventh report published by ACCC as part of its five-year inquiry into markets for the supply of digital platform services in Australia and their impacts on competition and consumers. This report focuses on smart home devices and consumer cloud storage.

“The continued expansion of digital platforms has also increased the risk of those platforms engaging in harmful behaviour, such as invasive data collection practices and consumer lock-in practices that can reduce choice and stifle innovation. Robust competition is critical for markets to function well.” — ACCC Chair Gina Cass-Gottlieb

The regulator is proposing targeted consumer protections and service-specific regulations to prevent anti-competitive conduct by designated digital platforms.

The Indian government is also working on a new competition law for digital platforms that is expected to adopt a similar approach of targeting specific large platforms with ex-ante regulations.

What are potential competition harms that ACCC wants to address?

  • Bundling, pre-installation, and defaults: “Digital platforms with significant market power can use practices like bundling or tying of products, pre-installation and default settings to limit customer choice or deter innovation from competitors.” The regulator took the specific example of cloud storage bundling to point out that “consumers may use a bundled cloud storage service even when there are more innovative or high-quality alternatives available to them” just because these services come embedded in products and services offered by large digital platforms.
  • Self-preferencing: Digital platforms hold a gatekeeper position between consumers and businesses. “For example, certain digital platforms can exercise control through self-preferencing – favouring their own products and services over competitors who rely on the platform to reach consumers.” ACCC took the example of how platforms engage in gatekeeping with voice assistants that are incorporated into smart home devices: “voice assistants like Google Assistant, Siri and Alexa may provide an opportunity for Google, Apple and Amazon to encourage users to favour their products and services to the detriment of rivals.”
  • Lock-in effect: “Coordination decisions, such as among families who use the same services to share files or photos, or lock-in effects arising from the cost and inconvenience of transferring files to a new service, can further deter consumers from switching to a different service.”

What are the harms to privacy?

ACCC also found faults with the data collection practices of digital platforms. As these platforms expand, “they have greater access to rich consumer data, which they can collect and use throughout their ecosystems of products and services,” the regulator noted.

“For example, Amazon, Apple and Google collect vast amounts of consumer data through smart home devices. It’s not always clear from the relevant privacy policies if the data collected exceeds that which is needed for device functionality or product improvement,” the regulator said.

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Role of digital platforms in developing emerging technologies

ACCC noted the role digital platforms play in developing emerging technologies. “The five largest digital platforms (Amazon, Apple, Google, Meta and Microsoft) are making substantial investments in research and development and buying smaller companies in areas such as generative AI and virtual reality to ensure they’re in strategically important positions in the developing digital economy.”

In light of this, the regulator noted that the country’s competition laws must be “fit-for-purpose to respond to the potential challenges posed by these technological and market developments.”

Recommendations

The competition regulator referred back to the regulations made in a previous report published in November 2022. This report suggested the following:

Recommendations to address competition issues: To address anti-competitive practices, the ACCC recommended service-specific codes of conduct that will apply to designated digital platforms. “This would ensure the obligations are appropriately targeted to particular competition issues present in specified digital platform services, allow consultation with stakeholders, and provide the flexibility to address emerging and new forms of harmful conduct,” ACCC Chair Gina Cass-Gottlieb said. These codes of conduct should include obligations to:

  • prevent self-preferencing, tying, and pre-installation arrangements
  • address data advantages
  • ensure fair treatment of business users
  • improve switching, interoperability and transparency.

Recommendations to address consumer harms: Noting the significant rise in scams, fake reviews, and fraud apps, on digital platforms, ACCC recommended that platforms must be required to:

  • provide an easy process for reporting scams, harmful apps, and fake reviews
  • verify certain business users such as advertisers, app developers and merchants to reduce the risk of scams
  • publish review verification processes to help users assess the reliability of reviews on the platform
  • report on measures taken to address scams, harmful apps, and fake reviews
  • ensure users can access dispute resolution.

You can access the full November 2022 report here for more details on these recommendations.

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