Competition in Digital Platform Services - ACCC Digital Platform Services Inquiry - No.5 Interim Report

On 28 February 2022, the Australian Competition and Consumer Commission (the “ACCC”) released a Discussion Paper for its fifth interim report as part of the five-year Digital Platform Inquiry.[1] The Paper considers whether Australia’s current competition and consumer protection laws (including merger laws) are sufficient to address the perceived harms identified in the Digital Platform Services Inquiry (DPSI). These included previous findings by the Commission that certain digital platforms had significant market power.

The paper raises issues of significance for technology companies in Australia, not only in relation to competition and consumer protection laws but also in the privacy space. Written submissions are open until 1 April 2022.

The Discussion Paper is underpinned by the ACCC’s previous findings[2] that certain digital platforms hold or are likely to hold significant market power across a number of digital platform services, including:

• Supply of general search engine services and search advertising;
• Supply of mobile operating systems, mobile app distribution and across the ad tech supply chain; and
• Supply of social media services and display advertising.

It also focusses on the broader range of consumer harms identified in the DPSI, including privacy and data issues. Accordingly, the issues in the Discussion Paper overlap to some extent with the issues arising in the current review of the Privacy Act 1988 (Cth), which is focussed on ensuring that privacy settings empower consumers, protect their data and best serve the Australian economy. Another area of overlap is with the draft Online Privacy Bill, which proposes a Code to be overseen by the Office of the Australian Information Commissioner and is intended to address some of the specific privacy concerns that arise from a lack of consumer awareness or control over digital platforms data practices. As at the date of this article, the draft Online Privacy Bill has not yet been introduced to Parliament.

The issues raised for consideration in the Discussion Paper include:

Is the CCA fit for purpose?

The ACCC considers that existing provisions of the CCA may be insufficient to address harms to consumers and competition arising from the large digital platforms' significant and entrenched market power due to its limitations of enforcement action and weak merger laws.

In particular, the ACCC identified a number of perceived constraints on enforcement action.

1. Investigations and court proceedings struggle to keep pace with the dynamic nature of digital platform services markets. There is a risk that the market power of digital platforms can be relatively quickly extended and/or entrenched while a case is still being investigated.
2. The ACCC can only address the harms that fit within the provisions of the CCA or the Australian Consumer Law. It struggles to deal with the breadth of conduct a digital platform with substantial market power can engage in.
3. Enforcement action does not adequately address the underlying causes of issues in digital platform services markets. While remedies are available for specific breaches, they cannot address the broader structural challenges such as barriers to entry, expansions and exit.
4. It is difficult for competition regulators to impose one-off penalties of sufficient scale to deter very large global platforms from engaging in similar conduct in the future.

The ACCC also restated its concerns about the current merger laws. Currently, merger parties are not required to notify the ACCC ahead of completing a transaction, regardless of the transaction’s size or impact on competition. Many see this flexibility in the Australian regime as a good thing. However, the ACCC considers that it provides a “loophole” for big digital platforms to conduct anti-competitive mergers without sufficient supervision in Australia. The ACCC considers the current legal test for mergers is incapable of dealing with significant information asymmetries between the ACCC and merger parties and cannot prevent low probability/high impact acquisitions.

A New Regulatory Framework?

To address the potentially anti-competitive issues raised above, the ACCC proposes a new regulatory framework with tools to complement the current CCA with respect to digital platform services. In its view, that framework should consider:

In many ways the last of these options is the most interesting as it helps capture these intuitive similarities between the ‘gatekeeper’ aspects of big digital platforms and the bottleneck facilities of the 20th century.

Potential New Rules and Measures

The ACCC invites comments on a series of potential rules or measures. Many of which will be familiar for those who have considered the Ad Tech Inquiry – Final Report. These include:

Privacy and Data

As noted above, the ACCC is also concerned about additional consumer harms in the privacy and data space, which may arise from digital platform services, including:

• Excessive online tracking and data collection and a lack of transparency about what data is being collected, how it is being used and an absence of effective consumer control over that data.
• The use of ‘dark patterns’ (or choice architecture) which make it difficult for users to express their actual preferences or manipulate users into taking certain actions (for example, an interface which makes it quick and easy for consumers to sign up to a free trial, but difficult or unclear how to navigate the interface to cancel subscriptions).
• Increased prevalence of online scams, harmful apps and fake reviews.
• A lack of transparency regarding the data practices of digital platforms (for example in respect of their search algorithms and featured editorials) and the supply of ad tech services.
• A lack of choice for consumers in respect of joining particular digital platforms (including those which do not ensure they meet their users’ privacy preferences) and accepting non-negotiable terms of service.
• Conduct which is harmful to users but not expressly prohibited under Australian laws including the collection or disclosure of consumer data without express informed consent, the failure to comply with reasonable data security standards, the inducement of consent or agreement from consumers to data collection and use through the use of long and complex contracts or “all or nothing” click-wrap consents, the provision of insufficient time or information that would enable consumers to properly consider agreement terms, and the dissuasion of consumers exercising their contractual or other legal rights.
• A lack of effective redress for complaints and disputes arising on digital platforms.

The Discussion Paper identifies a range of potential measures to address these privacy and data-related harms, including:

• Implementing the changes proposed by a recent Federal Government bill to prohibit the use of unfair terms in consumer contracts, as opposed to merely rendering them voidable.
• Increasing data access in the supply of digital platform services in Australia.
• Introducing data limitation measures which would limit data use in the supply of digital platform services in Australia.
• Imposing additional obligations on digital platforms to:
  • monitor their app marketplaces for malicious or exploitative apps and block or remove them from being displayed to users;
  • manage the harms associated with the prevalence of fake online reviews;
  • notify and/or provide redress to users who have been exposed to harmful content identified on their platforms;
  • implement systems and processes that proactively prevent the distribution of online scams and malicious apps to their users, such as verification of advertisers; report regularly to relevant regulators and law enforcement agencies;
  • require that information be provided regarding the operation or outcomes of key algorithms for regulators, researchers, and stakeholders;
  • impose prior notice requirements in respect of significant changes to key algorithms;
  • require independent verification of the performance of key algorithms, and
  • require that information be provided regarding how digital platform services use data to provide their services.
• Increasing ACCC scrutiny to better understand the prevalence and characteristics of dark patterns, along with guidance for businesses on how consumer laws apply to dark patterns;
• Increasing transparency including in respect of price, the operation of key algorithms or policies and key terms of service; and
• Introducing minimum internal dispute resolution standards, an independent complaints ombudsman to resolve complaints between digital platforms/consumers and digital platforms/businesses and any additional rules necessary to improve accountability and transparency (e.g. decision review mechanisms, requirements for staff based in Australia to handle and resolve disputes).

What’s next

The ACCC appears open to the type of framework or the potential measures that could be introduced to address the competition issues that it has identified. It will be for industry, whether the platforms themselves or those who interact with platforms, to determine the direction of the interim report (and ultimately the shape of reform).
Our competition team, headed by Thomas Jones and our privacy partners Sophie Dawson and Julie Cheeseman have worked extensively on the converged data, privacy and competition issues which are at the forefront of the Australian regulatory landscape at the moment. We also have access to the deep expertise of our international counterparts who advise on these issues. Should you wish to discuss the Discussion Paper further, please feel free to contact us.

[1] The Digital Platform Services Inquiry is a five-year project between 2020 and 2025.

[2] Such findings have been made in both the Digital Platforms Inquiry Final Report and the Ad Tech Inquiry – Final Report