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In brief

On 28 February 2022, the Australian Competition and Consumer Commission (ACCC) opened a public consultation on options for legislative reform to address concerns relating to the perceived dominance of certain digital platform services in Australia.

The consultation discussion paper outlines options for addressing potential perceived harms to competition, consumers, and business users across a range of digital platform services markets, such as the social media, search, app, online retail and ad tech markets. The ACCC seeks stakeholder views on the need for further regulatory tools to address competition and consumer issues in the digital platform services market, as well as potential options for regulatory reform.


Contents

  1. Key takeaways
  2. In depth

The many significant proposals in the paper include:

  • algorithm transparency obligations;
  • prohibitions on so-called “dark patterns” in platform design; and
  • a tailored merger control regime for certain digital platforms.

Submissions to the consultation are due by 1 April 2022, and these will inform the ACCC’s fifth interim report in the Digital Platform Services Inquiry, which is due by 30 September 2022.

This is an important opportunity for stakeholders to have their views heard and potentially influence the direction of future regulatory reform.

Key takeaways

  • The reforms proposed in the discussion paper are broad-reaching, and, if implemented, have the potential to significantly affect numerous digital platforms and services.
  • Companies should look at how the potential reforms may impact their ability to collect and leverage data, as well as the scope for the proposals relating to consumer protection, fair dealings and transparency to require substantial changes to internal operations and processes.
  • Companies should also examine the proposed changes to merger controls and related proposals, as those reforms could significantly affect how digital platforms approach acquisitions and deal with associated regulatory risks.

In depth

Background

Since the ACCC completed its Digital Platforms Inquiry 2017-2019, it has been focused on investigating specific competition and consumer issues relating to digital platforms. In that regard, it has conducted a number of related “spin-off” inquiries such as the Digital Advertising Services Inquiry and Digital Platform Services Inquiry 2020-2025. The ACCC’s discussion paper on updating competition and consumer law for digital platform services published on 28 February 2022 represents a key milestone, and approximately the halfway point, in the inquiry, and is an important signifier of the direction the ACCC is aiming to take platform regulation.

Overview of discussion paper

As an overview, the ACCC recaps the regulatory and market status quo, relevant feedback it has received and concerns it has identified regarding digital platforms’ influence on competition and consumers and the state of regulation in Australia, before asking whether there is a need for a new regulatory framework to address those concerns in digital platform markets, and what shape such a framework should take.

Key aspects of the paper are contained in Chapters 7 and 8 which consider the available regulatory tools that could be used to implement reform, and detail potential rules and measures that could be introduced as part of any new framework. We look briefly at highlights from these chapters below.

Chapter 7: Available regulatory tools to implement potential reform

Chapter 7 seeks views on the merits of different regulatory tools that could be adopted under a new regulatory framework, with options including:

  • prohibitions and obligations contained in legislation
  • the development of code(s) of practice
  • the conferral of rule-making powers on a regulatory authority
  • the “reactive” introduction of pro-competition or pro-consumer measures following a finding of a competitive or consumer harm
  • the introduction of a third-party access regime that would open up platforms’ data and/or services.

Chapter 7 also notes that different measures might apply to different platforms depending on what issues those measures are seeking to address. For example, a measure seeking to address the consequences of entrenched market power might only apply to large digital platforms perceived to have persistent market power. This section of the paper also suggests there may be scope for allowing measures to be tailored to the specific business models of relevant digital platforms, such as where the supposed harm to be addressed is associated with only a few digital platforms.

In Chapter 7, the ACCC also seeks views on the benefits, risks and costs of the application of its proposed regulatory tools, as well as any other approaches that could suit its objectives. Although the paper’s tone does suggest that the ACCC is keen on implementing a new framework in a “big bang” fashion, the ACCC is open to alternative approaches; it asks for feedback on a staged approach whereby specific harms could be addressed on an “as needed” basis as and when they are identified, similar to the approach taken with the News Media Bargaining Code.  

Chapter 8: Potential new regulatory measures for digital platform services

In Chapter 8, the ACCC starts from the premise that there is a definite need for new regulation in the ad tech and general search services markets, but asks for stakeholders’ views of the pros and cons of further regulation in other digital platform services markets, such as social media, online private messaging and electronic marketplaces. Chapter 8 also examines which data access and limitation measures are the most appropriate and effective for different types of digital platform services and data. However, the bulk of Chapter 8 focuses on the range of potential new regulatory measures for digital platform services:

  • Further action to prevent anti-competitive conduct by digital platforms: the ACCC proposes to prohibit exclusionary conduct in the digital platform services market, including anti-competitive self-preferencing and leveraging. This could potentially extend to imposing positive obligations to deal with competitors, and provide them with access to key inputs in a non-discriminatory manner. The ACCC also suggests that, wherever possible, digital platforms should have to give third-party apps access to device hardware or operating system features on a comparable basis to its own apps, in order to enhance service interoperability.
  • Measures to address perceived digital platform data advantages: the ACCC proposes new measures aimed at increasing access to data, including mandating or promoting data portability and interoperability (subject to consumer and privacy considerations). Notably, it suggests that data portability measures could involve mandating that digital platforms action consumer requests for data transfer and permit the use of third party data export tools. Specific sectors could be exposed to additional data access requirements. The ACCC also seeks views on other potential measures, including data sharing, data pooling and mandatory data access arrangements and the possible introduction of data banks, as well as data limitation and/or separation requirements for incumbents.
  • Enhanced consumer protection measures in the supply of digital services: as well as reiterating its support for an economy-wide prohibition on unfair trading practices, the ACCC advocates for additional obligations for certain digital platforms to protect consumers from harm from online scams, harmful apps and fake reviews. This could involve a range of operational obligations such as notifications and redress for affected consumers, and regulatory reporting. Other measures discussed include proactive checks on websites or apps to identify breaches, consumer awareness and digital literacy measures, and enhanced dispute resolution processes. A particularly interesting point is the recommendation to prohibit so-called “dark patterns” in the design of some digital platform services that the ACCC considers manipulate users into certain selections or behaviour.
  • Requirements to promote fair dealings between digital platforms and their business users: borrowing the concept of platforms as gatekeepers from European discourse, the ACCC argues for specific fair trading obligations for digital platforms, for example by prohibiting restrictions on business users that unreasonably restrict access to consumers or that restrict such users from offering different promotions or discounts to consumers outside the platform environment. The ACCC also continues to recommend that digital platforms should be subject to minimum internal dispute resolution standards and an independent ombudsman scheme for user complaints, but also now advocates for additional rules, including obligations to have local dispute resolution teams or have certain review mechanisms in place for account terminations and suspensions.
  • Increased transparency in relation to digital platform services: the ACCC is considering imposing additional transparency requirements, including in respect of price, the operation of key algorithms and policies and terms of service. Most significantly, algorithm transparency requirements could involve obligations to:
    1. provide certain information or data regarding the operation or outcomes of key algorithms to regulators, researchers, and stakeholders
    2. give prior notice of significant changes to key algorithms
    3. arrange independent verification of the performance of key algorithms
    4. provide information regarding how digital platforms use data to provide their services
    5. keep certain records about algorithm operation, which could potentially be used for public and market information purposes.
  • Additional scrutiny of digital platforms’ acquisitions: the ACCC has long campaigned for reform of Australia’s merger controls and in this paper it reiterates its economy-wide proposals for a reform package, but goes on to explore the potential for a tailored merger regime specifically for certain large platforms who fulfil “relevant criteria” (“In Scope Platforms“). The paper considers that any such regime would:
    1. involve as-yet unspecified bespoke notification requirements
    2. apply a lower probability of competitive harm threshold to acquisitions by In Scope Platforms, or alternatively adopting a “balance of harms” approach (as has been mooted by experts in the United Kingdom)
    3. either:
      • – reverse the onus of proof such that In Scope Platforms would not be able to obtain merger clearance unless the ACCC is satisfied that the acquisition is not likely to substantially lessen competition, or
      • – introduce a rebuttable presumption that certain acquisitions by In Scope Platforms would result in competitive harm.
    4. similar to the economy-wide reform proposals, apply merger factors which focus more on the structural changes arising from an acquisition, and include factors relating to the loss of potential competitive rivalry and/or increased access to or control of data, technology or other significant assets
    5. include an enhanced “deeming” provision that would mean that certain acquisitions by In Scope Platforms are automatically treated as substantially lessening competition, e.g. where the acquisition will raise barriers to entry for rivals
    6. introduce stricter prohibitions on certain categories of acquisitions by In Scope Platforms e.g. businesses operating in the same or adjacent markets, or businesses that may allow the platform to extend, expand or entrench market power.

See the discussion paper for a full understanding of the issues and questions asked by the ACCC.

Review and respond now

The reforms suggested by the ACCC in the discussion paper have the potential, if introduced, significantly to affect digital platform service providers operating in Australia.

All firms with interests in the evolution of digital regulation should take note of this important consultation and consider advocating their position in a submission in response to the discussion paper. Submissions can be emailed to digit[email protected] by the ACCC’s deadline of 1 April 2022.

With thanks to Kirsten Foley (Paralegal) and Liz Grimwood-Taylor (Knowledge Lawyer) for preparing this alert. 

Author

Anne has been with Baker McKenzie since 2001. Prior to that, she spent four years with the Australian Attorney-General's Department/Australian Government Solicitor mostly working on large IT projects. In her time at Baker McKenzie, Anne has spent 18 months working in London (2007-2008) and more recently three years working in Singapore (2017-2020).

Author

Anne-Marie Allgrove is a partner in the Sydney office of Baker McKenzie. She is also the Global Chair of the Firm’s Technology, Media and Telecommunications Industry Group and Practice Group and is recognised in both Chambers and The Legal 500 as a leading individual.

Author

Toby Patten is a partner in Baker McKenzie's Technology and Healthcare teams in Melbourne. He joined the Firm in March 2005.

Author

Georgina Foster is a partner in Baker McKenzie's Sydney office and leads the Firm’s Australian competition practice.

Author

Lynsey Edgar is a partner in Baker McKenzie's Sydney office, specialising in competition and consumer law.  She has a reputation for combining technical excellence with strategic commercial advice.

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