Digital platforms set to face new competition regulation in Australia

The Australian Government has announced its intention to introduce obligations specific to digital platform services to address competition concerns previously raised by the Australian Competition and Consumer Commission (ACCC). However, in a move which departs somewhat from the Code-based approach initially recommended by the ACCC, the Government’s newly announced proposal would see broader obligations introduced into Australian competition law, to be applied to services provided by platforms “designated” by the relevant Minister, as well as service-specific obligations in subordinate legislation.

The Government has indicated that app stores and ad tech will likely be the first two services to be investigated for designation under the regime, but is also seeking views about whether to also designate social media as an initial priority area.

Failure to comply with the requirements would attract maximum penalties of up to A$50 million, three times the value of the benefit obtained, or 30% of adjusted turnover during the breach period, under the proposal.

The ACCC’s digital platforms concerns

The ACCC’s ongoing Digital Platform Services Inquiry (DPSI) has examined competition and consumer dynamics in a number of digital services, including private messaging, mobile app stores, retail marketplaces, social media services, and data products since 2020. The ACCC’s final DPSI report is due to be provided to the Federal Government in March 2025.

In November 2022, the ACCC released an interim report as part of the DPSI outlining its recommendations for regulatory reform to address the competition and consumer concerns it had identified. The ACCC’s central recommendation was for legally binding, service-specific codes of conduct, which would impose obligations on certain “designated” digital platforms.

At the time of the report’s release, ACCC Chair Gina Cass-Gottlieb observed that:

“Our analysis has identified concerning consumer and competition harms across a range of digital platform services that are widespread, entrenched, and systemic.

The critical positions that digital platforms hold, as ‘gatekeepers’ or ‘intermediaries’ between businesses and consumers, mean they have a broad influence across the economy, making the reforms we are recommending crucial and necessary for all Australians.”

The ACCC envisaged that the introduction of mandatory codes of conduct would address its concerns to improve consumer switching, information transparency and interoperability between different services, and to prevent anti-competitive self-preferencing,^[1] tying,^[2] and exclusive pre-installation arrangements identified by the ACCC.

In its interim report recommending the ex ante regulation of digital platform services in Australia, the ACCC drew heavily on regulatory reforms pursued or proposed in other jurisdictions to explain the basis for its recommendations, including most notably the European Union Digital Markets Act. Many jurisdictions have proposed some form of ex ante regulation to supplement existing ex post competition law enforcement.

In December 2023, the Government responded to the ACCC’s recommendations, supporting them in principle. Between December 2022 and February 2023, Treasury sought views on the ACCC’s recommendations and any associated regulatory reform in Australia, receiving 71 submissions .

The Government’s response to the Digital Platforms interim report and consultation questions

In a speech delivered yesterday, Assistant Treasurer Stephen Jones announced the Government had taken up the ACCC’s call for reform, although it is now proposing to legislate both broad, and service-specific, obligations for digital platform services rather than specifically taking up the ACCC’s recommendation for service-specific codes of conduct.

According to the Assistant Treasurer, the proposed framework would target anti-competitive behaviours, including:

• “where a platform preferences their own products unfairly” (self-preferencing);
• “where a platform forces consumers to buy one of their products to use another product” (tying); and
• “where a platform prevents consumers from switching to better alternatives”, including alternative payment methods (increased third-party interoperability).

The Government has proposed that amendments to the Competition and Consumer Act would establish overarching principles, the ability to designate identified digital platform entities in respect of a specific service, broad obligations, enforcement and compliance mechanisms, and a framework for making subordinate legislation with detailed obligations applying at the service-level.

Once a digital platform entity has been designated in respect of a specific service, the ACCC would be responsible for enforcing the obligations. That legislation would stipulate a list of digital platform services to be regulated under the new regime. The Proposal Paper for the reforms notes that the list of covered digital platform services “could substantially align with the types of ‘core platform services’ subject to potential regulation under the European Union’s Digital Markets Act”, including app marketplace services, social media services, search engine services, online private messaging services, web browsers, operating systems, and others.

Treasury is inviting consultation on a dual framework which would impose:

• broad obligations in primary legislation and include obligations targeting anti-competitive self-preferencing, tying, impediments to consumer switching, restrictions on interoperability, “unfair treatment of business users”, and transparency issues; and
• service-specific obligations in subordinate legislation (such as regulations), developed by the Government in consultation with the ACCC

and is seeking stakeholders’ views on:

• the general framework and scope of covered services;
• the priority services for designation;
• the designation process to ensure the regime is appropriately targeted;
• potential obligations that would apply to designated platforms, and
• proposed enforcement and compliance mechanisms.

The obligations would apply to platforms “designated” by the relevant Minister, following an investigation conducted by the ACCC. The criteria for designation are intended to include quantitative thresholds (eg. Australian and/or global service-specific revenue, Australian and/or firm-wide revenue, the number of Australian users or business users for the service and/or the relevant entity’s market capitalisation) and qualitative factors, including the degree of market power held by the digital platform in the relevant service. Again, this is similar to the thresholds which apply in Europe under the Digital Markets Act.

The ACCC would oversee compliance with the new framework. Treasury is considering whether affected platforms should be able to seek merits review of decisions under the regime (either designation, or enforcement, decisions). Treasury proposes that designation should apply for five years.

The Government has identified app marketplaces, ad tech and social media services as priorities for the implementation of service-specific obligations. The Government intends for these to be the first services to be “investigated for designation” under the proposed framework.

The Government has said that it hopes the proposed ex ante framework will “lead to more choice, lower prices and fairer outcomes for consumers” in digital markets.