ACCC recommends new measures for digital platforms to address “significant” harms

On Friday 11 November, the ACCC released the fifth interim report for the Digital Platform Services inquiry.

The report considers competition and consumer issues identified in the course of the Digital Platform Services Inquiry, the ACCC’s Digital Advertising Services Inquiry and the original Digital Platforms Inquiry.

The ACCC has recommended a range of new ex-ante measures to address concerns about harms to Australian consumers, small businesses and competition. In addition to specific recommendations for digital platforms, the report also reiterates the ACCC’s support for the economy-wide expansion of unfair contract term laws and introduction of a general unfair trading practice prohibition.

The ACCC notes that these new regulatory recommendations are a significant but necessary complement to and expansion of Australia’s existing competition and consumer laws, and considers that these regulatory arrangements should be developed through close consultation with relevant Australian Government departments and agencies, and in co-operation with international regulators and first movers such as in the EU and the UK.

The ACCC has concerns about significant consumer and competition harms

The key concerns identified by the ACCC in its report include:

• financial losses to scams, harmful apps and fake reviews that persist despite app store review processes;
• inadequate dispute resolution processes leading to unresolved disputes;
• increased market concentration and instances of anti-competitive conduct;
• reduced choice and an inability to make informed choices;
• reduced innovation and quality; and
• higher (monetary and non-monetary) prices.

The ACCC considers that the conduct causing these harms is widespread, entrenched, and systemic and that current competition and consumer laws are not well suited to addressing these issues.

The ACCC considers new measures are necessary to protect consumers and promote trust and confidence

To address the ACCC’s concerns about consumer harms, the ACCC recommends new laws that require digital platforms to:

• provide user-friendly processes for reporting scams, harmful apps, and fake reviews, and to respond to such reports;
• reduce the risk of scams by verifying certain business users such as advertisers, app developers and merchants;
• publish review verification processes to provide important information to readers of online reviews to help them assess the reliability of reviews on the platform;
• report on scams, harmful apps and fake reviews on their services, and the measures taken to address them; and
• ensure consumers and small businesses can access appropriate dispute resolution, supported by the establishment of a new digital platform ombuds scheme to resolve disputes that cannot be resolved via internal dispute resolution processes.

These requirements would apply to platforms providing search, social media, online private messaging, app stores, online retail marketplaces and digital advertising services.

The ACCC considers that targeted, service-specific codes are required to address competition harms

The ACCC has recommended ex-ante regulation through mandatory service-specific codes designed to address anti-competitive conduct, unfair treatment of business users and barriers to entry and expansion that prevent effective competition in digital platform markets.

Codes should include targeted obligations to:

• prevent anti-competitive self-preferencing, tying and exclusive pre-installation;
• prohibit conduct that frustrates consumer switching;
• promote hardware and software interoperability;
• improve transparency (in particular in ad tech and app review processes).
• address data advantages by requiring targeted data portability, access, or separation measures, as appropriate; and
• ensure fair treatment of business users

These new measures would only apply to “designated” digital platforms. Designation may be based on quantitative (for example, using metrics such as numbers of monthly active Australian users of a platform’s service(s), and the platform’s Australian and/or global revenue) or qualitative (for example, whether the digital platform holds an important intermediary position, whether it has substantial market power in the provision of a digital platform service, and/or whether it operates multiple digital platform services) measures, or a combination of both.

The ACCC considers that economy-wide laws and ex-post enforcement are insufficient

In the ACCC’s view, the characteristics and dynamic nature of digital platform markets mean that enforcement of existing economy-wide competition laws is, on its own, unlikely to adequately protect and promote competition in these markets. In particular, enforcement through the courts is too slow to effectively address harms in these fast moving, opaque and complex services.

Summary of recommendations

Below is a diagram providing a summary of the ACCC’s recommendations to address consumer and competition harms: