Thursday, February 29, 2024

ACCC Calls for New Competition Laws to Cover Digital Platforms

The continued expansion of Amazon, Apple, Google, Meta, and Microsoft into emerging technologies and other markets demonstrates the critical need for regulatory reform, the ACCC has found in its latest report.

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 report, which is the seventh in the Digital Platform Services Inquiry, uses smart home devices and consumer cloud storage as examples to explore the impacts of the expansion of digital platforms into different products and services.

“We know that online products and services offer many benefits for consumers and businesses. The significant investments made by digital platforms to develop new technologies are having a transformative effect on our society and economy,” ACCC Chair Gina Cass-Gottlieb said. “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. As the digital economy evolves and the ecosystems of digital platforms continue to expand, we must be equipped with the appropriate regulatory tools to ensure effective competition in these markets,” Ms Cass-Gottlieb said.

“This report is further evidence supporting our earlier recommendations that we should update our competition and consumer laws to ensure consumers and businesses continue to benefit from the opportunities created by digital platform services. Our proposed reforms include a call for targeted consumer protections and service-specific codes to prevent anti-competitive conduct by particular designated digital platforms.”

Digital platforms have expanded beyond their original core offerings (for example, in search and social media) to other markets including generative AI, digital health services, information storage, education, and financial products. Their reach now involves products and services in many markets and multiple touch points with consumers and businesses.

“Australians increasingly use digital platforms for work, study and play and can benefit from their wide range of interconnected products and services. While the size and scale of digital platforms alone does not raise concern, there is a risk that this expansion may be driven by a desire from digital platforms to entrench or extend their market power,” Ms Cass-Gottlieb said.

The ACCC has not made specific findings of anti-competitive conduct in this report but considers that when a digital platform service provider has significant market power in one or more markets, certain behaviours have a higher risk of harming competition.

Potential competition harms include practices like bundling or tying of products, pre-installation and default settings to limit customer choice or deter innovation from competitors.

Consumer cloud storage is commonly embedded within digital platform operating systems, devices and productivity suites and in some cases is no longer available as a standalone product. Consumers may use a bundled cloud storage service even when there are more innovative or high-quality alternatives available to them.

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.

“Integrated cloud storage services can be convenient for consumers, but they can also discourage consumers from purchasing new products and services outside the ecosystem. This makes it harder for competitors who offer standalone services to compete and potentially stifles the development of innovative products,” Ms Cass-Gottlieb said.

When a digital platform holds a crucial ‘gatekeeper’ position between consumers and businesses, it has the opportunity and incentive to harm competition. 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.

Some digital platforms have expanded into new gatekeeper roles with voice assistant technology that is 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.

The ACCC also finds that as digital platform service providers expand, they have greater access to rich consumer data, which they can collect and use throughout their ecosystems of products and services.

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.

As digital platforms create products and services in other sectors, consumers face the risk of losing control over their data.

“Consumers who use multiple products from a single digital platform may be forced to agree to unfavourable terms and conditions and/or accept unpalatable data collection practices due to a lack of suitable alternatives or because it is simply too inconvenient or costly to move out of that ecosystem,” Ms Cass-Gottlieb said.

The report also considers the role of digital platform providers 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.

“The critical role digital platform service providers have in the development of new technologies like artificial intelligence and cloud computing demonstrates their importance to the Australian economy, now and in the future,” Ms Cass-Gottlieb said.

“It is also further evidence that we need to ensure our competition laws are fit-for-purpose to respond to the potential challenges posed by these technological and market developments.”

The ACCC’s Digital Platforms Branch is conducting a five-year inquiry into markets for the supply of digital platform services in Australia and their impacts on competition and consumers, following a direction from the Treasurer in 2020. The ACCC reports to the Treasurer every six months and examines different types of digital platform services.

Responding to the ACCC’s report, Minister for Communications, Michelle Rowland, said in a statement, “The Government recognises the extensive work by the ACCC throughout the Digital Inquiry, and agrees that stronger measures are warranted to protect consumers and businesses from harms on digital platforms.”

In the report, the ACCC observed that “Australian consumers and small businesses often find it hard to achieve quick and easy resolution of complaints and disputes with digital platforms.” They highlighted the suspension or termination of a user’s accounts, and scam content, harmful apps and fake reviews as areas where disputes can arise.

“As a result,” said Minister Rowland, “further work will be undertaken by Treasury and the Department of Infrastructure, Transport, Regional Development, Communications and the Arts, to consider options to improve the dispute resolution processes available to users of digital platforms. As a first step, the Government is calling on members of the digital platforms industry to develop voluntary internal dispute resolution standards by July 2024.

“The ACCC also presented a strong case for the development of a new ex ante digital competition regime to address anti-competitive behaviours of certain digital platforms. Treasury will consult on the design of a potential ex ante digital competition framework in 2024.”

Visit https://www.accc.gov.au/

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