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ACCC recommends significant reforms targeting digital platforms

This approach is closely aligned with proposed reforms in the UK, under which platforms which are designated as having 'strategic market status' are bound by conduct requirements designed specifically for that platform. Similarly, changes to the German Competition Act empower its competition authority to designate platforms 'of paramount significance for competition across markets', and then 'activate' certain provisions to prevent these platforms from engaging in ant-competitive practices.
The EU’s Digital Markets Act applies to designated 'gatekeepers' which provide 'core platform services', such as online intermediation services, online search engines and online social networking services. However, unlike the more targeted approach proposed in Australia and the UK, designated gatekeepers across all these services are subject to the same set of obligations which are set out in primary legislation. Japan's law on Improving Transparency and Fairness of Digital Platforms has a similar effect.
Proposed reforms in the US are to be implemented across multiple different pieces of legislation, including the Platform Competition and Opportunity Act, the Augmenting Compatibility and Competition by Enabling Service Switching Act (ACCESS Act), the Ending Platform Monopolies Act, the American Innovation and Choice Online Act, and the Open App Markets Act. While these bills differ in their design, a number of them apply to platforms designated by the FTC as a 'covered digital platform'.

Designation process

The ACCC has proposed that a platform could be designated based on quantitative criteria (eg the number of monthly active Australian users or revenue), qualitative criteria (eg the platform's position as an intermediary, its market power and the number of related services it provides), or a combination of both.
The EU Digital Markets Act provides for the designation of 'gatekeepers' based primarily on quantitative criteria, including revenue and number of monthly active users. However, a firm which does not meet this criteria may still be designated by the European Commission as a gatekeeper, based on the consideration of qualitative criteria. Similarly, proposals in the UK and US rely on quantitative criteria relating to active users, and revenue (which is also included in the criteria proposed in Japan).
The ACCC considers that qualitative criteria for designation could include whether a platform 'occupies an important intermediary position'. This would align with approaches overseas, including in the US (where 'covered platforms' are described as 'critical trading partners') and the UK (where designation focusses on whether the platform has a 'strategic position').

Obligations to be introduced

The ACCC suggests that the codes to apply to each service should be developed in line with high-level principles to be set out in primary legislation, which should focus on promoting: (i) competition on the merits; (ii) informed and effective consumer choice; and (iii) fair trading and transparency for users of digital platforms.
This is similar to the approach in the UK, where 'fair trading,' 'open choices' and 'trust and transparency' have been proposed as three objectives which might be included in legislation to guide the development of conduct requirements to be applied to firms designated as having SMS.
On the other hand, reforms in other jurisdictions, including the EU, the US and Germany, provide for primary legislation to set out more targeted obligations, rather than high-level principles which will guide the development of targeted obligations to be enforced under alternative instruments.
However these obligations are enforced, the areas which the ACCC has proposed as important to address are largely consistent with the approaches in other jurisdictions.

For example:

Measures to address self-preferencing are included in the EU Digital Markets Act and the 10th Amendment to the German Competition Act. Self-preferencing conduct has also been identified as something the UK Government’s proposed pro-competition regime for digital markets would be able to address through conduct requirements.

Measures to address tying conduct are included in the EU Digital Markets Act and the 10th Amendment to the German Competition Act. Tying conduct has also been identified as something the UK Government’s proposed pro-competition regime for digital markets would be able to address through conduct requirements.

The EU Digital Markets Act includes requirements to display choice screens for search, browser and virtual assistant services, as well as requirements to allow users to un-install pre-installed apps. The UK Competition and Markets Authority (CMA) has recommended that the Digital Markets Unit have the power to implement choice screens under the UK Government’s proposed pro-competition regime for digital markets.

Measures to address such conduct are included in the EU Digital Markets Act, which requires that gatekeepers must not restrict (technically or otherwise) the ability of end users to switch between, and subscribe to, different apps and services to be accessed via its core platform services. Measures to allow app developers to communicate with consumers are also included in the Digital Markets Act and are within the scope of the UK Government’s proposed pro-competition regime for digital markets.

The EU Digital Markets Act includes measures requiring gatekeeper digital platforms to allow competing service and hardware providers to have effective interoperability with the same OS, hardware or software features as their own services or hardware, for free. The Digital Markets Act also prohibits gatekeepers from mandating the use of a particular browser engine. In addition, the UK CMA recently proposed potential interventions for mobile ecosystems to allow access for third-party app stores, browser engines and apps, subject to appropriate safeguards.

Transparency measures for digital platforms are a feature of the EU Digital Markets Act and laws in Japan. For example, like the ACCC's recommendations regarding Designated Digital Platforms to facilitate verification of ad performance, the EU Digital Markets Act requires gatekeepers to provide advertisers and publishers with access to the gatekeeper’s performance-measuring tools and data. Measures are also being considered for inclusion in the UK Government’s proposed pro-competition regime for digital markets.

Requirements on gatekeepers to share ‘click-and-query data’ are included in the EU Digital Markets Act and have been considered for inclusion in the UK Government’s proposed pro-competition regime for digital markets. Further, data limitations are already being implemented for Google’s ad tech services in response to the UK CMA's investigation into Google’s Privacy Sandbox.

The EU Digital Markets Act includes protections around the ability of business users to raise a digital platform’s non-compliance with EU or national laws with authorities. Europe’s Platform to Business Regulation seeks to address the superior bargaining power of online platforms, which enables them to behave unilaterally to the detriment of business users and consumers. Unfair app review processes and discriminatory terms, conditions or policies have also been identified as something the UK Government has proposed to address, consistent with the high-level objective that the regime promotes a fair-trading, pro-competition regime for digital markets.

The EU Digital Markets Act prohibits gatekeeper platforms from preventing business users from offering their products or services through third-party online intermediation services or through their own direct online sales channel at prices or conditions different to what they offer through the gatekeeper’s own services.

An economy-wide prohibition against unfair trading practices

Multiple jurisdictions (including the EU, UK, US, Canada and Singapore) already have general or specific protections against unfair trading practices. For example:

The EU Unfair Commercial Practices Directive contains three tiers of unfair commercial practices prohibitions, including material distortion or likely distortion of the economic behaviour of the average consumer with regards to the good or service or is contrary to the requirements of professional diligence; and
The US prohibits unfair or deceptive acts or practices in or affecting commerce.

Mandatory processes for scams, harmful apps and fake news

The ACCC recommends that digital platforms should be required to provide a way for individuals and entities to notify the platform about suspected scams, harmful apps and fake reviews and that platforms must promptly act in response to these reports.

In the EU, the Digital Services Act will require all providers of hosting services, including online platforms, to put mechanisms in place to allow any individual or entity to notify them of suspected illegal content on their service (including scams). Providers must make a decision about the content of the notice in a timely, diligent, non-arbitrary and objective manner, and must notify the reporting person of its decision and provide information about redress possibilities in respect of the decision.

In the UK, the draft Online Safety Bill (before the House of Commons at the time of writing) will require providers of regulated user-to-user and search services to operate their services using proportionate systems and processes designed to address illegal content, with a particular provision targeted specifically at scam ads. This includes a requirement that where a provider is alerted to the presence of such content, they must swiftly take it down.

The ACCC recommends that digital platforms should be required to take steps to verify the identity of certain business users, including advertisers, app developers and merchants, in order to minimise scams and harmful apps.

In the EU, the Digital Services Act's 'Know Your Business Customer' obligations require platforms that enable users to make distance contracts with traders to receive identity information from all traders, including: name, address, number, email, the trader's identification documentation, bank account details of the trader and appropriate registration details of the trader (where applicable).

Prior to enabling traders to use their services, platforms must make best efforts to assess whether the information received is reliable and complete.

The ACCC recommends that where platforms allow advertising of financial products and services (including crypto assets), they should take additional steps to verify the legitimacy of the advertiser and the product or service.

In the UK, the Financial Conduct Authority (FCA) issued a warning to digital platforms against hosting financial ads for unlicensed entities in June 2021. Advertisers are required to obtain FCA licensing before advertising financial ads.

The ACCC recommends that, where platforms show reviews and ratings of products or services, they should be required to provide users with information about whether the platform takes steps to help ensure that reviews are legitimate, and if steps are taken, what they are.

In the EU, all online traders are required to provide access to reviews as this is information that an 'average consumer needs to take an informed transactional decision'. Omission of this information is considered to be a misleading omission.

The ACCC recommends that digital platforms should be required to publish easily comprehensible reports on actions taken to prevent scams, harmful apps and fake reviews on their platforms.

The EU Digital Services Act contains stepped transparency reporting requirements for intermediary services, online platforms and very large online platforms. All three must publish easily comprehensible reports on content moderation undertaken and must include specific information such as: the number of notice-and-action notices submitted, actions taken pursuant to those notices, the proportion of notices processed using automated means, and the median time needed to process the notices. The reports must also include meaningful and comprehensible information about content moderation engaged in at the providers' own initiative. Online platforms and very large online platforms have additional reporting requirements.

In the UK, the Online Safety Bill proposes to require the Office of Communications to provide providers of user-user and search services with annual transparency notices, to which the provider must produce a report containing all the information in the notice. A non-exhaustive list of 30 matters about which information may be required is included in the Bill, including the incidence of illegal and harmful content on the platform, the number of users who are assumed to have encountered this content, and the systems and processes for users to report this content.

Mandatory internal dispute resolution processes and independent external ombuds scheme

In the EU, the Platform to Business Regulation (P2B) came into effect in July 2020, which required online intermediation services (including app stores, e-commerce and social media platforms) to provide an internal system for handling complaints of business users that is free, easily accessible and guarantees that complaints are dealt with in a reasonable time period. The system must be based on transparency, equal treatment for equivalent situations and treating complaints in a manner proportionate to their importance and complexity.

Also in the EU, the Digital Services Act requires providers of online platforms to ensure their internal complaint-handling systems are easy to access and user friendly. Online platforms are also required to handle complaints submitted in a timely, non-discriminatory, diligent and non-arbitrary manner.

In Japan, co-regulatory obligations have been introduced on specified digital platforms to develop systems and procedures for settling complaints and disputes.

The EU P2B Regulation introduced mandatory obligations for online intermediation services to identify two or more mediators in their terms and conditions that they are willing to engage in out-of-court dispute resolution, where an internal complaint-handling system was not able to resolve the issue.

Under the EU Digital Services Act, online platforms are required to implement out-of-court dispute settlement mechanisms. Online platforms captured by the Digital Services Act must also engage in good faith and are bound by the decisions taken by the external body.

UK: Competition and Markets Authority (CMA)

A new regime for digital markets has been proposed to address the market power of large digital platforms. A draft bill is expected to be introduced to parliament in 2024.
The regime will be administered by a new statutory Digital Markets Unit (DMU) within the CMA.
Certain firms would be designated as having Strategic Market Status, on the basis of whether the firm has substantial and entrenched market power which provides them with a strategic position in a designated digital activity.
Designated firms would then be subject to conduct requirements, and potential pro-competitive interventions required by the DMU, such as obligations regarding third-party access to data, software compatibility, access to operating systems/online marketplaces or operational or functional separation.

EU: European Commission (EC)

The Digital Markets Act (DMA) was approved by the European Parliament and Council in July 2022.
- The DMA will designate 'gatekeepers' which provide 'core platform services' (eg, online marketplaces, booking sites, search engines, and social networking services). It is expected that the first gatekeepers will be designated during 2023, and will then be required to comply with obligations and prohibitions six months later.
- A provider of a core platform service is designated as a gatekeeper if it meets criteria including:
  - it has a significant impact on the internal market of the EU;
  - it operates a core platform service that has over 45 million monthly active end users established or located in the EU and at least 10,000 yearly active business users established in the EU in each of the previous three financial years; and
  - it enjoys an entrenched position in its operations or will in the future.
- The DMA imposes various obligations and prohibitions on gatekeepers, including prohibitions on anti-steering provisions, requiring business users to use certain ancillary services, preventing business users from raising issues of-noncompliance with any EU or national laws, and self-preferencing, as well as obligations to allow apps to be uninstalled, default settings to be changed, and interoperability with hardware and software features.
- Under the DMA, the European Commission will be able to impose fines of up to 10% of a firm's annual turnover for the preceding year, or up to 20% for repeated infringements. In the case of systematic infringements, structural remedies and bans on certain acquisitions may also be imposed.
The proposed Digital Services Act (DSA) has also recently been agreed, and will apply (at the earliest) from 1 January 2024. It aims to better protect consumers and their rights online.
- The DSA will apply to all digital services that act as intermediaries in the EU, and establish three categories of platforms, with each category subject to different rules.
- The requirements under the DSA include mechanisms for flagging illegal content, the traceability of business users in online marketplaces, safeguards for users, bans on certain targeted advertisements, transparency measures, and internal complaint-handling systems.

Germany: Bundeskartellamt

In January 2021, the German Competition Act was amended.
Under the new provisions, Germany's competition authority, the Bundeskartellamt, is able to designate platforms of 'paramount significance,' and then prohibit these companies from engaging in anti-competitive practices.
Under these reforms, the Bundeskartellamt can intervene proactively to address anti-competitive practices of large digital companies, including where a company is self-preferencing or impeding competitors from entering the market by processing data relevant for competition.
Google, Meta and Amazon have already been designated under these provisions, and designation proceedings have been initiated for Apple.

US: Fair Trading Commission (FTC)

In June 2021, the US House Antitrust Subcommittee introduced several bipartisan bills to counter anti-competitive practices.
These bills apply to 'covered digital platforms' which are designated by the FTC based on whether the platform had at least 50 million US-based monthly active users or 100,000 US-based business users; a market capitalisation or net annual sales exceeding US$600 billion; and was a 'critical trading partner' for the sale or provision of products or services.
The Platform Competition and Opportunity Act prohibits acquisitions if the business activity enhances or increases the covered platform's market position or ability to maintain its market position.
The Augmenting Compatibility and Competition by Enabling Service Switching Act (ACCESS Act) aims to lower barriers to entry and switching costs by introducing interoperability and data portability requirements.
The Ending Platform Monopolies Act proposal prohibits ownership or control of a business which creates the ability for a platform to self-preference in a way that disadvantages competitors.
The American Innovation and Choice Online Act prohibits discriminatory conduct such as advantaging their own products or excluding business users providing similar products or services.
The Open App Markets Act prohibits certain app stores from requiring developers to use an in-app payment system owned or controlled by the company as a condition of distribution or accessibility. The proposal applies to a ‘covered company’, which owns or controls an app store with more than 50 million users in the US.

Japan Fair Trade Commission

The Act on Improving Transparency and Fairness of Digital Platforms enables the government to designate digital platform businesses as 'specified digital platform providers'.
Designated providers are required to disclose their terms and conditions, develop procedures and systems for dispute resolution, and submit yearly reports on their operations and compliance and undertake self-assessments.
Amazon, Google, Apple, Yahoo and ecommerce platform Rakuten have been designated.

South Korea

The proposed Act on Fair Intermediate Transactions on Online Platforms (Online Platform Act) applies to online marketplaces, app markets, ride sharing apps and price comparison sites. It seeks to address unfair contracts that contain unfavourable terms between platform providers and business users.
An amendment to South Korea’s Telecommunications Business Act, passed in August 2021, prevents application market operators such as Apple and Google from requiring app developers to use their billing system for in-app purchases.
Under the Monopoly Regulation and Fair Trade Act, changes to the merger notification thresholds mean companies operating social media or digital content services with at least one million monthly users or significant research and development activities in South Korea will be required to report any deals with a transaction value of above ₩600 billion (around A$694 million).

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