Competition law reform

Harms observed by the ACCC

• The ACCC found that some powerful digital platforms provide favourable treatment to their own services over those of third-party providers. This conduct can have an anti-competitive effect if it hinders rivals from competing with the platform based on merits. For example, a firm with market power can leverage its position to reduce the discoverability of rivals, raise rivals' costs, prevent competitors from innovating and utilise non-public data to free-ride off others' innovation.
• The ACCC is concerned about self-preferencing conduct by:
  • app store providers in their treatment of third-party app developers;
  • search providers in their treatment of third-party content in search results; and
  • ad tech providers in their treatment of third-party ad tech providers.

ACCC's recommendation

The ACCC has recommended that service-specific codes should include targeted obligations to address anti-competitive self-preferencing. For example:

• Code for search engines that prohibits Designated Digital Platforms from favouring their own products and services in ranking, indexing and crawling.
• Code for app store services that prohibits Designated Digital Platforms from favouring their own apps in app store search result rankings and prohibits commercially sensitive data collected from app review processes being used by Designated Digital Platforms to develop their own apps (data separation requirements).
• Code for ad tech services that prohibits Designated Digital Platforms from favouring their own ad tech services over ad tech services supplied by third parties.

Measures could also mandate data separation between the information a digital platform collects in its role as an intermediary and its role as a rival in a related market.

Harms observed by the ACCC

According to the ACCC, some digital platforms with market power are entering into exclusive pre-installation and default agreements that may result in anti-competitive effects. For example, the ACCC considers that exclusive pre-installation and defaults can restrict competition in respect of various services and benefit incumbent providers as consumers tend to stick with the default or pre-installed service. In particular, the ACCC believes these arrangements can heighten barriers to entry and expansion in search, app stores and downstream app markets.

ACCC's recommendation

The ACCC has recommended that service-specific codes should include targeted obligations to address exclusive pre-installation and default agreements. For example:

• Code for search services that prohibits Designated Digital Platforms from entering into pre-installation arrangements that are exclusive.
• Codes for mobile OS services or app store services that requires Designated Digital Platforms to allow consumers to delete or uninstall certain pre-installed apps, and to change default settings to a third-party service.
• Code for search services that requires Designated Digital Platforms to provide choice screens in respect of specific services that act as ‘search access points’.

Harms observed by the ACCC 

The ACCC is concerned that some digital platforms with market power are restricting or frustrating consumer switching, including by designing user interfaces that discourage users from switching services (eg- changing the default search service) and using contractual clauses to limit business users' ability to inform consumers about alternative payment options (eg- Apple and Google in the provision of app-store services). It has found consumer inertia, switching costs and a platform’s interface design can increase consumer lock-in, often to the incumbent’s advantage.

ACCC's recommendation

The ACCC has recommended that service-specific codes should include targeted obligations to address conduct that impedes switching. For example:

• Codes for search services, mobile OS services or app store services could prohibit Designated Digital Platforms from using dark patterns to restrict a consumer's ability to change defaults and switch to alternative services.
• Code for app store services could prohibit Designated Digital Platforms from restricting an app developer's ability to communicate with consumers about alternative payment options.

The ACCC has stated that, in addition to these examples, other options for promoting switching could also be considered, including a potential requirement on Designated Digital Platforms to provide sufficient APIs to enable consumers to switch between mobile OS (or other ecosystems) and to transfer app purchases and subscriptions between app stores. This is as well as obligations for digital platforms that provide cloud services.

Harms observed by the ACCC 

The ACCC observed that access to high-quality data can be a source of competitive advantage where data is a vital input and can increase barriers to entry where there is a lack of access to such data. Measures that facilitate data transfer, such as exporting data from one service to another at a consumer's request, can lower switching costs and lessen lock-in effects, whereas a lack of access to data can create substantial barriers to entry and expansion.

The ACCC found that data-related barriers limit competition in search and ad tech services. For example, it found that a lack of access to 'click-and-query' data, which is necessary to train search algorithms, is limiting the capacity for rival search services to compete with Google Search and presents a substantial barrier to entry and expansion in the supply of search services.

The ACCC also found that some digital platforms also have significant data advantages and can engage in conduct to improve their competitive advantage by, for example, accessing sensitive data in relation to their rivals. For example, the ACCC observed that in some cases, app marketplace operators can utilise their data advantage to enhance their competitive advantage.

ACCC's recommendations

The ACCC has recommended that service-specific codes should include targeted obligations to address data-related barriers to entry. For example:

• Code for search services that would require Designated Digital Platforms to share certain types of click-and-query data and facilitate data portability for this data.
• Code for ad tech services that would require Designated Digital Platforms to share third-party data and facilitate data portability for this data, or impose data limitations on a Designated Digital Platform.
• Code of conduct requiring Designated Digital Platforms to share first-party data subject to data-related competition issues.

The ACCC also recommended:

• Data portability requirements to allow consumers to request that their data be transferred to them or a third-party from a Designated Digital Platform. It referred to the models for data portability incorporated by the Consumer Data Right (Australia), General Data Protection Regulation (EU) and Digital Markets Act (EU).
• Privacy and security risks be appropriately managed when introducing data portability and access obligation measures.
• Data access requirements requiring Designated Digital Platforms to provide access to specific data sources to rivals on an agreed basis.
• To address an ad tech provider's data advantage, the ACCC recommends data separation measures—this may level the playing field between, and minimise the potential for, self-preferencing conduct.

The ACCC considers that increasing data portability and access could result in more competition by reducing barriers to entry, addressing the competitive advantage of large digital platforms and encouraging innovation and development. 

However, the ACCC acknowledged careful consideration would need to be given to ensure any measures safeguard consumers’ privacy. It noted the following considerations:

• Obligations to increase data access would need to be underpinned by mechanisms that enable consumers to make informed decisions about whether their data can be used for this purpose or should otherwise incorporate safeguards to promote privacy and minimise privacy risks.

• Data-access obligations should not be considered for inclusion in any code until after the introduction of any privacy law reforms that result from the Review of the Privacy Act.

Harms observed by the ACCC 

The ACCC found that where digital platforms that offer intermediary services hold market power and control access to a business user’s target market, these business users may have no option other than to make their products or services available on that digital platform. As a result of this market power, the ACCC is concerned that business users may have no choice but to accept the platform’s standard terms of service even if they are unfair, unreasonable or give rise to significant risks to profitability.

In particular, the ACCC is concerned about such conduct by app stores arbitrarily applying app-review policies, applying restrictive terms and conditions for access to app stores (eg requiring business users to forfeit intellectual property and broad confidentiality clauses) and unilaterally varying terms of service without adequate notice or recourse for business users to contest changes. The ACCC has similar concerns for any intermediary services offered by a Designated Digital Platform.

ACCC's recommendations

The ACCC has recommended that service-specific codes should include targeted obligations on Designated Platforms to address contractual terms, conditions or processes that unreasonably and unfairly disadvantage business users of a Designated Digital Platform’s services. For example:

• Code for app store services could require Designated Digital Platforms to apply app-review processes fairly and consistently.
• Code for app store services, or any other code for an intermediary platform service, could require Designated Digital Platforms to:
  • Ensure that their terms and conditions do not unreasonably prevent business users from exercising or enforcing their legal rights; and
  • Address any significant and unwarranted deterioration in the terms of service due to a unilateral change made by the Designated Digital Platform.

The ACCC also continues to advocate for additional economy-wide protections in the Australian Consumer Law (ACL) to prohibit unfair trading practices and supports the new laws that have been passed, making unfair contract terms illegal and subject to penalties.

The ACCC considers that increasing transparency for app-review processes and removing unfair terms will be beneficial as it could increase app developers' incentives to invest in apps and app features and support a more level playing field. Transparency will assist in consistent decisions being made and remove unclear processes, which can delay the launch of apps and increase developers costs.

The targeted obligations recommended by the ACCC are intended to protect business users’ ability to access consumers through various channels and protect their ability to exercise or enforce their rights. They would also enable the relevant regulator to address changes to the terms and conditions that materially and adversely impact business users.