Anti-competitive conduct by digital platform services has proved a major challenge for regulators, with the Australian Competition and Consumer Commission (ACCC) calling for new measures to address “systemic” competition and consumer harms that cannot, alone, be addressed under current laws and regulators’ current enforcement actions.
Further, analysis of digital platforms (which includes an array of online services, including retailer Amazon, tech companies Apple and Microsoft, search engine giant Google, and social media platforms Facebook and Instagram, both owned by Meta), and their services over the past six years has raised concerns over conduct that the ACCC believes is “anti-competitive, reduces innovation and harms consumers”.
The competition watchdog said that the harm in digital platform markets was higher compared to other sectors in the economy due to their unique position as intermediaries between consumers and businesses. Moreover, their expansive ecosystems effectively serve to “lock in” users to a particular platform’s services.
At the same time, these digital platforms collect and maintain restricted access to vast volumes of high-quality data. This has led to increasing barriers to entry for alternative service providers, and has resulted in even higher levels of concentration and increased potential for harm.
Further to that, the ACCC said that exclusivity agreements, restrictions on interoperability with third parties, and the withholding of access to important hardware, software, and data, also reduced further consumer choice and limited investment and innovation.
Digital platform services are also technically complex, and often lacked transparency, such as how their algorithms are programmed to control what users see.
“These difficulties in prosecuting anticompetitive conduct by digital platforms under existing laws has significant costs for businesses, consumers, and the productivity of the Australian economy,” ACCC chair, Gina Cass-Gottlieb, told The Opportunities and Challenges in the Digital Revolution conference at Monash University last week.
“Regulatory and enforcement tools must be able to account for the rate of technological change to avoid the far-reaching consequences of anti-competitive conduct in services that are central to the economy.”
She stressed that there was recognition from regulators around the world that enforcement of current laws was not enough to deal with the competition challenges posed by digital platforms.
“We need to act quickly to ensure Australia keeps pace with both evolving digital markets and the large international jurisdictions that are shifting the onus on digital platform services to compete fairly and be more responsive and responsible.
“Aligning our reforms with those occurring in countries [within] Europe and the United Kingdom would also reduce the potential regulatory burden and compliance costs on digital platforms and support greater compliance with any new obligations imposed in Australia.
“We cannot expect the work done by international regulators to bring about change in Australia. We’ve observed that global businesses will make changes in the jurisdictions that act to give extra protection to their consumers and businesses but will not as a rule voluntarily extend those protections in jurisdictions that don’t.”
The chair concluded that the powerful position that digital platforms held as “gatekeepers” to online transactions left many businesses and consumers with limited options but to agree to the ‘terms of trade’ of those digital platforms. This has ultimately led to higher prices, poorer quality services and businesses being punished if they competed head-to-head with a powerful platform.
This has further led to concentration and misuse of market power, often resulting in a loss of innovation and choice for consumers.