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Acknowledgement of country
I wish to acknowledge the Traditional Custodians of the land we are meeting on today, the Wurundjeri people of the Kulin nation.
I pay my respects to them and their cultures and to their Elders past, present and emerging. I acknowledge their continuing connection to the land, sea and community.
I would also like to acknowledge and welcome any Aboriginal and Torres Strait Islander people who are attending today’s event.
Introduction
It is my pleasure to be addressing everyone here today at the Monash Conference on Opportunities and Challenges in the Digital Revolution.
Addressing the competition and consumer opportunities and challenges posed by digital platforms is a continuing priority for the ACCC.
We’re all aware that digital platforms have changed many aspects of our lives. Increasingly, we use digital platforms services at work, to study, socialise and shop, we use them for entertainment and to do business.
Leading digital platforms have become some of the most valuable companies in the world and offer many benefits for businesses and consumers. The important roles they play mean that ensuring effective competition and consumer protections apply in digital platform markets is essential.
The ACCC started examining digital platform markets in 2017. First, we looked at the impact of digital platforms on news and journalism content and advertising services markets in the Digital Platforms Inquiry. In 2020 and 2021, we undertook an examination of the supply of digital advertising technology and agency services through the Ad Tech Inquiry.
We’ve recently reached the halfway point of the five-year Digital Platform Services Inquiry. So far, we’ve examined a range of digital platform services including search, app stores, online private messaging services and electronic marketplaces.
In the six years we’ve spent analysing digital platforms and their services, we have found concerning conduct that in the ACCC’s view, is anti-competitive, reduces innovation and harms consumers.
The scale and range of anti-competitive conduct occurring across digital platform services presents a real challenge for regulators. The competition and consumer harms we’ve uncovered are widespread, entrenched, and systemic and cannot be addressed with enforcement action under current laws alone. We believe significant new measures are required.
Last year we released our fifth report as part of the Digital Platforms Services Inquiry. That report recommended options for regulatory reform to address the significant competition and consumer harms we’ve observed.
These reforms are necessary to ensure that consumers and businesses continue to benefit from the valuable services digital platforms provide, without the level of corresponding risks that too frequently come with the use of their services.
Today I would like to talk to you about the harms we have observed, why change is needed, and to discuss the growing international consensus towards regulatory reform and the need for Australia to be a part of this move.
The case for change - competition
Digital platforms are critically important for Australian businesses and consumers, and are major drivers of productivity growth for the Australian economy.
Many digital platform markets are dominated by one or two large digital platforms, who often act as gatekeepers between businesses and consumers. The powerful positions these platforms hold across multiple markets has provided the opportunity and incentive to limit competition and entrench their market power across multiple markets.
The potential for harm in digital platform markets is higher than many other sectors across the economy because of the position digital platforms hold as intermediaries between consumers and businesses and the expanding range of services these platforms offer. Expansive ecosystems can lock users in to using a particular platform’s wide range of services, and consumer inertia and high switching costs can keep them there.
Direct and indirect network effects, where the value of a service increases with the number of users with whom other users can interact, can contribute to markets tipping and significant entry costs and economies of scale make it challenging for new entrants to enter or to grow in the market.
Unique access to vast amounts of high-quality data is also a key characteristic of many digital platform markets, with this increasing barriers to entry, contributing to high levels of concentration and increasing the potential for harm.
Although many of these characteristics are not unique to digital platforms, their strength and combination in digital platform markets is unique compared to other areas of the economy.
The ACCC has produced important and ground-breaking work on the extent of concentration in digital platform services. We’ve also observed instances of conduct that is likely to be anticompetitive conduct across multiple markets.
We found Google has market power in search, search advertising services and in the ad tech supply chain, with market shares above 93% in each of these areas for the last decade.
We found Apple and Google have market power in mobile operating systems and app distribution, and Meta has market power in social media services and display advertising services, with Facebook and Instagram accounting for almost 80% of social media services in Australia by time spent, and the largest user numbers between 2018 and 2022.
The ACCC is also concerned about conduct that interferes with the process of competition, like digital platforms favouring their own services, practices that hamper the ability of consumers to switch easily between services or devices, and other practices which make it harder for rivals to compete.
For example, Apple has previously ranked its own apps more favourably than third-party apps in its App Store search results, and removed third-party apps from the App Store. This can distort app developers’ decisions to innovate, develop and upgrade their apps, particularly where these are similar to Apple and Google’s own offerings, and can steer consumers towards inferior or more expensive apps.
Exclusivity agreements, restrictions on interoperability with third parties, and withholding access to important hardware, software, and data, also reduces consumer choice and limits investment and innovation.
For example, Google’s agreements with mobile device manufacturers and Apple result in Google’s search service being exclusively pre-installed on almost all mobile devices in Australia. And Apple does not allow access to its Near Field Communications technology, which is a prerequisite for competitors to offer contactless payment services.
In recent years, regulators around the world have prosecuted major digital platforms to address this conduct.
In 2021, the Italian Competition Authority fined Google over 100 million euros for stopping electricity company Enel X Italia from developing a version of its app, called Juicepass, to be compatible with Android Auto.
The Juicepass app helps electric vehicle drivers find and book a charging station and Android Auto is a feature that allows apps to be used safely while driving.
The Italian Competition Authority found that by refusing interoperability with Android Auto, Google had unfairly limited the possible choices for drivers and had favoured its’ own Google Maps app, which enables similar functions for electric vehicle drivers. Google was ordered to make certain app programming tools available to Enel and other app developers.
Towards the end of last year, the European Commission accepted a binding commitment from Amazon barring it from using marketplace third party seller data to make its own retail business decisions. Amazon also agreed to measures that assist to level the playing field for third-party sellers and increase consumer choice. This outcome closed two associated abuse of dominance investigations against Amazon.
Across the Atlantic, the US Department of Justice, along with 8 State Attorney Generals filed a civil antitrust suit this year against Google. It alleges Google has monopolised multiple digital advertising technology products in violation of Sections 1 and 2 of the Sherman Act. The action seeks structural separation of Google’s ad tech business, which currently provides services to both publishers and advertisers and acts as the ad exchange, as well as treble damages for losses suffered by federal Government agencies that overpaid for web display advertising.
But enforcing competition laws through the courts is lengthy and resource intensive when pursuing large, well-resourced digital platforms with expansive ecosystems which allows for anti‑competitive conduct to adapt over time.
In the Google Android case, pursued by the European Commission, it took seven years to achieve a 4.125 billion euro fine against Google for imposing anti-competitive contractual restrictions on manufacturers of mobile devices and mobile network operators.
It was seven years before the Google Shopping case was resolved. In this case, brought by the European Commission, Google was fined 2.4 billion euros and found to have favoured its own comparison-shopping service in its search results.
In 2019, Google was fined 1.49 billion euros by the European Commission for abusive practices in online advertising. That case ran for 9 years.
The US DOJ’s case alleging Google unlawfully maintained monopolies in search and search advertising is scheduled to go to trial in September 2023, 3 years after the agency filed a complaint.
Enforcement action against well-resourced and sophisticated companies has been slow in Australia too.
It was more than a decade before the ACCC received a decision on an action against 15 international airlines for price fixing agreements. It took 6 years for penalties to be finalised in a case against Flight Centre for attempting to induce price fixing arrangements.
Epic Games instigated proceedings against Apple in 2020 and Google in 2021 over the platforms’ in-app payment requirements in Australia. Those cases won’t go to trial until March 2024.
Further, we observe that legal action by competition authorities around the globe has not led to a sustained change in the conduct of the largest digital platforms or their core business models in digital markets.
Google, and other large platforms have continued to come under scrutiny for engaging in practices that appear to be anti-competitive, suggesting that individual enforcement actions – even those that include high penalties – have not lead to broad improvements.
In addition, digital platform services are technically complex, and often lack transparency, such as in relation to the operation of algorithms that control what users see. These features can make it difficult to detect unlawful conduct.
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.
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.
The ACCC has recommended a range of new competition measures for digital platforms, including new service-specific mandatory codes of conduct for ‘designated digital platforms,’ based on principles set out in legislation.
These codes would introduce targeted obligations to address anti-competitive conduct we have previously observed, like self-preferencing, tying, exclusivity agreements, impediments to interoperability, and unfair business dealings.
These would allow for dynamic and flexible measures that could be targeted and tailored to relevant digital platform services and those platforms with the ability and incentive to harm competition by engaging in anti-competitive conduct. Tailoring requirements to a particular service allows for a detailed case-by-case analysis, which ensures that only anti-competitive conduct is prohibited, while still providing necessary clarity and certainty to participants in digital platform markets.
The case for change – consumers
Given that the ACCC is both a competition and consumer agency, we see consumer protection and competition law working hand-in-hand. We have also recommended a range of measures to address harms to small businesses and consumers on digital platforms.
We’ve observed a significant and sustained increase in the number of harmful scams on digital platforms.
Scamwatch reported that losses for Australians from scammers using social networking and apps, almost doubled between 2020 and 2021, from $42 million to $92 million dollars. Given the underreporting of scam losses, the actual cost is likely to be much higher.
Digital platform services can play a crucial role in the fight against this criminal conduct.
For scam victims, the emotional and financial costs is often exacerbated by the lack of effective avenues for dispute resolution or proper redress. Many simply give up because they cannot get digital platforms to engage adequately to address their problem.
Fake online ratings and reviews, the manipulation of reviews and harm from fraudulent apps, is also concerning.
We’ve proposed new targeted obligations to address these harms, including notice and action requirements to address scams and harmful apps, stronger verification of business users and reviews, and effective avenues for redress when issues arise, including through an external ombuds scheme.
Many digital platform services are ‘must haves’ for lots of businesses and consumers. Stronger safeguards are needed to protect consumers and businesses, and maintain trust and confidence in digital markets, ensuring these markets thrive.
Online and offline, we are also seeing conduct that, while harmful, is unlikely to breach the Australian Consumer Law because it may not reach the threshold for unconscionable conduct or misleading or deceptive conduct or constitute a harmful term in non-standard form contracts.
Online, we’ve observed design choices or ‘dark patterns’ that exploit behavioural biases and distort consumer choice, subscription traps which make it difficult to opt out of a service, and practices designed to get consumers to agree to unfair or unfavourable contract terms.
To address this, we reiterated our support for amendments to strengthen our existing unfair contract term prohibitions, which the government has already passed an amendment for, and the need for a new economy-wide ban on unfair trading practices.
Growing international consensus that reforms are necessary and benefits of international alignment and cooperation
There is recognition from regulators around the world that enforcement of current laws is not enough to deal with the competition challenges posed by digital platforms. Consensus is growing that urgent reform is needed to open up competition in existing services and ensure competition issues do not extend into new services.
Many jurisdictions are already acting and implementing, or considering, reforms to address competition and consumer harms.
In Europe, Germany has introduced a super-powered enforcement tool for digital platforms and the European Union has passed the Digital Platforms Act and the Digital Services Act, which include rules for gatekeeper platforms to promote contestability and fairness in the digital sector and strengthens consumer rights online.
The United Kingdom’s pro-competition regime, which will allow for targeted obligations in platform specific codes of conduct, is expected to be passed in the coming months and several bills to counter anti-competitive practices are being considered in the US.
There is growing support for ex ante regulation in India and Japan, with both countries looking at what reforms may be required in their jurisdictions. In Japan, this could complement legislation that has already been introduced to address concerns around a lack of transparency by digital platforms, and insufficient procedures and systems to handle user requests, including regarding dispute resolution.
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.
The global nature of large digital platforms requires a cross-jurisdictional response. Keeping pace with reforms around the world will assist coordination and cooperation between regulators. Aligning our reforms with those occurring in countries like 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.
For example, legislative changes in South Korea, and competition orders in the Netherlands against Apple, have prompted both Google and Apple in South Korea, and Apple in the Netherlands, to relax their restrictive in-app payment rules in those jurisdictions.* However, these changes have not been rolled out in full here, so many Australian app developers have not benefitted from the ability to choose a different payment provider.**
Australia was one of the first jurisdictions to consider competition and consumer issues on digital platforms, through the original Digital Platforms Inquiry.
Following on from that inquiry, the ACCC was involved in the development of the News Media Bargaining Code, which benefited news media companies by addressing bargaining power imbalances they experience in their interactions with Google and Facebook. A recent review of the code found it has been a success, with over 30 commercial agreements struck that were highly unlikely to have been made without the code.
The momentum building around the world presents an opportunity for Australia to continue our active participation in developing best practice approaches to addressing the competition and consumer challenges of the digital economy.
If we act now on the reforms the ACCC has proposed, Australian consumers and businesses will benefit sooner from more dynamic competition in these important services, such as through greater choice of service and business models, and innovations that may not otherwise eventuate.
Now is the time to act to protect competition in new and emerging digital services and to address anti-competitive conduct and high barriers to entry in existing digital platform markets.
Decisive action will ensure Australians can enjoy the immense benefits provided by digital platforms along with necessary safeguards to minimise harms and encourage trust and confidence online. Improving the functioning of these markets also presents an opportunity to realise far-reaching benefits across the economy, given the increasing importance of digital platforms to Australian businesses of all sizes and types.
Given the significant costs from inaction in terms of reduced innovation, choice, higher costs and lower quality, the need to act is urgent. Australia needs to be at the table to ensure we have a role in formulating how regulation of digital platforms will evolve, and ensure we have fit-for-purpose regulatory protections to safeguard Australian consumers and businesses.
Next steps for the ACCC
Treasury has finished consultations on recommendations from our fifth report and we await a response from Government. Progress is already being made in some areas, like scams, and we look forward to working with the Treasury on the further design of any measures that are adopted.
We are also aware of the broader context in which we are making these recommendations. Namely, the wide range of other digital platform issues that the Government is currently considering including in relation to cybersecurity, privacy, and misinformation and disinformation.
It is important that all relevant government departments and agencies are involved in the development of new competition and consumer measures for digital platforms. This is one of the motivations behind the Digital Platforms Regulators Forum, or DP-REG, which the ACCC, with the Australian Communications and Media Authority (ACMA), the Office of the Australian Information Commissioner (OAIC) and the Office of the eSafety Commissioner, formally launched last year.
The ACCC has plenty more work ahead in relation to digital platforms. We recently released the issues paper for our 7th report as part of the Digital Platform Services Inquiry. That report will examine the expanding ecosystems of digital platform service providers. Our 6th report on social media services will be handed to the Treasurer at the end of March.
Conclusion
The ACCC is now into its sixth year of looking into competition and consumer issues on digital platforms. We bring a wealth of experience to this issue, and we collaborate with and benefit from our colleague regulators - international giants. The competition and consumer harms we have seen are real, significant and systemic. Innovation and choice are at stake and consumers and businesses are paying the price.
The costs of waiting, while hard to quantify precisely, are significant. The powerful position that digital platforms hold as ‘gatekeepers’ to online transactions leave many businesses and consumers with limited options but to agree to the ‘terms of trade’ of those digital platforms.
This can lead to higher prices, poorer quality services and businesses being punished if they compete head-to-head with a powerful platform. Concentration and misuse of market power can also result in a loss of innovation and choice for consumers.
The need for action is urgent. It’s essential that Australian law keeps pace with fast-paced digital markets and regulatory developments overseas. Current laws are not sufficient to deal with these issues and new, targeted measures are required to bring about a more competitive, innovative, and consumer-centric digital economy.
* On 8 May 2023 this sentence was amended to clarify which requirements applied to each of Apple and Google.
** On 8 May 2023 this sentence was amended for accuracy. In September 2022, Google voluntarily launched a pilot program in Australia allowing developers of non-gaming apps to offer alternative in-app payment options to Google Play billing. Apple has not opened up in-app payment options in Australia.