ACCC calls for new competition and consumer laws for digital platforms

The ACCC has recommended a range of new measures to address harms from digital platforms to Australian consumers, small businesses and competition.

The fifth report of the ACCC’s five-year Digital Platform Services Inquiry has proposed that platforms be subject to mandatory dispute resolution processes and stronger requirements for combating scams, harmful apps and fake reviews, among other measures.

The Report has also proposed mandatory codes of conduct for certain platforms and services to protect and promote competition.

“We know that the expansion of digital platforms in Australia has brought many benefits to Australian consumers and businesses,” ACCC Chair Gina Cass-Gottlieb said.

“This expansion of digital platform services has also created risks and harms that our current consumer and competition laws are not always able to address.”

“Our analysis has identified concerning consumer and competition harms across a range of digital platform services that are widespread, entrenched, and systemic,” Ms Cass-Gottlieb said.

“The critical positions that digital platforms hold, as ‘gatekeepers’ or ‘intermediaries’ between businesses and consumers, mean they have a broad influence across the economy, making the reforms we are recommending crucial and necessary for all Australians.”

In addition to consumer and competition specific recommendations for digital platforms, the report also reiterates the ACCC’s support for a new economy-wide unfair trading practices prohibition.

Consumer issues and recommendations
The ACCC and other agencies have observed a significant and sustained increase in scams on digital platforms targeting consumers, including those experiencing vulnerability.

In addition, consumers have experienced harms from inappropriate and fraudulent apps made available on app stores, as well as from fake reviews and review manipulation.

“Digital platforms that host or otherwise act as intermediaries between scammers and their victims are in a unique position to identify and stop scams and remove harmful apps,” Ms Cass-Gottlieb said.

“Losses reported to Scamwatch from scams conducted via social networking and mobile apps almost doubled in the last year between 2020 and 2021, with $49 million recorded in 2020 compared with $92 million in 2021. This shows that digital platforms need to do more to stop their users from being scammed.”

“We also need more action on fake reviews from platforms whose services feature ratings and reviews, including those appearing on search, social media, app stores and online marketplaces,” Ms Cass-Gottlieb said.

“These problems have been made worse by a lack of avenues for dispute resolution for consumers and small businesses, who often simply give up on seeking redress because they cannot get the digital platforms to properly consider the problem.”

The ACCC’s report recommends new laws that require digital platforms to:

  1. provide user-friendly processes for reporting scams, harmful apps, and fake reviews, and to respond to such reports
  2. reduce the risk of scams by verifying certain business users such as advertisers, app developers and merchants
  3. publish review verification processes to provide important information to readers of online reviews to help them assess the reliability of reviews on the platform
  4. report on scams, harmful apps and fake reviews on their services, and the measures taken to address them
  5. ensure consumers and small businesses can access appropriate dispute resolution, supported by the establishment of a new digital platform ombuds scheme.

Competition issues and recommendations
Without effective regulation large digital platforms have the ability and incentive to engage in conduct that is harmful to competition. This can include preferencing their own services, or imposing tying arrangements where users of a digital product or service are pushed or compelled to use another service or product, such as smart phones pre-loaded with a certain bundle of apps. These poor competition outcomes harm consumers and business users.

The ACCC recommends a new regulatory regime to work alongside Australia’s existing competition laws that would address anti-competitive conduct, unfair treatment of business users and barriers to entry and expansion by potential rivals.

“We are calling for service-specific codes of conduct that apply to designated digital platforms,” Ms Cass-Gottlieb said.

“This would ensure the obligations are appropriately targeted to particular competition issues present in specified digital platform services, allow consultation with stakeholders, and provide the flexibility to address emerging and new forms of harmful conduct.”
Service-specific codes of conduct could include targeted obligations to:

  1. prevent anti-competitive self-preferencing, tying and exclusive pre-installation arrangements
  2. address data advantages
  3. ensure fair treatment of business users
  4. improve switching, interoperability and transparency.

The full report can be found at: Digital platform services inquiry 2020-2025- September 2022 interim report


Notes
‘Self-preferencing’ refers to where a platform gives preferential treatment to its own products and services when they compete with products and services provided by third parties using their service.

‘Tying conduct’ in this context refers to when a digital platforms makes access to a service conditional on using another service.

Background
On 10 February 2020, the Australian Government directed the ACCC’s Digital Platforms Branch to conduct a five-year inquiry into markets for the supply of digital platform services in Australia and their impacts on competition and consumers.

This report focusses on competition and consumer issues raised in the course of the Digital Platform Services Inquiry, the Digital Advertising Services Inquiry (2020-2021) and the Digital Platforms Inquiry (2017-2019) to date, and whether additional measures should apply to digital platform services. This report was provided to the Treasurer on 30 September 2022 as required by the Direction.

Losses reported to Scamwatch from scams conducted via social networking and mobile apps almost doubled between 2020 ($49m) and 2021 ($92m). Given low levels of reporting –only an estimated 13% of victims report their scam to Scamwatch and one in three victims don’t report their scam to anyone ? the actual sum of money lost to scams on digital platforms is likely much higher.