Digital Markets Guide – Global Competition Review
Australian approach to digital markets
The legislation governing competition in digital markets is the Competition and Consumer Act 2010 (Cth) (the Act), which is the competition law framework that applies economy-wide in Australia. In addition to competition law, the Act also contains:
- the Australian Consumer Law (ACL), which covers consumer protection issues; and
- the News Media and Digital Platforms Mandatory Bargaining Code (the News Media Bargaining Code), which is intended to address bargaining power imbalances between news media businesses and certain designated digital platforms.
The Australian Competition and Consumer Commission (ACCC) is the independent government agency responsible for enforcing the Act in Australia. With a few exceptions (such as small administrative fines under the ACL and the grant of exemptions), the ACCC is not a determinative body and must apply to the Federal Court of Australia to seek orders enforcing the Act. The Act gives the ACCC standing to do so and powers to seek penalties and injunctions in Court.
There are currently no special rules or exemptions applying to digital markets (though, as noted below, this is currently the subject of debate in Australia).
The Act gives the ACCC the power to conduct an inquiry into markets or undertake price monitoring activities at the direction of the Australian Treasurer. Once directed, the Act gives the ACCC compulsory information gathering powers (including documents, information and testimony) to allow it to report on and make recommendations to the government on matters of competition and broader policy.
Inquiries may also result in ACCC enforcement action. This power has been used to examine digital markets in three separate inquiries (one ongoing): the Digital Platforms Inquiry 2017–2019 (DPI), the Digital Advertising Services Inquiry 2020–2021 (the Ad Tech Inquiry) and the Digital Platform Services Inquiry 2020–2025 (DPSI).
Structure of the ACCC
The ACCC has a number of divisions, including the Mergers, Exemptions and Digital division. Within that division is the Digital Platforms branch, which is responsible for the ongoing scrutiny of digital platform markets through conducting its digital inquiries. The Digital Platforms branch also works with other units within the ACCC on specific matters, such as the Merger Investigations Branch (responsible for merger control) and the Competition Division (responsible for competition law enforcement).
Cooperation with other regulators
The ACCC actively cooperates with international competition agencies with respect to digital enforcement and regulation. In September 2020, it signed a memorandum of understanding with competition regulators in the US, the UK, Canada and New Zealand to share intelligence, case theories and investigative techniques. The ACCC announced that cooperation was needed to better coordinate investigations across international borders, as the global economy is increasingly interconnected and many large companies, especially in digital markets, operate internationally.
Further, ACCC chair Gina Cass-Gottlieb has recently stated the importance of international cooperation on regulating digital platforms, including considering the obstacles for intervention in the digital economy.
The ACCC also cooperates with other domestic regulators with respect to digital regulation. In March 2022, the ACCC, the Australian Communications and Media Authority, the Office of the Australian Information Commissioner, and the Office of the eSafety Commissioner formed the Digital Platform Regulators Forum (DP-REG) to share information and collaborate on issues relating to the regulation of digital platforms. DP-REG’s strategic priorities for 2022 to 2023 include focusing on transparency, the development and use of algorithms, and increasing collaboration and capacity building between the four regulators forming DP-REG.
Key developments to date
ACCC inquiries and advocacy in digital markets
Over the past five years, the ACCC has conducted three key inquiries in relation to digital platforms: the DPI, the DPSI and the Ad Tech Inquiry.
The primary purpose of these inquiries is to examine digital markets and make any relevant findings or recommendations to the federal government. The inquiries also present an opportunity for the ACCC to proactively monitor digital markets and develop institutional capabilities in digital markets. They may also result in enforcement actions.
In July 2019, the ACCC published the DPI report following its Digital Platforms Inquiry. The DPI report was the ACCC’s first substantive inquiry into digital markets, focused on the impact that digital search engines, social media platforms and other digital content aggregation platforms have on competition in media and advertising services markets.
The DPI report has played a major role in shaping the future direction of the legal framework relating to competition in, and regulation of, digital markets, including by:
- recommending subsequent inquiries into digital markets (the Ad Tech Inquiry and the DPSI);
- establishing the specialist digital platforms branch within the ACCC;
- introducing the News Media Bargaining Code, which intends to address bargaining power imbalances between news media businesses and digital platforms by setting standard obligations for registered news businesses to bargain individually or collectively with designated digital platforms, and providing a compulsory arbitration process where an agreement cannot be reached. To date, the government has not designated any digital platforms; rather, commercial deals have been struck between news media businesses and Google and Meta (formerly known as Facebook);
- introducing a review of the Privacy Act 1988 (Cth) (the Privacy Act) and proposing amendments to the Unfair Contract Terms regime of the Act;
- flagging multiple investigations, which have since resulted in consumer law enforcement actions commenced by the ACCC against Google and Meta; and
- identifying conduct specific to digital markets that it considers may result in anticompetitive harm.
Most of the ACCC’s recommendations were accepted by the government, and a road map to advance the recommendations from the DPI report is in place.
Following the DPI report, the government directed the ACCC to conduct an inquiry into markets for the supply of digital platform services (DPSI), in particular: search engines, social media, online private messaging, digital content aggregation, media referral services and electronic marketplaces. The ACCC was tasked with investigating: the intensity of competition in these markets; practices that may result in consumer harm; market trends that may affect the degree of market power and the durability of that market power; changes to the nature of these services arising from innovation; and technological change and developments in markets outside Australia.
The government directed the ACCC to provide interim reports on the inquiry every six months for five years, and a final report is due on 31 March 2025. To date, the DPSI has published four interim reports and has released a discussion paper for the fifth interim report.
The first interim report examined competition, consumer and privacy issues associated with online private messaging, and to a lesser extent search services and social media. Key findings of this report were that Facebook and Apple are the two largest suppliers of stand-alone online private messaging in Australia, Facebook has a competitive advantage relative to alternative stand-alone services that Apple cannot constrain, and Apple has a degree of freedom from competitive constraint over Apple users (limited by Facebook). This first interim report also reinforced the recommendations made in the DPI report, with a continued focus on power imbalances leading to unfair contract terms, and data collection practices (including around improved consumer choice and control), tracking and privacy in relation to these services.
The second interim report examined app marketplaces (primarily Apple App Store and the Google Play store). The ACCC found that Apple and Google operate a global duopoly in the market for mobile operating systems and this provides them with significant market power in the market for app marketplaces. The ACCC identified that a lack of competitive constraint allows both platforms to charge 15 to 30 per cent commission rates for in-app purchases. The ACCC put forward a set of interim measures that Apple and Google could implement to address the concerns raised in the report and indicated it will continue to monitor and explore these issues (including overseas developments).
The third interim report examined web browsers and search services. The ACCC expressed concerns regarding Google’s dominant position in general search services and recommended that it be given the power to implement a mandatory choice screen and consider other measures to improve competition and consumer choice in search.
The fourth interim report examined online retail marketplaces. The ACCC did not identify any one dominant marketplace, instead expressing concerns regarding transparency of factors influencing marketplace display, self-preferencing behaviour in hybrid marketplaces, and data practices. The fourth interim report continues to support the recommendations for dispute resolution mechanisms and amendments to the ACL addressing unfair contract terms and unfair trading practices made in the DPI report.
The ACCC has also published a discussion paper seeking responses that will inform the fifth interim report. This report is the mid-point of the DPSI and will consider:
- competition and consumer issues identified in the course of the DPSI, as well as issues identified in the Ad Tech Inquiry and the DPI to the extent they fall within the scope of the DPSI; and
- whether Australia’s current competition and consumer protection laws are sufficient to address these issues and, if reforms are needed to supplement existing laws, the options for regulatory reform.
Ad Tech Inquiry
Following the DPI report, the ACCC was directed to commence the Ad Tech Inquiry, which examined markets for the supply of digital advertising technology services and digital advertising agency services. These services are both concerned with personalised digital display advertising on websites or apps, namely advertisements that are shown before or alongside online content, as distinct from search advertising or classified advertising.
As part of the Ad Tech Inquiry, the ACCC considered the level of transparency in auction and bidding processes in online advertising and supplier behaviour (including vertically integrated suppliers offering ad tech services and ad agency services).
The Ad Tech Inquiry final report was published on 28 September 2021. The ACCC found that competition in ad tech services is dominated by Google, which is underpinned by Google’s access to data, access to exclusive inventory and advertiser demand, and integration across services. The ACCC recommended a range of remedies to promote more robust competition and encourage transparency in the ad tech supply chain.
The ACCC also found that Google’s vertical integration and dominance across the ad tech supply chains and in related services allowed it to engage in leveraging and self-preferencing conduct. The ACCC considers that over time, this conduct has had the cumulative effect of substantially lessening competition for the supply of ad tech services and has allowed Google to establish and entrench its dominant position in the ad tech supply chain.
On 25 March 2021, the Parliamentary Joint Committee on Corporations and Financial Services (PJC) began an inquiry into mobile payment and digital wallet financial services (the PJC inquiry).
The PJC inquiry has sought to understand concerns in mobile payment and digital wallet financial services from both the sector and independent government agencies like the ACCC, the market regulator (ASIC), the banking regulator (APRA) and the central bank (RBA), without a clear policy or legislative agenda.
The ACCC’s testimony to the PJC accepted concerns with Apple’s conduct with respect to its restriction of access to third-party digital wallets to the Near Field Communication technology (NFC) used on Apple devices to facilitate contactless payments. The ACCC noted issues associated with self-preferencing by Apple, as well as issues associated with Apple controlling an essential gateway for digital payment commerce.
The PJC’s mobile payment and digital wallet financial services report was published in October 2021. The report acknowledged that there was evidence suggesting that anticompetitive practices were emerging in the payments ecosystem that may be jeopardising consumer choice, stifling innovation and driving up payment costs. The PJC considered that for this reason, it was critical that legislation, regulators and regulatory approaches are nimble and flexible enough to adapt to the future of the sector.
While the PJC identified Apple’s restriction of access to its NFC technology as the most contentious and prominent issue, it did not consider that regulatory intervention was necessary at the time; however, the PJC made a recommendation for the ACCC to consider the impact of Apple’s restrictions on competition and innovation.
The ACCC has not taken action against a digital platform alleging breaches of the competition law provisions of the Act; however, it has disclosed that it is currently investigating:
- Apple’s restriction of third-party access to NFC technology on its mobile devices and the terms it imposes for use of Apple Pay by third parties; and
- Google’s limitation of access of third-party demand-side platforms to YouTube ad inventory, its channelling of demand from its demand-side platforms to its own supply-side platforms, and its use of its publisher ad server to preference its supply-side platform.
The ACCC has taken action against digital platforms under the ACL in circumstances where it has alleged that consumers have been misled about the data collection practices of digital platforms:
- On 29 October 2019, the ACCC commenced enforcement action against Google, alleging misleading or deceptive conduct in relation to Google’s communication to consumers on the collection and use of location data. In April 2021, the Federal Court found in favour of the ACCC and held that Google misled consumers, with penalties yet to be determined.
- On 27 July 2020, the ACCC commenced action against Google alleging misleading or deceptive conduct around Google’s use of consumers’ personal data.
- On 16 December 2020, the ACCC commenced proceedings against Facebook for misleading consumers about the use of their personal activity data in its Onavo VPN app.
- On 7 August 2019, the ACCC commenced proceedings against HealthEngine for misleading consumers about the use of their data. On 20 August 2020, the Federal Court ordered by consent that HealthEngine pay A$2.9 million in penalties for engaging in misleading or deceptive conduct.
More recently, the ACCC has instituted proceedings against:
- Uber, which admitted it breached the ACL by making false or misleading statements in cancellation warning messages and Uber taxi fare estimates. The parties agreed to make joint submissions with the ACCC to the Federal Court for penalties totalling A$26 million to be imposed; and
- Airbnb, alleging it misled consumers into believing prices for Australian accommodation were in Australian dollars when, in fact, for many consumers they were in US dollars.
The ACCC also identified competition and consumer issues relating to digital platforms as one of its 2022 compliance and enforcement priorities.
ACCC consideration of transactions in digital markets
Section 50 of the Act prohibits mergers that have the effect or likely effect of substantially lessening competition. The ACCC has an informal merger clearance process and a formal merger authorisation process. The ACCC does not itself have the power to block an acquisition, however, it can bring an action in the Federal Court to prevent an acquisition it considers breaches Section 50 of the Act. If a transaction completes and the ACCC successfully brings an action against the parties, the Court may order divestiture of assets.
This framework governs all mergers, including transactions involving digital platforms. The vast majority of mergers are reviewed within the informal merger clearance framework.
The ACCC’s last opposition of a merger of two online businesses was in relation to Carsales.com’s proposed acquisition of the Trading Post on 20 December 2012, in the context of online car classifieds.
In Google’s proposed acquisition of Fitbit, the ACCC did not reach a decision before the deal ultimately completed in January 2021. In June 2020, the ACCC raised a number of competition concerns in its statement of issues (SOI). In the SOI, the ACCC defined data relevant markets by reference to the potential commercial use of the data being aggregated (as opposed to any actual competitive overlap in that commercial use).
In response, Google offered court enforceable undertakings, which were ultimately rejected by the ACCC. Google proposed a number of behavioural remedies to address the ACCC’s concerns about data aggregation by restricting the ways in which Google would use Fitbit data. To date, the ACCC has not taken any enforcement action in relation to the parties closing the deal, but the ACCC indicated that it will continue a post-completion review.
The ACCC is also currently investigating Meta’s acquisition of Giphy. The ACCC proactively commenced this review after the transaction was completed in May 2020. To date, no enforcement action has been taken.
In digital markets, the ACCC’s authorisation process has been used to obtain antitrust immunity agreements between competitors that may otherwise breach the Act:
- In 2021, the ACCC granted authorisation to members of Country Press Australia (a collection of independent regional and local newspapers) and Commercial Radio Australia (a national radio industry association) to collectively bargain with Facebook and Google in respect of payments for producing content featured on those platforms.
- In 2017, the ACCC denied granting authorisation to several Australian banks who sought to collectively bargain with and boycott Apple in relation to access to Apple’s iPhone NFC controller.
- In March 2016, the ACCC allowed ihail Pty Ltd, a joint venture between a number of taxi companies and other participants, to launch its ihail smartphone taxi booking app.
Private enforcement supplements the role of the ACCC in enforcing the provisions of the Act. These actions often allow for a faster resolution for the parties involved (i.e., injunctive or real-time relief) as opposed to ex post investigation by the ACCC.
Similar to ACCC enforcement proceedings, private actions can also have wider implications for the broader community (e.g., by deterring or prohibiting monopolistic behaviour) and contribute to the development of the relevant law (e.g., findings of the court in private enforcement actions will add to the jurisprudence for the relevant provisions).
In 2017, the legislative framework surrounding private enforcement (and competition law more generally) was amended. This change clarified that admissions of fact in one proceeding (e.g., in proceedings brought by the ACCC) may be relied on by private litigants in other proceedings, which will likely increase the ease of commencing private enforcement actions (once more cases are tried and heard).
Currently there are six private actions ongoing in Australia alleging a contravention of competition law involving digital platforms:
- Epic Games v. Apple: Epic Games, developer of Fortnite, commenced proceedings against Apple, alleging that Apple engaged in misuse of market power (among other things) by forcing developers to use Apple’s App Store and Apple’s payment platform for consumers making in-app purchases, while taking a 15 to 30 per cent commission on all payments. Epic also commenced similar proceedings in the US and the UK. Following commencement, Apple filed for a stay of proceedings in favour of proceedings in the Northern District of California. After an initial decision in Apple’s favour, Epic appealed to the full Federal Court, which found that there are serious public policy issues that should be adjudicated in Australia. Apple has since applied to the High Court for special leave to appeal. At the time of writing, no decision on special leave has been made. If leave to appeal is not granted, trial will commence in November 2022.
- Epic Games v. Google: Epic brought proceedings against Google alleging misuse of market power (among other things) by Google for hindering Epic’s ability to supply Fortnite in the Google Play store. On 6 August 2021, Google filed an interlocutory application to stay proceedings in Australia. As at the time of writing, the hearing for the stay application is scheduled for October 2022.
- Anthony v. Apple Inc & Anor and McDonald v Google & Ors: in June 2022, these two class actions were filed against Apple and Google in the Federal Court, alleging they engaged in anticompetitive conduct in the operation of their respective app stores, which resulted in consumers paying inflated commissions on certain app and in-app purchases. The claims in these class actions largely replicate Epic’s case against Apple and Google (respectively); however, the classes are seeking declarations and damages only (not injunctive relief) on behalf of end consumers of apps and in-app content (as opposed to app developers) for the same conduct.
- Dialogue Consulting v. Facebook/Instagram: Dialogue, a start-up offering social media content scheduling, brought proceedings against Facebook alleging that Facebook’s decision to deactivate Dialogue’s access to its platforms was designed to harm Dialogue’s ability to compete with Instagram’s content publishing software. Dialogue claims that Facebook misused its market power, engaged in exclusive dealing and made contracts with the purpose or effect of substantially lessening competition. Facebook argues that its decision to deactivate access was in response to contractual breaches by Dialogue. In April 2019, Dialogue was granted an interim injunction against Facebook, restraining it from terminating, suspending or refusing Dialogue’s access to its platforms. In December 2020, Facebook sought a stay of the proceedings, but not as they related to Section 46. The stay application was dismissed at first instance in the Federal Court and on appeal to the Full Federal Court.
- Hamilton v. Facebook and Google: in August 2020, a class action was commenced in the Federal Court against Google and Apple, claiming they engaged in cartel conduct and concerted practices that substantially lessened competition by banning all cryptocurrency-related advertising. The proceedings are being brought on behalf of 33 different cryptocurrency holders. The case is currently active.
In a recent case management hearing for Epic Games v. Apple, Epic Games v. Google and Anthony v. Apple Inc & Anor and McDonald v. Google & Ors, a new class action (yet to be filed) against Apple and Google relating to app distribution was mentioned.
While private actions in Australia are still rare compared to other jurisdictions, the recent uptick may be a sign of future growth in this area.
Upcoming developments and proposed reforms
The ACCC’s DPI, Ad Tech and DPSI reports have sparked major changes to the frameworks surrounding digital markets.
Privacy Act review
In the DPI report, the ACCC recommended the strengthening of protections in the Privacy Act as well as broader reform of Australian privacy law to ensure that consumers’ personal information is protected in light of the increasing volume and scope of data collection in the digital economy.
In December 2019, the Attorney General announced that the government will commence a review of the Privacy Act. In its review, the government will consider:
- whether the Privacy Act protects personal information and provides a framework that promotes good privacy practices;
- whether individuals should have direct rights of action to enforce privacy obligations under the Privacy Act;
- whether a statutory tort for serious invasions of privacy should be introduced;
- the effectiveness of enforcement powers and mechanisms under the Privacy Act; and
- whether an independent certification scheme should be implemented to monitor and demonstrate compliance with Australian privacy laws.
In October 2021, the government published an issues paper seeking feedback on possible reforms. In June 2022, the Attorney General indicated that the review’s final report may be released in the coming months.
Proposed merger reform
In April 2021, the ACCC released a joint media statement with the UK’s Competition and Markets Authority and Germany’s Bundeskartellamt, which advocated that the best way merger control can protect competition is through completely opposing a transaction or divestitures and that behavioural remedies are inappropriate.
In August 2021, the ACCC announced a proposed overhaul of the current merger control regime. The ACCC is not a legislative body, and there is no draft legislation before Parliament; however, the ACCC can be expected to strongly advocate for its proposed reform.
The ACCC has since expanded on its proposal for a digital-specific merger regime, setting out in the discussion paper for its fifth DPSI interim report potential rules that could apply to digital platforms that meet predefined criteria linked to their market power or strategic position (e.g., a gatekeeper) in one or more digital markets, if the ACCC determines that reform is necessary. Subject to consultation, potential measures could include:
- a bespoke notification regime for digital platforms, including mandatory notification of all acquisitions where the target is carrying on business in Australia;
- a lower probability of competitive harm threshold or adopting the balance of harm assessment taken in the UK;
- reversing the of onus of proof for showing the acquisition does not substantially lessen competition, or introducing a rebuttable presumption that certain acquisitions by digital platforms that meet relevant criteria result in competitive harm;
- amending the merger factors to place greater focus on structural changes and factors relating to the loss of potential competition rivalry or increased access to or control of data, technology or other significant assets;
- a new deeming provision applicable to digital platforms with a substantial degree of market power whose position would likely be entrenched, materially increased or extended by the acquisition, and an enhanced deeming provision applying to digital platforms that meet relevant criteria where the acquisition raises barriers to entry, or removes or weakens a source of future or partial competitive constraint; and
- a prohibition on acquiring businesses in certain categories (e.g., businesses in the same or adjacent markets) for certain digital platforms.
While there is significant overlap between the above elements of the proposed digital-specific merger regime and the proposed economy-wide merger framework changes, the ACCC will consider the digital-specific proposals first in its fifth DPSI interim report.
UCT exposure draft legislation
Australia’s existing unfair contract terms (UCT) regime is designed to protect consumers and small businesses from UCTs in standard form contracts. In the DPI report and the first DPSI report, the ACCC recommended additional protections from UCTs, owing to issues arising from the power imbalance between small businesses and consumers, and large digital platforms. The ACCC found that the terms and conditions must be accepted by default and often leave businesses and consumers at a significant disadvantage.
In August 2021, the government released its draft Treasury Laws Amendment (Measures for a later sitting) Bill 2021: unfair contract terms reforms, which seeks to amend both the ACL and the Australian Securities and Investment Commission Act 2001 (Cth) to strengthen the UCT legislative framework. The key changes proposed by the draft include:
- making unfair contract terms unlawful (as opposed to void);
- the application of UCT protections to more businesses, covering standard form contracts where one party either has annual turnover of less than A$20 million or employs under 100 employees (as opposed to the current 20-employee threshold);
- introducing civil penalties for proposing, applying or relying on a UCT. For corporations, this would be the greater of A$10 million, three times the value of the benefit derived from the contravention or 10 per cent of annual turnover; and
- introducing a rebuttable presumption for UCTs in similar circumstances.
These proposed changes are only set to apply to new contracts, contracts that are renewed or terms that are varied after the legislation’s commencement date.
The exposure draft legislation lapsed owing to the May 2022 federal election; however, in the days before the election, the Australian Labor Party (which was elected) announced its intention to proceed with UCT reforms if elected.
Key themes and trends
The ACCC is ramping up its focus on digital platforms, which we can expect to continue. Some of the key themes and trends we are likely to see develop are:
- The Digital Platforms branch will continue to proactively advance investigations and inquiries into the practices of digital platforms, and we are likely to see more court action.
- The ACCC has made a number of comments regarding market power of digital platforms, although its prosecution under Section 46 has been limited and undeveloped. It is likely its approach to abuses of market power in digital markets will develop rapidly (and will substantially draw on work it has already undertaken as part of its inquiries).
- Beyond merger control, the ACCC considers there are broader issues in digital platform markets that may need rules that apply to conduct of specific companies in those markets. The ACCC is currently considering the introduction of regulatory tools targeted at addressing a broad range of issues identified in digital markets, as set out in its discussion paper for the fifth interim report of the DPSI.
- The ACCC is continuing to consider options for merger control policy reform, with the proposed framework containing specific provisions for digital platforms that would be stricter than in other non-digital markets. The ACCC is particularly concerned where digital platforms purchase ‘nascent competitors’ without notification and has signalled a more interventionist approach. It is currently undertaking a post-completion investigation of Facebook/Giphy.
- The ACCC is focused on the treatment of data and its role in competition law – with data ownership and portability being flagged as key issues. This focus also highlights the intersection between privacy and competition law, with data being the intersection point. In particular, we have already seen:
- the implementation of the Consumer Data Right in the financial sector, with the intention that it will apply to the telecommunications and energy sectors (and potentially other sectors);
- action taken by the ACCC under the ACL for misleading use of consumer data against Google and Facebook;
- a full review of the Privacy Act to ensure privacy settings empower consumers, protect data and best serve the Australian economy;
- concerns raised in the DPI report about unfair trade practices related to data collection from large digital platforms; and
- concerns in the PJC inquiry over where consumer data in Australian mobile payments is stored.