ACCC chair argues need for digital platform reforms

The Australian Competition and Consumer Commission (ACCC) has raised a number of data-related competition and consumer concerns it has over digital platforms and why there needs to be regulation.

The ACCC is currently in the midst of a five-year inquiry into markets for the supply of digital platform services, named the Digital Platform Services Inquiry (DPSI).

In September last year, at the halfway point of the DPSI, the ACCC recommended the Australian Government implement significant regulatory reforms to promote competition and protect consumers in digital platform markets.

Speaking at the KWM Digital Future Summit 2023, Gina Cass-Gottlieb, chair at the ACCC told attendees the three reasons why these digital reforms are necessary.

First, digital platform markets feature a unique combination of characteristics that make them prone to competition issues.

Cass-Gottlieb said one of these characteristics is the important role of data.

“Access to vast amounts of high-quality user data has provided a considerable competitive advantage to established platforms, which can use this data to train algorithms and offer improved and personalised services,” she said.

“As digital platforms expand into new markets – artificial intelligence, health services, information storage, and financial products, to name a few – they benefit significantly from the opportunity to combine user data collected across services.”

Cass-Gottlieb argued that these data-related factors, in combination with other factors like strong network effects and large economies of scale, contribute to high barriers to entry and expansion in digital platform markets and increase the potential for harm.

Gatekeeping

Second, Cass-Gottlieb said some large digital platforms have significant market power and act as gatekeepers between consumers and businesses.

She said this gives these large platforms the ability and incentive to engage in strategic conduct to entrench their market power and extend it into other related services.

“The ACCC has observed a range of conduct by digital platforms that can entrench their market power and reduces competition,” she said.

“This conduct includes self-preferencing; bundling and tying; exclusivity agreements; impeding switching; denying interoperability; and withholding access to important hardware, software, and data inputs.”

When gatekeeper platforms engage in this sort of anti-competitive behaviour, it exacerbates the already high barriers to entry and expansion faced by rivals that lack access to large data sets, Cass-Gottlieb said.

“An example of this is when app store providers use non-public data collected in the provision of app store services that helps the development of their own apps in competition with rival developers,” she explained.

“Or, when platforms make it unnecessarily difficult for users to transfer their own data to another platform’s equivalent service, thereby discouraging consumers from switching.”

Competition and consumer harms

Throughout the ACCC’s digital platforms work, they have established a strong evidence base of the competition and consumer harms related to digital platforms.

Consumers and businesses face less choice, diminished innovation and quality, and pay higher (monetary and non-monetary) prices, Cass-Gottlieb explained.

“We also know most Australian consumers are uncomfortable with how their personal information is handled by digital platforms, and expect to be able to participate in the digital economy without excessive tracking,” she said.

“Other key concerns for consumers include scams, a lack of effective dispute resolution options, and an inability to make informed choices online.”

While Australia, like many other countries, has robust competition and consumer laws, Cass-Gottlieb explained that these laws are insufficient by themselves to address the harms they have identified.

“Investigation and enforcement action can take considerable time. Even successful litigation and available remedies may have limited ability to address systemic and widespread harmful conduct after it has occurred,” she said.

“Digital platform services markets are fast-moving and our regulation must be able to keep pace with the rate of technological change.”

New tools

For these reasons, Cass-Gottlieb said new regulatory tools are necessary.

“We’ve recommended new service-specific mandatory codes of conduct for particular ‘designated digital platforms,’ based on principles set out in legislation,” she said.

“Each code would introduce targeted obligations to address the types of anti-competitive conduct most relevant to that service.”

Cass-Gottlieb explained that this framework would allow for dynamic and flexible measures that could be targeted and tailored to relevant digital platform services and apply only to particular platforms with the ability and incentive to harm competition by engaging in anti-competitive conduct.

“To give a hypothetical example of how such codes could address data-related barriers to entry and expansion, an app marketplace code could prohibit designated digital platforms from using non-public data collected from the app review process to develop their own apps (for example, through data separation requirements),” she ended.