Digital Platform Services Inquiry: The road so far, and what to expect in 2022

Mihkel Wilding, Damiano Fritz, Annie Achie and Minnie Wu
20 Dec 2021
The ACCC's Digital Platform Services Inquiry is in full swing, and is set to report in September 2022 on regulatory reforms to address the matters identified in three interim reports so far.

On 10 February 2020, the Australian Government directed the Australian Competition and Consumer Commission (ACCC) to conduct a five-year inquiry into markets for the supply of digital platform services and their impacts on competition and consumers (the Digital Platform Services Inquiry or DPSI). The DPSI follows the ACCC's Digital Platform Inquiry of 2019 (DPI).

The ACCC has released three interim reports as part of the DPSI:

  1. Online private messaging (September 2020)
  2. App marketplaces (March 2021)
  3. Search defaults and choice screens (September 2021)

We summarise below the key takeaways from each of the three reports released so far (with two other reports scheduled for release in 2022).

Online private messaging services (October 2020)

The first DPSI interim report focused on online private messaging services in Australia offered by a wide variety of platforms. Online private messaging services encompass a range of services, including text, audio and video messaging services.

In its report the ACCC identified potential consumer concerns relating to:

  • the display of sponsored search results on mobile devices, and the extent to which sponsored content can reduce the ability of consumers to obtain information through search that best suits their needs;
  • the tracking of users' online activity, including the ability of new products and services (such as voice assistants and augmented and virtual reality services) to increase providers' ability to collect consumer data;
  • consumers' allegedly limited understanding of the data practices that they consent to;
  • scams on digital platforms, which the ACCC has found to be increasing (with an 89% increase in scam activity in 2021 compared to 2020).

The private messaging services report elaborated further on the ACCC's earlier concerns expressed in the DPI that standard contract terms between Australian businesses and platforms for advertising could be considered "unfair" within the meaning of the Australian Consumer Law (ACL). The ACCC specifically noted its view that many standard-form contracts relating to private messaging services often confer broad discretions on platforms and limit the ability of businesses to address issues as and when they arise due to dispute resolution clauses benefiting the platform not users (including as choice of forum, exclusive jurisdiction clauses, and confidentiality restrictions).

App marketplaces (March 2021)

The second interim report considered the distribution of mobile apps to the users of smartphones and other mobile devices. App marketplaces are a critical gateway to reach consumers given the ubiquity of smartphones globally and in Australia. Examples of app marketplaces include Google Play and the Apple app store.

In its report, the ACCC did not make any recommendations and instead proposed a number of "potential measures" including:

  • requiring app marketplaces to provide users with information about alternative payment options, and removing restrictions on developers from offering such alternatives;
  • increasing transparency about how and when key algorithms operate and what this means for what users see;
  • addressing the risk of self-preferencing in app marketplace discovery. The ACCC is concerned that app store operators may have the ability and the incentive to favour their own first-party apps at the expense of rival third-party apps, and that such conduct may have anti-competitive effects on downstream markets (for example, by allegedly pre-installing or setting as defaults first-party apps; greater discoverability for first-party apps on marketplaces; or greater device functionality for first-party compared to third-party apps);
  • providing an option for consumers to rate and review first-party (ie, pre-installed) apps;
  • providing consumers with greater choice over default apps and app settings;
  • requiring app marketplaces to take further steps to address the risks of malicious, exploitative or otherwise harmful apps; and
  • addressing the perceived risks of app marketplaces misusing the commercially sensitive information of their downstream competitors.

Web browsers and search services (October 2021)

In its third interim report, the ACCC explored how web browsers and general search services are offered to consumers, and whether consumers have a genuine choice in what they are offered.

The ACCC determined that many browsers are offered to consumers by default and that most consumers continue to use the default web browser and search service they are initially offered instead of switching to another provider. Of particular concern to the ACCC is that:

  • consumers are likely to remain with what is offered to them and may not always know how to change their browser or search engine, or be aware of alternative services; and
  • the architecture of device ecosystems can exacerbate default biases and harm consumer choice.

In its report, the ACCC recommends the implementation of a mandatory choice screen, which the ACCC would have the power to develop and implement. "Choice screens" have been considered in other jurisdictions, most notably in the EU, where Google voluntarily implemented a choice screen for Android in 2019. Choice screens aim to allow for more easily choice by consumers of which search engine to use on their devices. The choice screen would provide users with a selection of search engine options, thereby increasing consumer awareness of rival services. The ACCC has said that the design and scope of any mandatory choice screen would be the subject of industry consultation, and proportionate to the competition and consumer choice issues identified in the report (which minimising any adverse efficiency effects).

The ACCC also proposed that it be given additional powers to improve competition and consumer choice in the supply of search engine services, which could include limit the ability of a "deemed" search engine provider (the criteria for which have not been explained) to:

  • tying or bundling their supply of search engine services with their supply of other goods or services; and
  • paying for certain default positions, subject to further consideration of the likely impacts of this measure on the business models of OEMs and browser suppliers.

The ACCC has suggested that these measures might also involve mandating such a provider to:

  • provide access to its click-and-query data, and potentially other datasets, subject to extensive consideration of privacy impacts, and careful design and ongoing monitoring to ensure there are no adverse impacts on consumers; and
  • when providing syndicated search results to downstream search engines, do so on fair, reasonable and non-discriminatory terms.

Upcoming reports: Retail marketplaces and regulatory reform

The ACCC is set to release two further DPSI interim reports in 2022. The first will consider online retail marketplaces, including:

  • current trends in online shopping and online retail marketplaces;
  • relationships between marketplaces and third party sellers and marketplaces and consumers; and
  • the conduct of marketplaces acting as platforms/facilitators.

The second report in 2022 will consider whether there is a need for regulatory reform to address the competition and consumer concerns that the ACCC has expressed in digital platform services markets to date, in particular:

  • competition and consumer issues identified in the course of the DPSI to date;
  • competition and consumer issues identified in the Digital Advertising Services Inquiry and DPI (to the extent that these matters fall within the scope of the DPSI); and
  • whether there is a need for sector specific regulation to address these issues and supplement Australia’s competition and consumer law, and if so, what these changes could include.
Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.