New competition regime for digital platforms

The Australian Government has recently released a proposal paper setting out a new ex ante regime of competition regulation for digital platforms operating in Australia.

Why has this been proposed?

The proposed regime is a response to concerns raised by the Australian Competition and Consumer Commission (ACCC) that Australia’s existing competition law framework may be inadequate to regulate digital platform markets. The rationale for singling out digital platform markets is expressed to be that they are fast-moving and dominated by a small number of large "big tech" firms.

The competition notice regime for telecommunications in Part XIB of the Competition and Consumer Act 2010 is underpinned by similar policy considerations but has ultimately proven to be very lightly used since its introduction in 1997. 

What has been proposed?

The regime introduces a process for digital platforms to be "designated" based on assessment of certain quantitative and qualitative factors. Under this framework, the ACCC would conduct a designation investigation into entities identified by either the ACCC or the Minister, assessing whether they meet the criteria for designation. The ACCC would also have the authority to exercise its information-gathering powers to request documents and data to support its evaluation. Designation investigations would be required to be completed within six months, unless extended by the ACCC.

Once an investigation is complete, the ACCC would provide its findings to the relevant minister who will make the designation decision. Following designation, a platform will be subject to both general and service-specific obligations. 

What Are the General and Service-Specific Obligations?

General Obligations will be set out in primary legislation (likely the Competition and Consumer Act), targeting anti-competitive conduct that the ACCC has previously identified as common across digital platform services, such as:

• Self-preferencing: restrictions on conduct that favours a platform’s own products or services over competitors.
• Tying: restrictions on requiring customers to use one product or service in order to access another.
• Unfair treatment of users: ensuring that users are treated equitably and not subject to unfair practices.

Service-Specific Obligations will be included in subordinate legislation and will apply to specific digital services. The Government has indicated that app marketplaces and ad tech services will be prioritised for service-specific obligations.

Who will be affected? 

The following services have been identified as ‘priority services’ for investigation and potential designation under the new regime:

• app marketplaces (Apple App Store, Google Play); 
• ad tech services (Google Ads and Google Ad Manager); and
• social media services (Facebook, Instagram, TikTok).

These services have been identified due to concerns about transparency, interoperability, self-preferencing, and tying conduct that could harm long-term consumer interests.

How will digital platforms be designated?

The criteria for designation are yet to be finalised but will likely include both quantitative and qualitative factors. Quantitative factors may include revenue thresholds, user numbers or market capitalisation. While qualitative factors would be focused on the extent to which a given digital platform has market power and holds "a critical position in the Australian economy". 

The proposal suggests that the thresholds for designation could be aligned with international regimes, such as the EU and UK. For example, the EU has the following criteria:

• an annual turnover of at least EUR 7.5 billion in each of the last three financial years, or a market capitalisation of at least EUR 75 billion in the past financial year; and
• at least 45 million monthly active users and 10,000 yearly active business users in the EU.

In the UK, the threshold is based on annual global turnover exceeding GBP 25 billion, or annual UK turnover exceeding GBP 1 billion.

However, the qualitative factors that have been proposed are arguably more complex and generally out of step with the thresholds adopted in the EU and UK which tend to be objective and readily ascertainable without reliance on a significant amount of economic and technical evidence. 

The extent to which designation decisions will be subject to merits and judicial review is not yet clear and will be considered by the Treasury.

Who Will Enforce the New Regime?

The ACCC will be responsible for overseeing compliance with the new regime. This includes investigating breaches and imposing penalties, which may be significant. Penalties for non-compliance are proposed to mirror those under the Competition and Consumer Act, with maximum penalties of either:

• A$50 million;
• three times the benefit obtained from the breach; or
• 30 per cent of the adjusted turnover during the breach period.

Providing the ACCC with the power to issue infringement notices as an alternative to applying to the courts for a pecuniary penalty order also remains under consideration.

Why Does This Matter?

While the proposal currently targets major digital platforms such as Apple, Google, and Meta (Facebook), it is likely that other providers of ‘priority services' will come under scrutiny as the regime expands. 

In addition, the proposal has already identified a non-exhaustive list of other digital services that could potentially be included in the regime in the future:

• digital content aggregation platforms, such as news aggregators (Flipboard), music and podcast aggregators (Spotify, Apple Music), e-book aggregators (Amazon Kindle, Audible), content aggregators (Reddit, Twitter, Pinterest); 
• search engine services (Google, Bing, Yahoo); 
• electronic marketplaces (Amazon, eBay); 
• video-sharing platforms (YouTube, Vimeo); 
• online messaging services (WhatsApp, Messenger);
• operating systems (Android, iOS);
• web browsers (Chrome, Safari); 
• virtual assistants (Siri, Alexa);
• cloud computing services (Amazon Web Services, Microsoft Azure, Oracle Cloud); and
• media referral services (LinkedIn, Tumblr).

What's Next?

The Government is currently accepting submissions on the proposal paper, with a deadline of Friday, 14 February 2025.