The expansion of Google, Amazon, Apple, Meta, and Microsoft into emerging technologies and other interconnected products is increasing the risk of competition and consumer harm, according to the Australian Competition and Consumer Commission’s latest report, bolstering the watchdog’s push for regulatory reform.
The Australian Competition and Consumer Commission’s (ACCC) examined the expanding ecosystem of the five largest platforms, finding they have moved significantly beyond core offerings and introduced new risks to consumers’ lives.
From origins in internet search and social media, for example, some of the big tech firms have expanded into generative AI, digital health services, information storage, education, and financial products.
“The continued expansion of digital platforms has also increased the risk of those platforms engaging in harmful behaviour, such as invasive data collection practices and consumer lock-in practices that can reduce choice and stifle innovation,” ACCC chair Gina Cass-Gottlieb said.
The findings support the ACCC’s earlier recommendations to update competition and consumer laws to “ensure consumers and businesses continue to benefit from the opportunities created by digital platform services”.
Those earlier recommendations, published in the fifth interim report in November 2022, include targeted consumer protections and an enforceable service-specific codes of conduct that target anti-competitive self-preferencing, tying and exclusive pre-installation arrangements as well as barriers to switching between platforms and increasing transparency of market participants.
The ACCC announced in March it would begin the probe into the “expanding ecosystems” of the five biggest digital platforms for its seventh interim report from the five-year Digital Platform Services Inquiry.
The report was released Monday, two months after it was due to be handed to Treasury at the end of September.
The biggest platforms were found to be making “substantial investments in research and development and buying smaller companies” in areas like generative AI and virtual reality, putting them in “strategically important positions” in the developing digital economy.
While high levels of investment can support innovation that can be plugged into an existing digital platform ecosystem, digital platform service providers “may have the ability and incentive to inhibit innovation to protect their core markets from being disrupted, for example, through limiting interoperability with rivals or potential rivals”, the repot said.
Ms Cass-Gottlieb said this is “further evidence that we need to ensure our competition laws are fit-for-purpose to respond to the potential challenges posed by these technological and market developments”.
While the economies of scale produced by expanding digital platform ecosystems can benefit consumers by lowering the cost of access, they can also raise barriers to entry for new innovative firms.
This could include the development of so-called ‘kill-zones’, where venture capitalists may be “reluctant to fund businesses in sectors that compete directly or have the potential to compete with digital platforms, which may also play a role in hampering investment and innovation”, the report said.
In addition to the risk of diminishing economy-wide innovation, the ACCC highlighted that consumers are at risk of losing control over their personal data in increasingly complex and interconnected service environments.
“For example, Amazon, Apple and Google collect vast amounts of consumer data through smart home devices. It’s not always clear from the relevant privacy policies if the data collected exceeds that which is needed for device functionality or product improvement,” the ACCC said in a statement.
Control of personal data may be lost through “digital platforms nudging or requiring users to share more data than they are aware of or more than they would otherwise be prepared to share to access services within a digital platform’s ecosystem”, the report notes.
Ms Cass-Gottlieb also flagged that consumers may be forced to agree to unfavourable terms and conditions and “unpalatable data collection practices due to a lack of suitable alternatives or because it is simply too inconvenient or costly to move out of that ecosystem”.
While Ms Cass-Gottlieb said the huge investment by digital platforms is “having a transformative effect on our society and economy” that must be addressed.
“Robust competition is critical for markets to function well. As the digital economy evolves and the ecosystems of digital platforms continue to expand, we must be equipped with the appropriate regulatory tools to ensure effective competition in these markets.”
Do you know more? Contact James Riley via Email.