Amazon, Apple, Google and other Big Tech companies face the prospect of an EU-style ex ante digital competition regime in Australia after the federal government agreed to progress work on a new regulatory framework.
The framework could see the creation of mandatory service-specific codes for designated digital platforms to prevent anti-competitive conduct like self-preferencing. Ex ante rules are those that are imposed ‘up front’ or ‘ahead of time’.
Treasury is set to begin work on the “design and form of a possible legislation framework” in 2024, with the government acknowledging that “extensive consultation” with industry will be needed before any new regulation is introduced.
The government provided in-principle backing for the ex ante framework in its response to the Australian Competition and Consumer Commission’s sixth report from the Digital Platforms Services Inquiry on Friday.
In its September 2022 report, the ACCC argued existing competition law was “unlikely to adequately protect and promote competition” on digital platforms and that enforceable, service-specific codes were needed to prevent anti-competitive conduct before it occurs.
It said the codes would target anti-competitive self-preferencing, tying and exclusive pre-installation arrangements, and could also improve consumer switching, information transparency and interoperability between different services.
Similar laws have already been introduced in Europe in the form of the Digital Markets Act and the Digital Service Act, while the United Kingdom is progressing its Digital Markets, Competition and Consumer Bill.
“Targeted and detailed ex ante regulatory obligations that limit the scope for anti-competitive conduct would protect competition, while providing necessary clarity and certainty to participants in digital platform markets,” the ACCC said in its report last year.
In its response to the report, the government agreed in-principle that digital market power has led to anti-competitive practices like self-preferencing, impacting consumer choice and bargaining power.
“The evolution of digital platforms has provided significant benefits for consumers and businesses, reducing the cost of a variety of transactions and providing new services, often at low or no direct cost,” it said in the response.
“However, the government agrees that due to the unique nature of the digital economy, some platforms play a gatekeeper role for consumers and businesses and have entrenched market power in particular services.”
With the introduction of any new ex anti regime expected to be a “significant undertaking”, the government has tasked Treasury with beginning work on the “design and form of a possible legislative framework”.
“The outcomes of this work would be informed by extensive consultation on an appropriate framework and governance mode,” the government said, adding that it would “take a harms-based approach to prioritising this work”.
“Part of designing the new framework would include considering the broader allocation of powers for the regulator to enforce the regime and undertake roles under other reforms,” the government said.
“This will include considering providing the ACCC with information-gathering powers to assist with preparing periodic reports to the government under the News Media and Digital Platforms Mandatory Bargaining Code.”
The government has also backed other recommendations for improved dispute resolution processes, but has asked digital platforms to come up with a set of voluntary standards over the next six months as a first step.
It has also asked Treasury and the Department of Infrastructure, Transport, Regional Development, Communications and the Arts to undertake further work to consider options to improve the dispute resolution processes available to users of digital platforms.
The ACCC has welcomed the government’s in-principle agreement to progress work on the ex ante regime, noting that services provided by Google, Apple, Meta, Microsoft and Amazon are used by most Australians everyday.
“These digital platforms are often unavoidable ‘gatekeepers’ between Australian businesses and consumers, giving them huge influence across the whole economy,” ACCC Acting Chair Catriona Lowe said.
“The proposed reforms will ensure fairer and more transparent treatment of small and medium-sized businesses, allowing Australians to fully realise the benefits of participating in the digital economy.”
Reset Australia, which this week released a report showing vulnerable Australians’ activity is being tracked and traded online, also backed the government’s response, arguing that Australia is “now lagging behind numerous overseas jurisdictions on digital competition”.
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