ACCC recommends new laws for digital platforms

Digital platform providers would be required to verify certain business users such as advertisers, app developers and merchants under laws proposed by the Australian Competition and Consumer Commission (ACCC).

The laws have been recommended by the consumer watchdog to address harms from digital platforms to Australian consumers, small businesses and competition. They are listed in the fifth report of the ACCC’s five-year Digital Platform Services Inquiry, published this week.

The report proposes mandatory codes of conduct for certain platforms and services to protect and promote competition. It also reiterates the ACCC’s support for a new economy-wide unfair trading practices prohibition.

The ACCC report recommends new laws requiring digital platforms to:

1. provide user-friendly processes for reporting scams, harmful apps, and fake reviews, and to respond to such reports
2. reduce the risk of scams by verifying certain business users such as advertisers, app developers and merchants
3. publish review verification processes to provide important information to readers of online reviews to help them assess the reliability of reviews on the platform
4. report on scams, harmful apps and fake reviews on their services, and the measures taken to address them
5. ensure consumers and small businesses can access appropriate dispute resolution, supported by the establishment of a new digital platform ombuds scheme.

The ACCC has seen an increase in the availability of inappropriate and fraudulent apps on app stores and fake reviews on search, social media, app stores and online marketplaces.

“These problems have been made worse by a lack of avenues for dispute resolution for consumers and small businesses, who often simply give up on seeking redress because they cannot get the digital platforms to properly consider the problem,” said ACCC Chair Gina Cass-Gottlieb.

Cass-Gottlieb said that the “expansion of digital platform services has also created risks and harms that our current consumer and competition laws are not always able to address.”

The watchdog sees digital platforms that host or otherwise act as intermediaries between scammers and their victims as being in a unique position to identify and stop scams and remove harmful apps.

“The critical positions that digital platforms hold, as ‘gatekeepers’ or ‘intermediaries’ between businesses and consumers, mean they have a broad influence across the economy, making the reforms we are recommending crucial and necessary for all Australians,” Cass-Gottlieb said.

Without effective regulation, the ACCC claims, large digital platforms can incentive to engage in conduct that is harmful to competition. This includes preferencing their own services, or imposing arrangements where users digital products or services are pushed to use another service or product, such as smart phones pre-loaded with a certain bundle of apps.

The watchdog recommends a new regulatory regime to work alongside Australia’s existing competition laws that would address anti-competitive conduct, unfair treatment of business users and barriers to entry and expansion by potential rivals. It is calling for service-specific codes of conduct that apply to designated digital platforms.

“This would ensure the obligations are appropriately targeted to particular competition issues present in specified digital platform services, allow consultation with stakeholders, and provide the flexibility to address emerging and new forms of harmful conduct,” Cass-Gottlieb said.

Service-specific codes of conduct could include obligations to prevent anti-competitive self-preferencing, tying and exclusive pre-installation arrangements, address data advantages, ensure fair treatment of business users and improve interoperability and transparency.

In early 2020, the Australian Government directed the ACCC’s Digital Platforms Branch to conduct a five-year inquiry into markets for the supply of digital platform services in Australia and their impacts on competition and consumers.

“Losses reported to Scamwatch from scams conducted via social networking and mobile apps almost doubled in the last year between 2020 and 2021, with $49 million recorded in 2020 compared with $92 million in 2021. This shows that digital platforms need to do more to stop their users from being scammed.”

“Our analysis has identified concerning consumer and competition harms across a range of digital platform services that are widespread, entrenched, and systemic,” Cass-Gottlieb continued.

Despite these numbers, only an estimated 13 percent of victims report their scam to Scamwatch, according to the ACCC, suggesting the losses are significantly higher.