Australia was an early pioneer of digital markets analysis and regulation, having investigated these issues since 2017. The ACCC has highlighted concerns about competition in digital markets in nine excellent reports during its 5-year Digital Platform Services Inquiry, which concludes in March 2025. In September 2022, the fifth report set out the concrete recommendations for a new ex-ante digital markets regime. Meanwhile, Australia introduced the world’s first payment for links regulation that aimed to give news publishers a fair share of the money being made from their work online. It grabbed the headlines last week when it passed a law banning the use of social media by under-16 children. Australia has a good claim to being the world’s digital regulation ideas factory.
The implementation of the digital markets regime had lost some momentum in recent years, so it is pleasing to see that the government launched its consultation on the implementation of the new regime yesterday. It is described as being similar to the equivalent regimes in the EU, the UK, Germany, Japan, India and Brazil. In fact, it is arguably closest to the UK’s Digital Markets, Competition and Consumers Act, with just a sprinkling of the EU’s approach because there will be some obligations laid out in the primary legislation. As will be explained in further detail below, this may give them the best of both worlds if enacted in the best way.
Responses to the consultation are due by 14 February 2025, and would obviously make a perfect Valentines present for that digital markets enthusiast in your life!
Legal framework
The proposal is to amend the Competition and Consumer Act 2010 (“CCA”) to introduce the core features of the regime such as designation, certain key obligations, enforcement and compliance mechanisms and a framework for making subordinate legislation. Subordinate legislation would then impose further detailed obligations on the designated digital platform services at the service level, which would be developed by the government and ACCC. The framework would provide the ability to designate companies in respect of specific services in primary law and also impose certain key obligations to address the most well-established competition harms. The ACCC will administer the regime. It is clearly the right body to do so, having built up a deep expertise in these issues.
The regime seems to fit more easily within the CCA than it would have fitted into the traditional UK or EU competition legislation because the CCA casts its remit slightly wider than purely competition considerations. Its objectives span competition, fair trading and consumer protection, and these three objectives seem well suited to providing an umbrella for the digital markets regime. To characterise some aspects of the sector, such as choice architecture or the protection of journalism, purely in terms of competition is to miss some of their essence. For this reason, it was a shame that explicit consumer protection objectives fell out of the UK’s regime during its many consultations and changes of prime ministers and business ministers, so hopefully Australia will avoid that misstep.
The designation process will be familiar to UK readers as it will include both quantitative and qualitative factors. However, there are slight differences. For example, if a company does not meet the quantitative criteria in the UK process, it is not eligible for designation, whereas in Australia it seems that designation is still possible in that situation. Also, the Australian timeframe for designation is six months, which is three months quicker than the UK.
Hybrid model for imposing obligations
The framework for imposing the obligations on the designated companies is where the Australian proposals aim to triangulate between the UK and EU models.
There are some basic obligations that are well established, so they will be written into the primary legislation. The consultation document gives the examples of self-preferencing, tying, impediments to switching, restrictions to interoperability, unfair treatment, and a lack of transparency. Importantly, it is not currently clear how detailed these provisions will be. We hope that they can be fairly detailed so that they are capable of being implemented on a standalone basis while the more service-specific obligations are being considered. If they are not detailed enough, the obligations in the legislation will not be enforceable and the Australian approach will not materially differ in practice from the UK approach. The consultation calls the Australian approach a “hybrid” between the UK and EU approaches, but that does not seem guaranteed at this stage.
With the right level of detail, this approach will help the Australian regime to be implemented quickly, as soon as a company has been designated. It will also minimise the opportunities for the designated companies to drag them through the courts.
The legal framework in the legislation would then set up a process for more detailed obligations to be imposed through secondary legislation. The policy decision is that these more technical obligations, which would apply to individual companies and specific activities, will need more careful design. The government hopes that this will avoid the “whac-a-mole” issue that the European Commission has encountered (and this may be the first official document to use the apt phrase “malicious compliance” to describe the way in which companies choose to implement digital regulations). The government says that the legislation will allow obligations to apply outside the designated activity to cover the situation where market power is being leveraged to neighbouring activities.
It seems that the dividing line between the broad rules that are in the primary legislation and the service-specific rules that will be in secondary legislation is whether the rule should apply to all designated firms or not. I query whether this is the right definition. For example, why couldn’t an obligation to allow alternative app stores and direct downloading be written into the primary legislation even if it applies only to operators of mobile operating systems? At this stage, it is well established that this requirement is necessary.
The consultation document mentions giving the ACCC the power to adopt technical rules on its own initiative, but it remains to be seen if these will be minor technical issues or more substantive remedies. The document implies the former at this stage.
Political involvement
The Australian proposal includes ministerial involvement to a greater extent than the UK and EU. The minister can direct the ACCC to open a designation investigation. Then, at the end of the investigation, the ACCC merely recommends a designation to the minister who makes the final decision. There are of course pros and cons to this approach. On the one hand, the minister has more democratic legitimacy that an unelected regulator, and is better-placed to take policy decisions that significantly affect the country’s economy. However, on the other hand, it is sometimes useful for a politician to defer to a technocratic regulator when decisions that anger powerful companies are being made. Challenger companies will worry about the lobbying power of Big Tech, although there is little evidence of their lobbying success in recent years given the news bargaining code and the social media ban for under-16s. Basically, it comes down to a judgment about whether the decision is a political one or an analytical one. The UK has decided it is the latter, whereas Australia is leaning towards the former. In most cases, it will not make any practical difference, but it is sometimes the edge cases that are most important in the success of a significant policy intervention. Personally, I am not averse to some proportionate political involvement in digital markets regulation, but I know that many competition lawyers are allergic to it.
Similarly, even the more detailed secondary rules will not be adopted by the ACCC on its own. The regime will require subordinate legislation and therefore government approval for all the obligations on the designated companies (except for the “limited power” to write rules on “matters of technical detail” to facilitate the ACCC’s “ongoing administration and enforcement”). It therefore remains to be seen to what extent the ACCC’s recommendations will be accepted, and to what extent the addition of the political process at the end of the ACCC’s process will delay and obstruct the efficient operation of the regime.
Another aspect of political involvement is that governments tend not to impose strict deadlines on themselves. The only deadline in the consultation document is for the ACCC to deliver its recommendations about which companies to designate. There is no deadline for making the subordinate legislation, for example. As a general rule, the greater the political involvement, the greater the scope for delay.
Priorities
Unlike in the UK, the Australian government is explicitly stating which markets it believes should be designated first. It is proposing that the ACCC should start with app marketplaces (defined to include operating systems and app stores, but browsers are not mentioned) and ad tech (defined to include display advertising, but not search advertising). It is also seeking views on whether social media should be prioritised.
It is interesting that search engines are excluded from this list, and the omission is not explained in the consultation document. Is it because they doubt the search market would offer any quick wins due to it having tipped so comprehensively in Google’s favour? There could be a reasonable argument that the best place to make prompt improvements to the digital ecosystem is in app marketplaces and ad tech, especially in a jurisdiction that already has a news bargaining code that applies to Google and Meta. However, competing search engines and specialised search companies (shopping, travel, local services) would strongly disagree. And many might argue that the search market more directly impacts consumers than ad tech.
Amazon is also missing from the discussion, but this is understandable. Amazon is a huge issue in jurisdictions such as the US, UK, Italy, Germany and France, but it has a relatively smaller presence in Australia for now. Nevertheless, rest assured that Amazon concerns are on their way. It already has revenues of over $3 billion in Australia, Goldman Sachs says it’s the now second largest online retailer, it has invested over $15 billion in the country, and it is growing fast.
International compliance
An innovative aspect of the Australian regime is that the ACCC will be able to take account of a company’s compliance activities in another country. If the company commits to rolling them out in Australia, and the ACCC is satisfied with them, the company would be deemed to meet some or all of the obligations that apply to the platform under the Australian regime. This seems a good idea. It is arguably implicit in other regimes such as the UK’s, but it could help the development of a worldwide approach to addressing the lack of competition in digital markets.
Conclusion
The Australian proposals are thoughtful and well-designed, although they are still not very detailed at this stage. There is time for these proposals to develop significantly when they are converted into draft legislation and then travel through the legislative process.
The ACCC will be given less autonomy than the UK’s CMA, but perhaps this will mean it will also therefore have the political backing it needs. In the UK, it is not at all clear at this stage that the government will support its more controversial decisions, and that could be a significant drag on the CMA’s ability to open up digital markets to competition.
The consultation document explicitly positions the Australian regime as a “fast follower” of other leading jurisdictions. This seems too modest as Australia was previously in the vanguard on these issues. Its competition authority has a lot to offer and it could and should move forward together with jurisdictions like the UK, India and Brazil (all of which will soon draw level with the EU, which is bearing the brunt of the early examples of “malicious compliance”).