Why it is now clear that the Australian ex ante regime will be much closer to the proposed UK regime than the EU Digital Markets Act

On 11 November 2022, the Australian Competition and Consumer Commission (“ACCC”) released the fifth interim report for the Digital Platform Services inquiry (the “Interim Report”). This report recommends a range of new measures to address harms from digital platforms to Australian consumers, small businesses and competition.

The diagnostic of the ACCC is not different from what could already be found in similar reports produced in Europe and the United States. The ACCC notes that its analysis had “identified significant consumer and competition harms across a range of digital platform services” and that the “conduct causing these harms is widespread, entrenched and systemic.”

The ACCC also found that existing laws, and in particular competition law, had “proven insufficient in Australia and overseas to address such conduct quickly or effectively, further increasing the risk and magnitude of harm.” Hence, it “recommends new and strengthened laws to better protect Australian consumers and small businesses, who are increasingly reliant on digital platforms, and new measures to promote competition in the supply of digital platform services.”

The most interesting question is, of course, what these new and strengthened laws will eventually look like. On 28 February 2022, the ACCC published a discussion paper outlining various options that could be taken to address the problems identified above and in reading this new report I was particularly interested in finding which of these options the ACCC recommends.

So far, we have observed three different approaches to ex ante regulation:

• The EU Digital Market Act (“DMA”), which seeks to promote contestability and fairness in digital markets. With that aim in mind, the DMA applies a set of obligations to designated gatekeepers (with designation being based primarily on quantitative criteria), independently of their business model.

• The UK ex ante regime, laid out in the UK Government’s consultation “A new pro-competition regime for digital markets”, suggests that the Parliament should adopt a legislation setting the high level “objectives”, with the detailed “principles” to be written by the Digital Markets Unit (“DMU”) embedded in the CMA. The regime would apply to firms with Significant Market Status (“SMS”), with each SMS firm getting its own principles and guidance encapsulated in a Code of Conduct.

• The US approach is more fragmented as it revolves around several individual bills, such as the American Innovation and Choice Online Act (“AICO”) and the Open App Markets Act (“OAMA”) whose legislative fate is unclear.

Of these approaches, I have always felt that the UK model was the most promising one because it was more flexible and could account for differences in business models. Unfortunately, progress has been impeded by the fact that the Government has not yet tabled the enabling legislation to Parliament.

The ACCC’s fifth report makes it clear that the proposed regime would be conceptually close to the proposed UK regime (with some differences, however). Its main components would be as follows:

• The first component would be the passage of primary legislation with three main elements: (i) a power given to the relevant regulator to make service-specific mandatory codes of conduct for Designated Digital Platforms; (ii) broad principles to guide the scope of these codes, and (iii) a power for a decision maker (either the relevant regulator or a government minister) to designate digital platform firms in respect of the provision of particular services, alongside clear criteria for making this designation decision.

• Once empowered to do so by the new legislation, the relevant regulator would initiate the code development process for one or more codes. Each code would set out detailed obligations within the scope of the principles in the primary legislation. These obligations would be specific to, and tailored to, the type of digital platform service the code applies to.

• The designation decision “would likely be made in parallel to, or after, a relevant code of conduct has been developed. However, the designation of a digital platform firm would not by itself apply any new obligations to that platform until or unless a relevant code has taken effect.”

Thus, as in the case of the proposed UK regime, the regulatory obligations applying to designated firms would be included in codes of conduct, which would implement in greater detail the broad principles comprised in legislation. The difference with the UK regime would be that these codes would not concern a given company, but a given type of digital platform service. For instance, the Interim Report evokes a “code of conduct for search services”, a “code of conduct for ad tech services”, etc. These codes of conduct would then apply to the designated platforms for such services.

The Interim Report discusses a series of targeted obligations that could be included in the codes of conduct to address the following sources of harm:

• anti-competitive self-preferencing;
• anti-competitive tying;
• exclusive pre-installation and default agreements that hinder competition;
• impediments to consumer switching;
• impediments to interoperability;
• data-related barriers to entry and expansion, where privacy impacts can be managed;
• a lack of transparency;
• unfair dealings with business users; and
• exclusivity and price parity clauses in contracts with business users.

The type of interventions that the Interim Report suggests are very much in line with the obligations contained in the DMA with the Interim Report citing these obligations as a possible source of inspiration.

One of the oddities of the Australian approach is the incredibly long timeline for the regulation of digital platforms with the Digital Platform Services Inquiry being run from 2020 to 2025. After issuing six reports during that period, the ACCC will issue its final report on 31 March 2025. If we consider that it will take some additional time to adopt legislation and to design codes of conduct, the first obligations binding digital platforms will only come in 2027-28 under an optimistic scenario. This is peculiar considering that the ACCC was one of the first authorities to recognize that some of the conducts of these platforms can create significant harm and that urgent intervention is needed.

Photo by Johnny Bhalla on Unsplash