Chapter 3Competition

Overview

3.1Market dominance of Big Tech has raised several concerns for competition. Submitters suggested that Big Tech firms have substantial market power that makes it difficult for other businesses to compete, resulting in less innovation and limited choices for consumers.

3.2This chapter discusses a range of concerns raised by submitters in relation to:

vertical integration, mergers and acquisitions;

self-preferencing;

tying; and

interoperability.

3.3This chapter will then discuss proposed solutions to digital platform competition issues, including the adoption of principles-based legislation or industry codes.

Vertical integration, mergers and acquisitions

Vertical integration

3.4As tech companies have grown to become some of the largest firms in the world, they have increasingly engaged in a practice called ‘vertical integration’.

3.5Vertical integration is a business expansion strategy where companies acquire additional levels of the supply chain. Companies can integrate vertically by building additional operations, or through mergers and acquisitions.[1]

3.6Vertical integration allows companies to limit reliance on competitors for other services and gives companies the opportunity to have full control of the processes related to their operations. It also grants competitive advantages such as allowing firms to gather larger suites of data and improved customer insights, which can lead to higher quality products and services, and increased profits.[2]

3.7An example of a vertically integrated company is shown in Figure 3.1 below. In the case of Apple, it controls multiple levels of the phone supply chain, including design and sales of devices, the iOS operating system on those devices, the Apple App Store, and apps such as the Safari browser.[3] Google pays Apple around US$7 billion annually to be the default search engine for Safari.[4]

Source:Australian Competition and Consumer Commission, Digital Platform Services Inquiry, Third Interim Report, 28 October 2021, p. 26.

3.8Submitters raised concerns that vertical integration increases companies’ market power, leading to monopolisation of markets, limited competition, higher prices, and reduced customer choices.[5]

Conflict of interest

3.9Submitters argued vertical integration creates a conflict of interest that incentivises and allows companies to engage in anti-competitive conduct.[6]

3.10Vault Cloud submitted that vertical integration:

… may harm consumers ability to choose alternatives or switch to competitors. This could create conflicts of interest in the different stages of the supply chain, which makes not only ensuring the use of personal data in an ethical and transparent manner more difficult but potentially enable Big Tech companies to use its dominant market position to raise prices and drive small local companies out of business or create barriers to entry for new businesses.[7]

3.11Professor Toby Walsh, Chief Scientist, AI Institute, University New South Wales, acknowledged centralised markets may have advantages for consumers, such as easy accessibility. However, he noted vertically integrated companies create a conflict:

A fundamental principle for the fair and efficient operation of any market, physical or digital, is independence of the market maker from the market participants. A bank, for example, must have Chinese walls between its brokerage operations and the other parts of its business. Digital markets largely lack such safeguards. Amazon, for example, is both the market place for much e-commerce and a trader in that market place. It can therefore, if it chooses, use pricing and sales information from running the market place to out compete other traders. It also gets to choose which traders to highlight, which also creates problematic issues of conflict.[8]

3.12An example of the conflict of interest caused by vertical integration is seen in Google’s practice of bundling exclusive access to Google data and YouTube video inventory with Display and Video 360 (DV360). DV360 is a demand side platform (DSP) technology that allows buyers to buy advertising inventory. A conflict arises because Google is a seller of inventory and determines where advertiser budgets are allocated, giving it the ability to preference its own services.[9]

3.13Mr Ben Campbell, Director, Digital Advertising and Data Products, Nine Entertainment (Nine), clarified this practice, providing a specific example of when an advertiser wants to run a digital video campaign:

The advertiser might say, 'Well, I want to access some of that rich targeting that Google has. I also said from the outset that I need to run my campaign on YouTube, so my only option is to run that campaign in DV360 as a DSP.' It would set up the campaign for 100,000 impressions and select those sites that it wants to run across. The DSP would choose the allocation of where that budget gets delivered. That is the issue. Google owns the DSP. It also owns some of that inventory in the form of YouTube inventory. Google is essentially deciding where that budget is being spent on behalf of the advertiser when it is running that campaign programmatically.[10]

3.14Blockchain Australia stated that even threats of Big Tech expanding its offerings can stifle innovation:

An example of this is the threats by Apple over a year ago to add a buy now pay later capability to Apple Pay. This has greatly impacted the development of an industry that started in Australia and had potential to grow internationally. Apple has still not gone live, but the threats have had the desired impact.[11]

Mergers and acquisitions

3.15A merger is an agreement that unites two existing companies into a new company.[12]

3.16A business acquisition is where a company purchases most or all of another company’s shares to gain control of that company. Acquisitions are typically agreed between the two companies, but the term can be used interchangeably with ‘takeover’, in which one company takes control of another against the wishes of its management team.[13]

3.17Mergers and acquisitions allow companies to expand and provide additional products and services, which may be beneficial to consumers. However, they may eliminate competition and entrench market power of large companies.

3.18Between 2008 and 2018, Amazon, Facebook (now Meta) and Google made approximately 300 acquisitions, 60 per cent of which involved firms that were less than 4 years old.[14]

3.19Submitters raised concerns that large tech companies may adopt a strategy of acquiring rivals to eliminate or take control of other companies that threaten a platform’s dominance. This undermines competition and allows Big Tech to gain additional advantages such as economies of scale, larger data sets and network effectsthat entrench their market power.[15]

3.20The Centre for AI and Digital Ethics explained how Big Tech seeks to take out rivals that threaten their power:

Killer acquisitions refer to the practice of acquiring competitors to shut down or take control of projects that threaten a platform's dominance or market share-a well-known phenomenon on [sic] the pharmaceutical industry.The most well-known instance of this conduct in the digital platforms context is Facebook's acquisition of lnstagram in 2012, which Facebook considered a 'threat'. This has a deleterious effect on competition and obviates the potential benefits of innovative new services.[16]

Self-preferencing

3.21Vertical integration incentivises companies to engage in self-preferencing behaviours that may be anti-competitive.

3.22Free TV Australia (Free TV) provided an explanation of self-preferencing behaviours:

Self-preferencing refers to the practice of a platform using a dominant or gateway position in one market to provide an advantage to products and services the same company offers in related markets … Self-preferencing also occurs when a digital platform service forces businesses and consumers to use particular products or services of that platform in order to use the platform’s products or services in a related market. This bundling and tying of products and services can occur, for example, through digital platform services only being available through one of its own offerings, or the imposition of interoperability restrictions.[17]

3.23Examples of self-preferencing raised in submissions include:

Apple and Google using data collected in the provision of app store services to inform the development of their own apps.

Apple ranking its own apps more favourably than third-party apps in its App Store search results.

Google promoting its own services in search results on Google Search.

Google giving its own ad tech services favourable treatment compared to ad tech services provided by third parties.

pre-installed web browsers such as Safari on iOS, or Google demoting rival shopping aggregator search results in favour of its own service.

3.24The committee received evidence that self-preferencing behaviour by Big Tech platforms entrenches their market power and stifles competition.[18]

3.25Self-preferencing may affect the ability of rivals to compete by reducing the discoverability of their products, raising costs through discriminatory terms and conditions of access, reducing innovation by limiting or denying interoperability, and utilising non-public data to ‘free ride’ off the innovation efforts of their rivals. It may also reduce incentives for competitors to enter and compete in digital platform markets, leading to reduced innovation and consumer choice, increased prices, and steering consumers to products that do not align with their preferences.[19]

3.26Commercial Radio & Audio argued platforms are incentivised to preference their own products and discriminate against other companies due to vertical integration.[20]

3.27However, the Australian Competition and Consumer Commission (ACCC) noted some forms of self-preferencing may be harmless or pro-competitive, for example, if it makes platforms more beneficial to consumers or leads consumers to more suited products.[21]

Self preferencing in search services

3.28The ACCC’s digital platforms inquiry highlighted the significant market power of Google in search and advertising services:

Google has substantial market power in the supply of online search in Australia with approximately 94 per cent of online searches in Australia currently performed through Google.

Google has substantial market power in the supply of online search advertising. This flows directly from its substantial market power in the consumer facing market for online search.[22]

3.29Self-preferencing may give Google an unfair advantage, rather than services competing on merit. The ACCC identified ‘many examples of Google favouring its own related services at the expense of third-party ad tech services’ of which ‘the cumulative effect … had been to lessen competition in the supply of a range of ad tech services’. The ACCC found Google had:

restricted purchase of YouTube inventory to its demand-side platforms

directed demand from its demand-side platforms (particularly Google Ads) to its own supply-side platform

used its publisher ad server to preference its supply-side platform over time

restricted how its supply-side platform works with third-party ad servers

used its control over auction rules in its publisher ad server to advantage its other services

announced plans which could allow it to use its position in providing the Chrome browser to preference its ad tech services.[23]

3.30Self-preferencing of search services could affect multiple other related markets by preferencing services such as YouTube, Google Hotels and Google Flights. Increased competition from Google in these services could benefit consumers, but does not always do so. For example, Google Search displayed its own paid Google Play and YouTube services first, for a television show that could be viewed for free elsewhere.[24]

3.31Dr Janine Arantes argued Google’s dominance in the search engine market has allowed Google to bundle search services with email and cloud storage, creating a barrier to entry for competitors and limiting the choice available to educators and students.[25]

Default search engine settings

3.32Submissions highlighted that one method Google has used to gain and maintain dominance is by being a default search engine.

3.33DuckDuckGo, an internet search engine provider, stated that setting a default service is one of the most effective forms of self-preferencing, as users rarely switch to an alternative. It noted that, in 2018, Google observed users are unlikely to change the default search engine on a mobile. DuckDuckGo explained:

This strategy translated into Google securing the search default on its own operating system Android through licensing agreements, establishing the Google default on its own devices (Pixel phones or Chromebooks), and acquiring default positions elsewhere. According to the DOJ [United States Department of Justice], Google pays Apple between $8-12 billion annually in order to secure the search default across the Apple ecosystem. As a result, the DOJ estimates in its lawsuit against Google that “over 85 percent of all browser usage in the United States occurs on Google’s own Chrome browser or on one of the browsers covered by these revenue sharing agreements.”[26]

Self-preferencing in app markets

3.34Apple and Google benefit from self-preferencing as they each have their own first-party app store that is pre-installed on Apple or Android devices. In 2021, Apple iOS and Google Android accounted for close to 100 per cent of mobile operating system use in Australia.[27]

3.35Apple devices specifically restrict downloading of alternate app stores and thereby Apple ‘faces no constraints on its market power in relation to iOS app distribution or in-app payment processing’.[28]

3.36Google is ‘by far the largest mobile app distribution platform on Android OS’.[29] Google allows other stores to be downloaded, though 90 per cent of purchases occur through the Google Play.[30] Submissions suggested other stores are rarely used because Google Play is pre-installed, displayed on the home screen of Android devices, and other stores have a smaller user base.[31] Match Group (Match) elaborated:

Google has taken steps to quash competing app stores, including by erecting barriers to prevent users from downloading or using alternate stores, imposing restrictions on competing app stores that do not apply to the Google Play Store and by reaching anticompetitive agreements with other companies to not start alternative stores.[32]

3.37Many Apple and Google apps enjoy the benefit of pre-installation, being set as defaults or having superior integration. Apple phones come pre-installed with Apple apps such as Apple Music, Apple TV, and Apple News. Google requires device manufacturers that pre-install the Google Play Store to also install other Google services. These services enable Apple and Google to attract and retain consumers within their platform ecosystems.[33]

3.38Submitters raised concerns that the market power of Apple and Google gives them the ability and incentive to favour first-party apps at the expense of rival apps.[34] App stores may treat first-party apps more favourably than third-party apps by:

ranking first-party apps more favourably in app store search results

removing consumers’ ability to rate and review first-party apps, which may result in a more positive ranking of first-party apps than otherwise

providing first-party app developers with superior access to data, including information about rival apps. This includes information collected through app review processes, the operation of the app stores, and app developers’ use of in-app payment systems

delaying or blocking competing third-party apps’ access to their app stores.[35]

3.39The Centre for AI and Digital Ethics commented on how Apple preferences its own web browser, Safari, by using it as the default:

For example, using its dominance in the mobile device market, Apple may set Safari as a default and give it unique access to system functionality within iOS. Such behaviour by Apple likely drives traffic away from competitors such as Firefox and towards Apple’s own offering, reducing market competition.[36]

3.40Epic Games, with regard to its attempt to introduce its own in-app payment system and subsequent litigation with Apple, commented:

Developers are barred from reaching billions of iOS and Android users unless they go through the Apple and Google app stores and submit to whatever terms they impose. Opening mobile devices to alternate means of downloading applications and software is foundational to the creation of a more open ecosystem, whether it be alternative app stores or direct downloading of applications from the web. These solutions already exist and are regularly and safely used by consumers every day when they use their laptop or desktop computers, including PCs, [M]acs and Chromebooks. It is only when consumers shift from the computer on their desk to the computer in their pocket that they are limited to software installation through the App Store and Play Store. These limits are the product of commercial decisions by Apple and Google – not of safety or technical necessity.[37]

3.41The Coalition for App Fairness stated that Apple has affected app developers and preferences its own digital well-being and parental control apps by restricting other developers from accessing certain device features. It argued Apple’s preferencing ‘undermines the ability of app developers to compete, innovate and solve issues of concern to consumers’. It gave an example:

… following a change to its operating system, Apple made it very hard for third-party apps to ask users for permission to track their location when the app is not being used (functionality that is necessary for the operation of certain apps), while Apple tracks by default users’ location at all times and users cannot opt out unless they go deep into Apple’s settings.[38]

Tying

3.42Tying conduct is a form of self-preferencing where a supplier provides one product or service on the condition that the purchaser buys another product or service from the same supplier.

3.43A digital platform with market power may exclude or hinder its competitors by tying a service in which it has market power to a product or service it provides in a related market. This can damage competition in the related market by limiting access to users or reducing the ability of rivals to gain sufficient scale to profitably and effectively compete in that market.

3.44Submissions raised concerns that tying of products and services limits competition and reduces consumer choice.[39]

3.45Gumtree Australia explained:

Gatekeepers often gain and maintain unfair market advantage by tying other (ancillary) services with their core platforms, nudging users to access and use the broader service offering within their ecosystem which have the effect of discriminating against or excluding competing solutions against the service owned by the platform. Examples are adjacent services (like a marketplace, a payment solution or distribution service) that are pre-installed, tied, embedded and/or integrated with their core platform service. Users are exposed to these services regardless of whether they choose to or not, thereby locking-in users while foreclosing competitors.[40]

In-app payment tying in app markets

3.46The Google Play Store and the Apple App Store require developers to pay commission fees on in app purchases (IAP) of 15 to 30 per cent. Further, each app store bans developers from informing consumers about opportunities to make purchases outside of the app.

3.47Submissions stated that forced IAPs limit competition as they make it difficult for developers to compete with Apple and Google.[41]

3.48The ACCC concluded:

Tying of app store services to in-app payment systems leads to a loss of consumer choice as consumers are unable to use (and developers are unable to offer) any other payment option when making payments in apps.This could negatively impact the quality and functionality of the apps and services that app developers wish to provide their users, such as by limiting their ability to issue refunds or cancel subscriptions. It could also affect:

app developers’ ability to make changes to the prices of in-app purchases

competition between apps that are subject to the requirement and apps that are not the choice of business model for app developers.[42]

Uneven playing field

3.49Submissions stated the circumstances that determine which apps need to pay commission fees are arbitrary and lead app developers to compete on an uneven playing field.[43] Match described:

… only 3% of developers [are] required to pay this fee to Google, and 16% required to pay this fee to Apple. There does not appear to be a justifiable rationale for Apple or Google to require some apps (offering digital services), and not others (offering physical services), to use their proprietary in-app purchase systems and pay a 30% commission.

For example, Uber provides a similar type of service to Tinder: Uber connects a rider to a driver to meet and take a ride, while Tinder connects two people together so they can meet and go on a date. Yet, Uber is not required to use Apple's IAP because Apple considers it involves services consumed outside the Uber app. Similarly, Facebook, which since September 2019 has been providing a dating service, does not have to pay Apple for any services relating to its app (ie. distribution of its app to iOS users), save for an annual USD [US dollar] $99 fee.[44]

3.50Free TV stated IAP tying leads to ‘substantially different revenue outcomes for app developers/providers’.[45] Match explained that one reason this occurs is because:

… subscription funded apps that are subject to the in-app tying condition must pay differential rates compared to those which are ad-powered. This results in the former paying hundreds of millions in commission fees to Apple and Google, while their rivals pay only USD$99 per annum to Apple or USD$25 registration fee to Google (which subscription-funded apps must also pay). This results in ad-powered apps having an enormous advantage over subscription-based apps, even if users would generally prefer a subscription-based service.[46]

3.51Evidence to the committee suggested the 30 per cent fee is ‘exorbitant’ and limits developer profits.[47] For example, Epic Games stated the fee ‘is around 10 times higher than fees charged by analogous electronic payment processors in competitive contexts, such as PayPal, Stripe, Square or Braintree, which typically charge payment processing rates of around 3%’.[48] It commented:

… Apple and Google necessarily force developers to (i) suffer lower profits (rendering some apps financially unviable altogether), (ii) reduce the quantity or quality of their apps, (iii) raise prices for consumers, or some combination of the three … Opening the mobile ecosystem to the same level of competition and openness that consumers and developers experience on desktop computers will help ensure that self-determination and market forces – rather than the unilateral preferences of two companies – set the terms by which these products, services and industries evolve to meet consumer needs and demands.[49]

3.52Match argued IAPs may be used by Apple and Google to plan their own prospective entry into developers' app categories using the sensitive customer data and other insights obtained. Apple may have already done this in relation to music streaming services (Apple Music), 'e-readers' (Apple Books), video streaming services (Apple TV), news (Apple News) and gaming (Apple Arcade).[50]

Security concerns

3.53Epic Games highlighted Apple’s argument to the United Kingdom (UK) Competition and Markets Authority that:

… if third-party app stores were able to operate on iOS devices, the level of protection against malware would move from Apple’s high standard of review to the lowest standard offered by a third-party app store, creating a risk for the individual device and the overall ecosystem.[51]

3.54However, Epic Games disagreed with Apple’s statement:

Apple self-servingly mischaracterises the risk and the function of the App Store app review process and its impact on device security. It also makes the baseless assertion that competition in app distribution would be a security “race to the bottom,” rather than a “race to the top'' where rivals with more innovative and secure app stores challenge Apple to do better. To the contrary, Apple’s app review protections could be replicated—and even improved—by third parties. Anticompetitive app store policies should not get a free pass from scrutiny just because Apple or Google invoke privacy and security justifications … The choice between promoting competition and promoting security is not a binary one. Competition is likely to drive innovation and improvement in security and consumer privacy.[52]

IAPs limit app personalisation

3.55Evidence to the committee suggested IAP tying may also hinder apps from catering to consumer needs by limiting the data developers can collect and by hindering communication.

3.56Match contended that by not giving apps access to the IAP data, developers cannot address user needs influenced by geographical borders or historical context.[53] Match argued:

By mandating the use of IAP tying, Apple and Google insert themselves as intermediaries between app developers and their customers, effectively usurping the customer relationship and impacting app developers' ability to service their customers. For example, when an iOS (Apple) user contacts Tinder to obtain a refund of their Tinder subscription, Tinder has no visibility or control over the user’s purchase. Apple's process is opaque, inefficient and insufficiently staffed to keep developers informed about the status of a refund or request. Tinder has received negative user feedback regarding this process. In addition to harming developers, this intermediation increases users’ reliance on Apple and Google, thereby increasing the “stickiness” (and market power) of their respective platforms.[54]

3.57Nine stated that IAP tying limits communication between developers and app users, meaning app users receive an inferior experience. Nine was concerned about the effect of this on the sustainability of its business:

It is not always possible to communicate with these customers or understand if they are using the app, resulting in a worse customer experience and risking Nine’s business relationship with app users. This could result in a premature churn of a subscriber due to the inability to showcase the breadth of value from our subscriptions. Even as more information was made available (through development effort and significant time spent working with Apple), Apple’s App Store rules limit direct contact with these customers.[55]

3.58Mr Luc Delany, Chief Executive Officer, International Social Games Association, commented that tying:

… also creates a bottleneck on data. It means that we don't necessarily know how our customers are using the service. It gets further complicated when we, as the game being sold through the app store, we are increasingly obliged under data protection rules to know more about our customers to ensure we protect their data better. One of the best ways to do that would be to have a payment relationship with the customer. We can't have that relationship because we are blocked from doing so by the app stores.[56]

3.59As noted in Chapter 7: Consumer harms, IAP tying also frustrates developer efforts to detect and respond to scams and identify bad actors as they have limited data to cross reference and verify user authentication.[57]

Interoperability

3.60Consumers tend to use services and products that are defaults or with which they are familiar. This may reflect brand loyalty, ‘learning costs’ involved with new systems, or behavioural bias. These factors can be overcome more easily if barriers to switching, such as costs, are limited.[58]

3.61Interoperability refers to the ability for systems or devices to work with other systems or devices. Interoperability allows consumers to move to new services or devices that better fit their needs. Features that lock consumers into a particular system or platform by making it difficult for consumers to change are not interoperable.

3.62Companies may impede consumers from switching products or services through bundling and tying practices that lock consumers in to one provider.[59] Features that lock consumers into a particular service may include:

high switching costs

challenges in coordinating a network of users to switch

lack of transparency

restrictions of accessing device functionality

the inability to delete certain apps

exclusive pre-installation and default settings such as for a browser or search engine.

3.63Many submissions suggested services or features that are not interoperable are likely to limit competition, reduce consumer choice, and hinder innovation and quality of services.[60]

3.64Free TV provided an example of how Google reduces interoperability to preference its own products at the detriment of supply-side platforms (SSPs):

… Google imposes restrictions on how its products integrate with ad tech services such as header bidding (an ad tech service that enables a number of SSPs to bid against each other in real time) … The ACCC has found that Google’s refusal to participate in industry-developed header bidding preferences its own SSP product. While there are workarounds available to include Google’s SSP at the final stage of a heading bidding process, this process is sub-optimal and still places the Google SSP at a structural competitive advantage to those SSPs limited to inclusion in the initial header bid auction. Google’s proprietary service, Exchange Bidding, itself is characterised by self-preferencing with non-Google SSPs subject to an extra fee if they win the auction process.[61]

3.65Mr Mark Nottingham, expert advisor to the UK Competition and Markets Authority's Digital Markets Unit, suggested mandating interoperability would promote competition:

While requiring companies with undue power to ‘open up’ interfaces is not a panacea, it does show great promise: not only would doing so open up opportunities for competing companies, but (if correctly applied) it would allow users to manage their data directly, without a commercial intermediary. This approach is in keeping with the architecture and historical examples of the Internet and the Web themselves. Openly specified, interoperable protocols and formats brought us these public goods and helped to assure that no single party had control over them. Legal pressure to provide interoperable interfaces to specific functions identified as ‘chokepoints’ for power — e.g., when there is an imbalance in power due to network effects — has the potential to do the same for social networking, shopping, chat, and other proprietary functions that have been built on top of the open Internet.[62]

Innovation

3.66Mozilla stated that dealing with issues stemming from interoperability failure or self-preferencing by other platforms is a significant cost which could be otherwise spent on innovation:

For example, Apple and Microsoft require their respective browser engines to be used in any browser product listed in their app stores. However, rebuilding a browser for a separate browser engine is a significant technical challenge that requires financial and human capital. This increases development costs and can prevent or delay market entry. For example, as of April 2021, Mozilla has no listing in the Microsoft App Store because development on Microsoft’s browser engine (which is currently Google’s Blink/Chromium) is impractical when the value of Firefox is in its unique Gecko browser engine. This impedes download and use of Firefox on Windows because it is not considered a "verified app" by Microsoft.[63]

Inability to exercise consumer choice

3.67Submissions suggested locking features may limit the ability for consumers to make fully informed choices or exercise preferences, therefore reinforcing barriers to entry and expansion for competitors.[64]

3.68The Australian Communications Consumer Action Network argued that messaging services lock consumers into one platform, which forces users to choose platforms based on social networks rather than the merits of each app. Further, it stated:

Platforms often cite privacy and security as excuses for the lack of initiative in interoperability, but their lack of progress in finalising standards leads some critics to find this argument unconvincing. For example, the open-source Signal protocol already underpins many messaging apps and could serve as a preliminary cryptographic standard. The lack of messaging interoperability risks making communications worse for Australian consumers. SMS is a fundamental means of communication for many Australians. As Australians expect more from their messaging services, such as multimedia and reactions, standards will need to evolve to meet those expectations. However, Apple’s iMessage, one of the most popular apps for SMS and messaging, limits interoperability with other apps. According to court documents, the lack of interoperability may be intentional to protect Apple’s market share.[65]

3.69The Australian Publisher’s Association stated that digital platforms lock consumers to their platforms when purchasing books online. For example, eBooks purchased through Amazon can only be read on Amazon Kindle devices.[66]

Interoperability of mobile services

3.70The committee was advised that interoperability for Apple and Android phones is limited.

3.71The Centre for AI and Digital Ethics stated that Apple makes interoperability with other services such as Android difficult, ‘allowing Apple to charge higher prices than they would if they had to compete on quality of product and service alone’.[67]

Downloading on Apple and Google devices

3.72Apple has banned direct downloading on iOS devices. Google allows direct downloads but makes it difficult to download via alternative app stores or browsers. Google also ‘imposes technical impediments, including multiple warning screens and requires settings adjustments, which discourage users from directly downloading applications onto their mobile devices’.[68]

3.73Epic Games stated that these are unnecessary barriers:

Apple and Google have argued that a closed ecosystem, which limits or bans direct downloads or competing App Stores while limiting interoperability, is the only guarantee of safety and privacy. Contrary to Apple and Google’s claims, the choice between competition and security is not binary. Rather, greater competition in the distribution of applications on mobile devices will not only open the market to greater price competition, it will also spur innovation and improvements in security and privacy offerings. Many competition authorities around the world are grappling with these issues, including how to encourage meaningful competition in mobile ecosystems.[69]

Access to technology components

3.74Apple prevents third parties from accessing the near-field communication (NFC) components that allow contactless payments on Apple mobile devices. This means that any contactless payments on Apple mobile devices must be made using ‘Apple Wallet’ or ‘Apple Pay’.

3.75The ACCC raised concerns ‘that this conduct may reduce competition in the supply of alternative payment apps and services, including preventing third parties from providing mobile wallet services that effectively compete with Apple’s on its devices.’ It also recommended regulations that allow parties access to the NFC functionality.[70]

3.76The Commonwealth Bank of Australia agreed with this recommendation and added:

… this needs to go further with any regulation of NFC chips and mobile wallets also needing to ensure that consumers have the same rights against the mobile wallet provider that they have against regulated financial institutions that provide payment services. The Government’s announcement that digital wallets would be part of any new payments regulatory framework was encouraging and could go a long way to achieving this outcome.[71]

Interoperability of cloud services

3.77Many submissions raised the lack of interoperability as limiting competition in cloud markets.[72]

3.78Many cloud providers use proprietary systems or bundle costs that make it difficult for consumers to switch providers. Mr Rupert Taylor-Price, Chief Executive Officer, Vault Cloud, gave an example:

… if you migrate from a government facility to ours, and back and forward, it's very free and easy. If you go onto a proprietary platform, where at deep layers of the technology they've potentially put hooks in that hold you into that environment, these are not things that benefit the consumer. These are there purely for the benefit of the provider.[73]

3.79Google stated the lack of interoperability could result in reduced user-choice, higher consumer costs, lower quality of services, reduced security and stunted innovation.[74]

3.80The Digital Transformation Agency argued:

… one of the impediments to cloud competition is the cost and complexity of the supporting management and reporting tools that have been developed by large providers over time. These are often proprietary in nature, and they are often critical in the cost-effective deployment of data and systems to the cloud. In most cases these tools are bundled with the cloud subscription costs and their use can create “lock-in” positions …[75]

3.81Mr Rob James, Principal Consultant and Chief Executive Officer, Rob James Consulting Pty Ltd, echoed these concerns, stating:

… a lot of these cloud providers are bringing proprietary technologies for organisations to use now. This is a double-edged sword. Some of these proprietary technologies actually help and encourage innovation in the ability to develop digital solutions rapidly, but it also provides a lock into that particular vendor. Again, if we look at larger organisations, they have the potential to have resources and capabilities to manage that and to be able to plan around that, but, for a lot of smaller organisations, that is close to impossible. The fact that you're leveraging the proprietary technologies to accelerate your digital solutions also means that you're potentially painting yourself into the corner and locking into that vendor, unless you intend to place some significant investments to orchestrate your way out of that if you need to.[76]

3.82However, this view was not universally shared, with Amazon Web Services and Mr Nottingham commenting that interoperability is not an issue in the cloud sector.[77] Mr Nottingham stated:

There is already significant competition in the largest cloud markets (especially infrastructure-as-a-service); consumers have many choices for services like virtual CPUs and block storage. In most cases, switching costs are reasonable; an adapter or library might be needed, but because many services share base concepts, it's hard to argue that there isn't a competitive market.[78]

Problems with the current regulatory framework

3.83Competition in digital platform markets is primarily regulated by the ACCC under the Competition and Consumer Act 2010 (CCA).

3.84Many submitters stated enforcement of the current competition laws is insufficient to effectively address harms arising from entrenched market power of some digital platforms and promote competition.[79]

3.85The nature of the technology industry is fast-moving, opaque and complex, and new forms of conduct and harm can emerge rapidly. Anti-competitive conduct may be systemic and widespread, with the potential for significant harm.[80]

3.86Under the CCA, enforcement is retrospective, addressing specific conduct on a case-by-case basis.[81] This approach is only capable of addressing discrete categories of conduct through a lengthy and costly process, and as a result is not effective or efficient. The immense scale and financial resources of digital platforms further impede traditional court enforcement and result in protracted litigation outcomes (as shown in Box 3.1).

3.87Match elaborated on its perspective of the current regulatory framework:

Markets for digital platforms services tend to be dynamic and fast paced, due to frequent innovations in terms of products and services offered by digital platforms. Given the length of typical enforcement cases (not to mention the uncertainty of the outcomes), there is a risk that the conduct of a digital platform may result in further harm while any enforcement proceedings are on foot. Further, it would be impossible for the ACCC to take enforcement action against all the different competition issues arising in different digital platforms markets one by one. This difficulty of ex post enforcement is heightened by the need to gather evidence in a litigious action, particularly if the necessary evidence is not preserved by digital platforms.[82]

3.88Ms Kate Reader, General Manager, Digital Platforms Branch, ACCC, also shared her concerns:

The current method of dealing with competition concerns in terms of bringing litigation in relation to individual, specific sets of actions is probably not the most effective way to deal with these large global platforms, particularly with things like self-preferencing, where particular digital platforms preference their own products over the products of third parties who may be smaller or unable to offer the suite of services that are offered by large digital platforms.[83]

3.89Epic Games stated litigation cannot address systemic market issues. Further, the costs of litigation make it difficult for businesses to pursue issues:

… litigation is costly – prohibitively so for many innovators, particularly small businesses, and new entrants. While Epic has brought legal proceedings against Apple and Google, few developers have the resources to endure protracted litigation against two of the world’s wealthiest companies.[84]

3.90Where cases are not addressed in a timely manner, it can have significant costs for economic and consumer welfare. Factors like high barriers to entry and strong market power are often difficult to reverse, even if a platform ceases its conduct.[85]

3.91Free TV argued enforcement action under the ACCC’s existing powers is inadequate and ‘unlikely to have broad deterrent value in the Digital Platform sector, where there are a small number of dominant providers engaging in a broad range of different types of anti-competitive conduct’.[86]

3.92Free TV noted that for these reasons the ACCC has not taken enforcement action to comprehensively address competition or consumer issues in this sector.[87]

3.93The ACCC also argued available remedies are not sufficient to adequately address harms, as digital platforms may simply change their conduct to achieve a similar outcome.[88]

Source: ACCC, Digital platform services inquiry, Interim report No. 5 – Regulatory reform, September 2022, pp.48–49.

The case for reform

3.94Evidence to the committee supporting implementation of new competition measures specific to digital platforms was mixed.

3.95Many submissions supported greater regulatory oversight.[89] For example, Vault Cloud argued ‘[t]he current amount of regulation in the technology sector is disproportionately small relative to the risks that the sector poses to Australia’s security’ and supported increased regulation of IT to ensure the welfare of Australians. It stated that resistance to regulation is not unique to the digital platforms sector:

… there have been many instances where industries have resisted regulation, often to the detriment of consumers. The examples of smoking, driving, aviation, food, pharmaceuticals, oil and gas, and firearms are just a few of the many instances where this has occurred. The current conduct of foreign technology companies is in line with these past behaviours. It is essential that regulations are put in place to protect public health, safety, and well being, even when the industry resists such measures.[90]

3.96Epic Games argued:

Regulatory action inherently is directed at remedying broader systemic failure and providing guidance and relief to all those impacted in a market … The Australian Government does not – and should not – need to await the outcome of private or ACCC proceedings instituted against Apple and Google to implement legislative reform.[91]

3.97Other submitters did not support reform. They suggested that the digital platforms sector is highly competitive and that the characteristics identified (such as economies of scale, self-preferencing, optimising user experience, and mergers and acquisitions) are not unique to digital platform markets.[92]

3.98Some submissions stressed that there are multiple ongoing initiatives seeking to address digital platform issues, and no further changes should be proposed until these current initiatives have been reviewed to avoid overlap.[93]

Proposed solutions

3.99This section discusses proposed solutions to the competition issues raised in submissions. Submitters suggested aligning Australia with international regulations, implementing principles-based legislation and implementing industry codes. Submissions also proposed more specific solutions to limit anti‑competitive effects of vertical integration, self-preferencing and tying, and to promote interoperability.

International alignment

3.100Multiple submissions advised the committee that alignment with international regulations is important.[94]

3.101The Tech Council of Australia considered Australia should avoid international regulatory conflicts:

This is important because tech companies are born with the intention of becoming global – operating in multiple regions and nations, having a diversified workforce and tapping into a global market of customers. Many tech companies operating in Australia already ‘benchmark’ themselves by reference to global regulations including the EU’s GDPR [General Data Protection Regulation] and those from ISO/IEC [International Organization for Standardisation/International Electrotechnical Commission] standards. It is important for any outcomes from this inquiry acknowledges the need for international interoperability.[95]

3.102Mr Delany commented positively about the EU Digital Markets Act[96], stating:

We are optimistic that when it does come into effect it will create greater consumer choice and greater choice for developers as well in how they get their services in front of the consumer.[97]

Principles-based legislation

3.103Various submitters recommended the introduction of principles-based legislation to address the competition issues raised throughout the inquiry.[98]

3.104Evidence highlighted that principles-based legislation is flexible and can therefore capture emerging technologies.[99]

3.105The ACCC recommended promotion of the following principles:

competition on the merits

informed and effective consumer choice

fair trading and transparency for users of digital platforms.[100]

3.106Epic Games supported the principles proposed by the ACCC, adding:

… it is important to recognise that the term “user of digital platforms” encompasses developers, as well as consumers … Developers must program and support an app both on iOS and Android OS to successfully commercialise an app, and must adhere to Apple’s and Google’s unilateral, arbitrary and often opaque app store terms, just as consumers must. Consequently, to ensure the effectiveness of any codes of conduct, “fair trading and transparency” principles should apply to users on both sides of the mobile app marketplace.[101]

3.107The inclusion of principles in legislation would be consistent with the proposed UK Digital Markets regime. The UK Government has proposed to set out three high-level objectives to establish the types of behaviour it will regulate. While wording is yet to be finalised, the objectives will relate to ‘fair trading’, ‘open choices’ and ‘trust and transparency’.[102]

Industry codes

3.108In the context of industry codes, the Communications Alliance recommended self or co-regulatory approaches be considered:

Industry codes and consultation process have provided practical and flexible frameworks for addressing issues that often appear intractable. By providing a channel for industry knowledge and commitment, solutions can be developed that promote compliance without restricting growth or innovation in very dynamic environments. This is particularly important to ensure digital innovation and investment, employment and skills development continue to benefit the Australian economy.[103]

3.109The ACCC recommended it be given powers to introduce sector-specific mandatory codes to address competition issues such as anti-competitive self‑preferencing, denying interoperability, anti-competitive tying, and unfair dealings with businesses. These powers would come from implementing legislation that included guiding principles.[104]

3.110The ACCC stated ‘[e]ach code would be for a single type of digital platform service (i.e. service-specific codes) and contain targeted obligations based on the legislated principles. This would allow flexibility to tailor the obligations to the specific competition issues relevant to that service as these change over time’.[105]

3.111Multiple submissions supported the ACCC’s proposal as it would provide regulatory certainty while also remaining flexible.[106]

Solutions for vertical integration

3.112Evidence to the committee suggested Australia’s current merger and acquisition regime may be ineffective in digital platform markets. Submitters suggested merger reform to address market power arising from vertically integrated companies.[107]

3.113The Consumer Policy Research Centre recommended the merger and acquisition framework should be reviewed to consider ‘the acquisition of existing or potential competitors, the economies of scope gained from additional data sets and growing network effects’.[108]

3.114The ACCC recommended an economy wide merger review that considers acquisitions of digital platforms:

Although such challenges are not unique to acquisitions by digital platforms, they are particularly acute in markets for digital platform services due to their fast-paced and dynamic nature, significant market concentration, high barriers to entry and expanding ecosystems. Network effects also mean that the gains from achieving market power are substantial, as such market power is more likely to be enduring.[109]

3.115Free TV also suggested legislating requirements that assist in addressing the conflict of interest caused by vertical integration in an advertisement technology code:

To address conflicts of interest, the Code should include ad exchange provisions that govern how auction processes, and any other ad tech services trading processes, are to be conducted by designated entities. This will ensure that exchange processes are both transparent and that conflicts of interest are adequately addressed.[110]

Solutions for self-preferencing

3.116Multiple submissions called for regulation that prevents gatekeeper companies from self-preferencing and referenced international approaches that could guide Australia (see Box 3.2).[111]

3.117Submitters recommended the introduction of a prohibition which would restrict a platform with dominant market power self-preferencing its services and products over those of third parties.[112]

3.118The ACCC noted there may be ‘legitimate justifications for some types of self‑preferencing conduct, such as promoting efficiency, or addressing security or privacy concerns, which would need to be carefully considered in developing new obligations.’[113]

Source: Digital Markets Act 2022 (EU); UK Government, A new pro-competition regime for digital markets, July 2021; German Competition Act (DE); American Innovation and Choice Online Act 2021 (US).

Solutions for tying

3.119Submitters supported regulation that prohibits digital platforms with dominant market power from tying services, in particular the tying of IAPs.[114]

3.120Mr Delany recommended Australia adopt regulations:

… allowing for competing app stores. The other, linked to that, is competing payments, even if through the Apple app store or through the Google Play store, so that the consumer can choose whether to use Apple Pay or Google payments. Or they could use PayPal or they could pay directly to the games company.[115]

3.121Epic Games urged for ‘implementation of provisions that would open mobile devices to alternative app distribution, including competing app stores and sideloading’ to address tying concerns. It suggested to:

… open-up existing mobile app distribution ecosystems, unlocking competition and innovation benefits. Any new regulation will also need robust anti-circumvention provisions to ensure Apple and Google comply with the terms and purpose of the law and do not shift their anticompetitive behavior [sic] into an adjacent portion of the mobile app ecosystem.[116]

3.122Match requested prioritisation of legislation that bans forced IAPs ‘because it can be solved much more simply than some of these other issues’.[117]

3.123Submissions also highlighted international approaches that could be used to guide Australia (see Box 3.3).

Source: Digital Markets Act 2022 (EU); UK Government, A new pro-competition regime for digital markets, July 2021; German Competition Act (DE); American Innovation and Choice Online Act 2021 (US); Telecommunications Business Act (S.KOR); Match, Submission 73, p. 17.

3.124In response to South Korean amendments to its Telecommunications Business Act that required app store operators to unbundle in-app payments from the use of apps, Google and Apple announced they will allow developers to add their own billing system. However, Google will still charge a commission, but deduct four per cent, and Apple will charge 26 per cent.[118] The South Korean Communications Commission is investigating Apple and Google over potential violations of the new legislation.[119]

3.125Mr Delany argued the reductions are not meaningful as ‘[i]t's not worth the aggravation of setting up your entire own payment mechanism for a 3 per cent reduction in fee.’[120]

3.126Epic Games cautioned:

… in-app payment reform alone may be insufficient to discipline Apple’s and Google’s control over the mobile economy. While it is important to establish clear rules that make Apple and Google offer third party payment services, payments are just one part of a broader pattern of Apple’s and Google’s monopolist behaviour. Their ability to levy supracompetitive ‘rents’, whether levied through app store dominance or payment rules, are an indication of their respective monopolies, and require comprehensive action to prevent them from simply finding new ways to charge or allocate commissions in response to enforcement measures. Without the creation of an independent market for mobile app distribution, Apple and Google can continue to play an app store fee “shell game” with developers and consumers. That is why, as a baseline, the codes must provide for alternative app distribution means outside the proprietary app stores, including sideloading and competing app stores.[121]

Solutions for interoperability

3.127Submissions called for regulation that promotes interoperability and cited international approaches that could guide Australia (see Box 3.4).[122]

3.128For example, Free TV argued that regulations that ensure interoperability of designated entities with third-party vendors should be implemented:

… to ensure that designated entities cannot use claimed technical limitations to entrench and extend their market power to unduly incentivise or lock other participants into using the designated entity’s products or services. Interoperability measures would in part be addressed by including in the Code requirements for designated entities to apply the same rules, provide access to key inputs on fair and non-discriminatory grounds and give the same information to all other digital advertising services providers.[123]

3.129Mr Nottingham suggested that regulation is needed, as specifications written by companies cater to their own needs, not those of competitors or society. He recommended using international standards as a guide:

… existing international and open Standards Development Organisations (SDOs) like the IETF and W3C are the most suitable venues for creating interoperability specifications. They have the necessary expertise, a proven track record, are transparent, and have reasonable processes for avoiding domination by any one concern. Importantly, civil society organisations, academics and governments are already represented in their work. For example, the IETF MIMI Working Group has just been created. If it successfully delivers an appropriate specification, this should address the interoperability requirements for messaging created by the European Digital Markets Act.[124]

Source: Digital Markets Act 2022 (EU); UK Government, Competition and Markets Authority, Mobile ecosystems: Market study final report, June 2022; American Innovation and Choice Online Act 2021 (US).

Regulatory designation

3.130Some submissions cautioned the committee on a ‘one-size-fits-all’ approach to regulation that could affect smaller businesses.[125]

3.131The Law Institute of Victoria (LIV) explained:

… the LIV cautions against reform which has the effect of limiting entrepreneurship or technological and small business innovation within Australia. The LIV supports reform which has the effect of creating opportunities for new market entrants to succeed or existing smaller technology organisations to grow. The LIV recommends that any regulatory framework distinguish between Big Tech companies with significant market power and smaller tech companies by determining a threshold based on net profit or the number of users.[126]

3.132Some submissions recommended that competition legislation, and any codes, should apply only to designated entities.[127]

3.133These submissions recommended a designation approach similar to approaches implemented overseas (see Box 3.5). Criteria for designation could include:

designation if an entity reaches a certain number of users.

designation if a certain revenue threshold is met.

consideration of whether the platform holds an important intermediary position or if it has substantial market power.[128]

3.134Free TV recommended Google, Meta and Apple and related bodies corporate be designated as they are dominant in each of the markets they operate.[129] It supported the first two criteria listed above:

These criteria are objective and the thresholds would be able to be set at appropriate levels to capture only platforms that hold market power, without adding the uncertainty of introducing an additional threshold test, such as whether the platform is considered to be a critical trading partner, as suggested in the US antitrust bills. For transparency purposes, it is recommended that the new Part of the CCA provides that the ACCC should undertake a short consultation with all stakeholders, not simply the impacted entity, prior to a designation being made. If an entity is designated, that entity should be subject to each code that applies to any digital platforms services provided by that designated entity.[130]

Source: Digital Markets Act 2022 (EU); American Innovation and Choice Online Act 2021 (US); Improving Transparency and Fairness of Digital Platforms Act (JPN).

Footnotes

[1]Abby Jenkins, How Does Vertical Integration Work? Pros, Cons and Examples, 5 January 2023, www.netsuite.com/portal/resource/articles/erp/vertical-integration.shtml (accessed 6November2023).

[2]Abby Jenkins, How Does Vertical Integration Work? Pros, Cons and Examples, 5 January 2023, (accessed6 November 2023).

[3]Paul Cole-Ingait, Vertical Integration Examples in the Smartphone Industry, https://smallbusiness.chron.com/vertical-integration-examples-smartphone-industry-79551.html (accessed 6 November 2023).

[4]Elijah Ajuwon, Apple Silicon: Why tech giants engage in vertical integration, 8 September 2020, www.tcsnetwork.co.uk/apple-silicon-why-tech-giants-engage-in-vertical-integration(accessed 6October 2023).

[5]See, for example, Free TV Australia, Submission 17, p. 9; Dr Janine Arantes, Submission 40, p. 2; Australian Competition and Consumer Commission (ACCC), Digital platform services inquiry, Interim report No. 5 – Regulatory reform, September 2022, p. 7.

[6]See, for example, Professor Toby Walsh, Submission 42, [p. 1]; Vault Cloud, Submission 38, [p. 1]; Commercial Radio & Audio, Submission 43, pp. 6–7.

[7]Vault Cloud, Submission 38, [pp. 1–2].

[8]Professor Toby Walsh, Submission 42, [p. 1].

[9]Free TV Australia, Submission 17, p. 8; Mr Ben Campbell, Director, Digital Advertising and Data Products, Nine Entertainment, Proof Committee Hansard, 3 October 2023, p. 25.

[10]Proof Committee Hansard, 3 October 2023, p. 25.

[11]Blockchain Australia, Submission 45, [p. 5].

[12]Marshall Hargrave, Merger: Definition, How It Works With Types and Examples, 8 May 2022, https://www.investopedia.com/terms/m/merger.asp (accessed 6 November 2023).

[13]Will Kenton, What Is an Acquisition? Definition, Meaning, Types, and Examples, 10 October 2023, https://www.investopedia.com/terms/a/acquisition.asp (accessed 6 November 2023).

[14]ACCC, Digital platform services inquiry, Interim report No. 5 – Regulatory reform, September 2022, p.36.

[15]See, for example, ACCC, Digital platform services inquiry, Interim report No. 5 – Regulatory reform, September 2022, p. 31; Centre for AI and Digital Ethics, Submission 23, [p. 11]; Law Institute of Victoria (LIV), Submission 12, [p. 2]; Consumer Policy Research Centre, Submission 60, p. 3.

[16]Centre for AI and Digital Ethics, Submission 23, [p. 11].

[17]Free TV Australia, Submission 17, p. 7.

[18]See, for example, Commercial Radio & Audio, Submission 43, p. 6; Commonwealth Bank of Australia (CBA), Submission 71, p. 3; Consumer Policy Research Centre, Submission 60, p. 3; Special Broadcasting Service, Submission 3, p. 8; Free TV Australia, Submission 17, p. 7; Centre for AI and Digital Ethics, Submission 23,[p.12].

[19]See, for example, ACCC, Digital platform services inquiry, Interim report No. 5 – Regulatory reform, September 2022, pp. 124-125; Centre for AI and Digital Ethics, Submission 23, [p. 12].

[20]Commercial Radio & Audio, Submission 43, pp 6–7.

[21]ACCC, Digital platform services inquiry, Interim report No. 5 – Regulatory reform, September 2022, pp.124–125.

[22]ACCC, Digital Platforms Inquiry: Preliminary report, 10 December 2018, p. 4.

[23]ACCC, Digital platform services inquiry, Interim report No. 5 – Regulatory reform, September 2022, pp.129–130.

[24]ACCC, Digital platform services inquiry, Interim report No. 5 – Regulatory reform, September 2022, p.129.

[25]Dr Janine Arantes, Submission 40, p. 2.

[26]DuckDuckGo, DuckDuckGo comments in response to [ACCC] Discussion Paper for Interim report No. 5,Updating competition and consumer law for digital platforms services inquiry, April 2022, p. 4.

[27]ACCC, Digital platform services inquiry, Interim report No. 5 – Regulatory reform, September 2022, p.37.

[28]Epic Games, Submission 77, [p. 1].

[29]ACCC, Digital platform services inquiry, Interim report No. 5 – Regulatory reform, September 2022, p.37.

[30]Match Group, Submission 73, p. 3.

[31]See, for example, Match Group, Submission 73, pp. 3-4; Epic Games, Submission 77, [p. 1].

[32]Match Group, Submission 73, pp. 3–4.

[33]See, for example, Mr Mark Buse, Senior Vice-President, Head of Global Government Relations and Policy, Match Group, Proof Committee Hansard, 26 July 2023, p. 2; ACCC, Digital platform services inquiry, Interim report No. 5 – Regulatory reform, September 2022, p. 133.

[34]Mr Mark Buse, Senior Vice-President, Head of Global Government Relations and Policy, Match Group, Proof Committee Hansard, 26 July 2023, p. 2; ACCC, Digital platform services inquiry, Interim report No. 5 – Regulatory reform, September 2022, p. 129.

[35]ACCC, Digital platform services inquiry, Interim report No. 5 – Regulatory reform, September 2022, p.127.

[36]Centre for AI and Digital Ethics and Melbourne Law School, Submission to the ACCC Digital Platforms Services Inquiry Discussion Paper [September 2022 interim report], April 2022, p. 2.

[37]Epic Games, Submission to ACCC September 2022 interim report, p. 7.

[38]Coalition for App Fairness, Submission to ACCC September 2022 interim report, pp. 9–10.

[39]See, for example, Free TV Australia, Submission 17, p. 7; Match Group, Submission 73, p. 1.

[40]Gumtree Australia, Submission to ACCC September 2022 interim report, p. 3.

[41]See, for example, Match Group, Submission 73, p. 1; Free TV Australia, Submission 17, p. 13; Epic Games, Submission 77, Appendix A, [p. 5].

[42]ACCC, Digital platform services inquiry, Interim report No. 5 – Regulatory reform, September 2022, p.133.

[43]See, for example, Epic Games, Submission 77, Appendix A, [pp. 5–6]; Mr Mark Buse, SeniorVice‑President, Head of Global Government Relations and Policy, Match Group, Proof Committee Hansard, 26 July 2023, p. 2.

[44]Match Group, Submission 73, p. 6.

[45]Free TV Australia, Submission 17, p. 13.

[46]Match Group, Submission 73, p. 6.

[47]See, for example, Epic Games, Submission 77, [p. 1]; Match Group, Submission 73, p. 7; Mr Mark Buse, Senior Vice-President, Head of Global Government Relations and Policy, Match Group, Proof Committee Hansard, 26 July 2023, p. 2.

[48]Epic Games, Submission 77, Appendix A, [p. 5].

[49]Epic Games, Submission to ACCC September 2022 interim report, pp. 8–9.

[50]Match Group, Submission 73, p. 6.

[51]United Kingdom (UK) Competition and Markets Authority, Mobile ecosystems market study interim report, December2021, pp. 373–374, cited by Epic Games, Submission to ACCC September 2022 interim report, p. 6.

[52]Epic Games, Submission to ACCC September 2022 interim report, p. 6.

[53]Match Group, Submission 73, p. 7.

[54]Match Group, Submission 73, p. 4.

[55]Nine Entertainment, Submission to ACCC September 2022 interim report, pp. 2–3.

[56]Proof Committee Hansard, 3 October 2023, pp. 36–37.

[57]Match Group, Submission 73, Appendix 2 (Match Group, ‘Response to the Government consultation on the ACCC’s regulatory reform recommendations for digital platforms’, Submission by Match Group Inc. to Treasury), p. 3.

[58]ACCC, Digital platform services inquiry, Interim report No. 5 – Regulatory reform, September 2022, p.35.

[59]See, for example, Digital Transformation Agency, Submission 7, p. 5; Mr Rob James, Principal Consultant and Chief Executive Officer, Rob James Consulting Pty Ltd, Proof Committee Hansard, 26July 2023, p. 32.

[60]See, for example, Digital Transformation Agency, Submission 7, p. 5; Google, Submission 49, p. 19.

[61]Free TV Australia, Submission 17, p. 11.

[62]Mr Mark Nottingham, Submission 37, p. 2.

[63]Mozilla, Submission to ACCC September 2022 interim report, p. 10.

[64]ACCC, Digital platform services inquiry, Interim report No. 5 – Regulatory reform, September 2022, p.35; Centre for AI and Digital Ethics, Submission 23, [p. 12].

[65]Australian Communications Consumer Action Network, Submission to ACCC September 2022 interim report, p. 10.

[66]Australian Publisher’s Association, Submission 56, p. 3.

[67]Centre for AI and Digital Ethics, Submission 23, [p. 12].

[68]Epic Games, Submission 77, [p. 1].

[69]Epic Games, Submission to ACCC September 2022 interim report, p. 5.

[70]ACCC, Digital platform services inquiry, Interim report No. 5 – Regulatory reform, September 2022, p.159.

[71]CBA, Submission 71, p. 2.

[72]See, for example, Digital Transformation Agency, Submission 7, p. 5; Google, Submission 49, p. 19.

[73]Proof Committee Hansard, 26 July 2023, p. 21.

[74]Google, Submission 49, p. 19.

[75]Digital Transformation Agency, Submission 7, p. 5.

[76]Proof Committee Hansard, 26 July 2023, pp. 32–33.

[77]Mr Mark Nottingham, Submission 37, p. 3; Amazon Web Services, Submission 46, p. 5.

[78]Mr Mark Nottingham, Submission 37, p. 3.

[79]See, for example, ACCC, Submission 8, p. 4; Free TV Australia, Submission 17, p. 14; Match Group, Submission 73, p. 7; CBA, Submission 71, p. 1.

[80]See, for example, ACCC, Submission 8, p. 4; Free TV Australia, Submission 17, p. 14; Match Group, Submission 73, p. 7; CBA, Submission 71, p. 1.

[81]ACCC, Submission 8, p. 4

[82]Match Group, Submission 73, p. 7.

[83]Proof Committee Hansard, 22August 2023, p. 34.

[84]Epic Games, Submission 77, Appendix A, [p. 4].

[85]ACCC, Digital platform services inquiry, Interim report No. 5 – Regulatory reform, September 2022, p.51.

[86]Free TV Australia, Submission 17, p. 15.

[87]Free TV Australia, Submission 17, p. 15.

[88]ACCC, Submission 8, p. 4.

[89]See, for example, Match Group, Submission 73, p. 2; Free TV Australia, Submission 17, p. 3; ACCC, Submission 8, p. 1; Consumer Policy Research Centre, Submission 60, p. 7; CBA, Submission 71, p. 1; Centre for AI and Digital Ethics, Submission 23, [p. 11]; Commercial Radio & Audio, Submission 43, p. 2.

[90]Vault Cloud, Submission 38, [p. 4].

[91]Epic Games, Submission 77, Appendix A, [p. 5].

[92]See, for example, Developers Alliance, Submission 35, [p. 2]; Meta, Submission 69, p. 10.

[93]See, for example, Communications Alliance, Submission 58, p. 7; BSA – The Software Alliance, Submission 32, p. 3; Amazon Web Services, Submission 46, p 6; Australian Institute of Company Directors, Submission 28, [p. 2].

[94]See, for example, Tech Council of Australia, Submission 63, p. 5; Developers Alliance, Submission 35, [p. 5]; Epic Games, Submission 77, Appendix A, [p. 6].

[95]Tech Council of Australia, Submission 63, p. 5.

[96]See Boxes 3.2—3.5 for further detail about the EU Digital Markets Act.

[97]Mr Luc Delany, Chief Executive Officer, International Social Games Association, Proof Committee Hansard, 3 October 2023, p. 35.

[98]See, for example, ACCC, Submission 8, p. 9; Consumer Policy Research Centre, Submission 60, [p. 7].

[99]See, for example, Consumer Policy Research Centre, Submission 60, [p. 6]; LIV, Submission 12, [p. 6]; Office of the Australian Information Commissioner, Submission 61, p. 10.

[100]ACCC, Digital platform services inquiry, Interim report No. 5 – Regulatory reform, September 2022, p.12.

[101]Epic Games, Submission 77, Appendix A, [p. 7].

[102]UK Government, A new pro-competition regime for digital markets - government response to consultation, 6 May 2022, www.gov.uk/government/consultations/a-new-pro-competition-regime-for-digital-markets/outcome/a-new-pro-competition-regime-for-digital-markets-government-response-to-consultation (accessed 6 November 2023).

[103]Communications Alliance, Submission 58, p. 8.

[104]ACCC, Submission 8, p. 8.

[105]ACCC, Submission 8, p. 8.

[106]See, for example, Match Group, Submission 73, p. 2; Free TV Australia, Submission 17, p. 3; CBA, Submission 71, p 1; Centre for AI and Digital Ethics, Submission 23, [p. 11]; Commercial Radio & Audio, Submission 43, p. 2.

[107]See, for example, ACCC, Digital platform services inquiry, Interim report No. 5 – Regulatory reform, September 2022, p.60; Consumer Policy Research Centre, Submission 60, [p. 3]; Centre for AI and Digital Ethics, Submission 23, [p. 13]; Epic Games, Submission 77, [p. 2].

[108]Consumer Policy Research Centre, Submission 60, [p. 3].

[109]ACCC, Digital platform services inquiry, Interim report No. 5 – Regulatory reform, September 2022, p.59.

[110]Free TV Australia, Submission 17, p. 21-22. Free TV Australia suggested ‘[w]hen operating exchange services, designated entities should be obliged to clearly disclose how and when buy and sell orders will be matched (including mechanics of the sales process and other aspects). Further, designated entities that provide both DSP [Display Side Platform] and SSP [Supply Side Platform] services must ensure that the auction, DSP bidding and SSP selection decisions for any transaction must be determined by an independent third party. In relation to pricing, different models could be adopted in the Code to achieve transparency for discrete services. For example, in relation to ad tech services, a real time dashboard of ad tech service provider costs for a campaign could be prescribed which would allow advertisers to consider the costs versus the potential benefits of going directly to publishers to engage in a direct deal.’

[111]See, for example, ACCC, Submission 8, p. 9; Free TV Australia, Submission 17, p. 18; Match Group, Submission 73, p. 25; Centre for AI and Digital Ethics, Submission 23, [p. 13]; Commercial Radio & Audio, Submission 43, pp. 6–7; Consumer Policy Research Centre, Submission 60, p. 3.

[112]See, for example, ACCC, Submission 8, p. 9; Commercial Radio & Audio, Submission 43, pp. 6-7; Consumer Policy Research Centre, Submission 60, p. 3.

[113]ACCC, Digital platform services inquiry, Interim report No. 5 – Regulatory reform, September 2022, p.131.

[114]See, for example, ACCC, Submission 8, p. 9; Free TV Australia, Submission 17, p. 18; CBA, Submission71, p. 3; Match Group, Submission 73, p. 2; Mr Luc Delany, Chief Executive Officer, International Social Games Association, Proof Committee Hansard, 3 October 2023, p. 36.

[115]Mr Luc Delany, Chief Executive Officer, International Social Games Association, Proof Committee Hansard, 3 October 2023, p. 36.

[116]Epic Games, Submission 77, [p. 2].

[117]Mr Mark Buse, Senior Vice-President, Head of Global Government Relations and Policy, Match Group, Proof Committee Hansard, 26 July 2023, p. 3.

[118]Kotaro Hosokawa, Apple accepts 3rd-party app payments in South Korea -- for a 26% fee, 2 July 2022, https://asia.nikkei.com/Business/Technology/Apple-accepts-3rd-party-app-payments-in-South-Korea-for-a-26-fee (accessed 24 November 2023); James Vincent, Google outlines plans for first alternative in-app payments in South Korea, 4 November 2021, www.theverge.com/2021/11/4/22763040/google-in-app-purchases-alternative-south-korea-payments (accessed 24 November 2023).

[119]Joyce Lee, South Korea warns Google, Apple of possible fines over apps marketing, 7 October 2023, https://www.reuters.com/technology/skorea-considers-505-mln-fine-against-google-apple-over-app-market-practices-2023-10-06/ (accessed 24 November 2023).

[120]Mr Luc Delany, Chief Executive Officer, International Social Games Association, Proof Committee Hansard, 3 October 2023, p. 36.

[121]Epic Games, Submission 77, Appendix A, [p. 8].

[122]See, for example, Mr Mark Nottingham, Submission 37, p. 2; Free TV Australia, Submission 17, p. 3; ACCC, Submission 8, p. 9; Centre for AI and Digital Ethics, Submission 23, [p. 13].

[123]Free TV Australia, Submission 17, p. 20.

[124]Mr Mark Nottingham, Submission 37, p. 2.

[125]LIV, Submission 12, [p. 3]; Tech Council of Australia, Submission 63, p. 2; Blockchain & Digital Assets Pty Ltd, Submission 18, pp. 1–2.

[126]LIV, Submission 12, [p. 3].

[127]See, for example, Free TV Australia, Submission 17, p. 17; ACCC, Submission 8, pp. 8–9; Epic Games, Submission 77, Appendix A, [p. 6].

[128]ACCC, Digital platform services inquiry, Interim report No. 5 – Regulatory reform, September 2022, p.12; Free TV Australia, Submission 17, p. 18.

[129]Free TV Australia, Submission 17, p. 17.

[130]Free TV Australia, Submission 17, p. 18.