A group of powerful cross-party senators have set out sweeping recommendations to the Australian government for a far-reaching legal and regulatory overhaul to curb big tech's incentives to engage in anticompetitive conduct that harms both businesses and consumers. The likes of Apple, Alphabet and Meta are firmly in the cross-hairs of the Senate Economics References Committee report into the Influence of International Digital Platforms that dropped this afternoon.

The Committee recommended that the Australian Government establish a new watchdog which it calls a digital platforms coordination body. There are also recommendations for new legislation to curb the power of Big Tech, including laws to prevent anti-competitive practices through the bundling of payment services and products, as well as mandatory disclosure by large digital platforms of self-preferencing conduct.

The Committee made eight key recommendations. It states the government should:

1. Establish a digital platforms coordination body.
2. Introduce legislation to prevent anti-competitive practices through the bundling of payment services and products by large digital platforms
3. Require mandatory disclosure by large digital platforms of self-preferencing conduct.
4. Implement mandatory dispute resolution requirements for large digital platforms via regulation.
5. Establish a tribunal for small disputes with digital platforms.
6. Implement a requirement for designated digital platforms to report advertising material via a public register, based on turnover, and that it implement mandatory reporting on algorithm transparency, data collection and profiling by very large platforms, particularly identifying what personal data is collected and how it is used.
7. Regulate an individual’s right to delete personal data.
8. Legislate for mandatory industry codes on the collection, use and retention of children’s data.

According to the report, "The substantial market power held by digital platforms gives them the ability and incentive to engage in anti-competitive conduct that entrenches and expands their market power."

"The importance and widespread use of digital platforms creates more opportunities and incentives for these platforms to engage in conduct that is anti-competitive or may harm consumers."

The report says digital platform in Australia have high levels of concentrated market power, with markets such as app stores, search services, and ad tech dominated by a small number of platforms with principal market power. "The lack of competition in the digital platforms sector gives Big Tech the opportunity to engage in anti-competitive conduct that benefits themselves, to the detriment of consumers and competitors."

By taking advantage of their dominant market power, especially in the context of inadequate protections, Big Tech's control over the market, "...harms platform users, as well as reducing trust in digital services and inhibiting economic growth."

Among the impacts of limited competition identified in the report;

• higher prices,
• increased harvesting of personal data
• reduced incentives to innovate and improve
• reduced consumer choice

Nothing to see here...

The platforms themselves see it differently, according to the report. In its submission, for instance, Meta argued, "Many of the characteristics of digital markets identified by Australian policymakers (such as economies of scale, use of data, self-preferencing, optimising the user experience, and M&A [merger & acquisition] activity) are not unique to digital platforms."

"They occur in industries right across the economy and can either deliver significant benefits or result in certain harms, depending on a range of factors. Regulating specific services or segments too narrowly will create market distortions between digital platforms and other competitors (such as print and broadcasting advertisers) and inhibit innovation and investment."

However, the report notes "these issues raise particular challenges when they occur on digital platform services."

It quotes the ACCC's assessment of "unique economic and commercial characteristics of digital platforms that contribute to high barriers to entry and expansion and support market concentration."

These include strong network effects where the value of a service depends on the number of users with whom other users can interact, and "significant economies of scale and sunk costs where the average cost of providing services decreases with increased use."

The digital platforms are also conferred with additional advantages of scope and expansive ecosystems, through costly barriers to switching, and from their ability to leverage the vast oceans of data they have collected from consumers.

According to the ACCC, "These characteristics also provide large incumbent digital platforms with the ability and incentive to engage in strategic conduct to entrench and expand their market power."

Mi3 will review the full report and outline the main features in our coverage next week.

- Andrew Birmingham