Digital giants harm consumers and competition

This is why we need to value and protect competition in our digital economy – just as much as we do at the local shopping centre.

This is why we need to value and protect competition in our digital economy – just as much as we do at the local shopping centre or high street.

Companies like Apple, Google and Meta dominate markets they operate in and have huge influence across our economy and how and where we spend money.

Australian consumers downloaded 790 million apps from app stores such as Google Play and Apple’s App Store in 2022, and spent over $3.4 billion on apps and in-app purchases.

Apple and Google collect a 15 per cent to 30 per cent commission on many app payments by forcing developers to use their payment platforms. By comparison, the fees merchants pay for Mastercard and Visa credit card processing are about 0.9 per cent, and companies such as PayPal, Stripe and Square charge between 1.75 per cent and 2.6 per cent.

Apple and Google have also previously prevented app developers from even advertising to consumers that cheaper payment options are available.

Australian businesses spent $14.2 billion on online advertising last financial year, almost quadruple the $3.6 billion spent on TV ads. In particular, Google dominates the “ad tech” services that place ads on websites and apps and the ACCC has found that these services don’t operate transparently, and can result in businesses paying more for advertising.

In both these examples, addressing these issues could decrease costs for businesses, allowing savings to be passed on to Australian consumers.

The power and influence of the major digital platforms was vividly illustrated three years ago this month, before my time at the ACCC, when Facebook (now Meta) blocked all domestic and international news content to Australian users. Some pages relating to health and other government services, not-for-profits and emergency services were also inaccessible.

The ban was in response to Australia’s plan to legislate a code enabling commercial deals between certain platforms and news-producing media companies; the “News media bargaining code”, which was first proposed among the recommendations of our 2019 Digital platforms inquiry.

The Facebook news ban lasted less than a week, but its impact was felt worldwide. While the issue at stake then was whether platforms should pay for displaying news, the implications were much wider as consumers and governments confronted the full reality of the platforms’ ubiquity and power.

Three years after Australia’s experience, many jurisdictions around the world have now gone further to curb the power of the digital platforms.

The United Kingdom, Germany, and the European Union are all implementing new and comprehensive competition regulations for digital platforms. Closer to home, Japan and South Korea appear not far behind with their own schemes.

Mandatory payment systems

In Europe, for example, from next week new competition laws will ensure European smartphone users can download iPhone apps from online stores other than the Apple App Store. This will instantly provide more choice for iPhone users in Europe.

These laws will also mean app developers can sell to consumers without using Apple or Google’s mandatory payment systems.

The European reforms will also give consumers increased control over their data and how it’s shared between services.

But digital platforms that are required to change their conduct in one country don’t necessarily roll out those changes in others. For example, Apple has already said it will not roll out any changes it makes in response to European reforms outside of Europe.

This is why we welcomed the government last year agreeing in principle to the ACCC’s 2022 recommendations to address competition harms from digital platforms.

New regulation would set the foundations for Australian consumers to similarly benefit from the changes soon to be enjoyed by Europeans.

We’ve proposed new mandatory codes of conduct for the platforms and services which hold a critical position in the Australian economy. These codes would include measures that could: allow consumers to access more apps on mobile devices; allow app developers to provide consumers alternative (and cheaper) in-app payment methods; provide more transparent and cheaper online advertising services for Australian businesses; allow consumers more control over their data and make it easier to switch between digital services.

Australia was an early voice in digital platforms regulation with our 2019 Digital Platforms Inquiry Report and is well positioned to remain a world-leader in this field.

I have spent much of my professional life thinking and talking about competition and its impacts. And right now, I am struck by the growing discussion and appreciation of the power of competition in Australia – how it can drive productivity growth and innovation, how it impacts the choices we have and the prices we pay, how it can be supported or stifled.

The ACCC last year released a series of proposed merger reforms that have been subject to appropriately robust debate, which I believe has been crucial in building community support for change in this area.

But we need to ensure this discussion includes a focus on competitive forces in our digital economy and the value of targeted reform in this area.

Gina Cass-Gottlieb is chairwoman of the Australian Competition and Consumer Commission.