In a series of recent statements the ACCC has begun to publicly articulate its position on competition law issues related to the digital economy.
Today the ACCC released three publications providing guidance to platform operators, suppliers and consumers in the sharing economy. This follows a number of recent statements by the ACCC Chairman, Rod Sims, on how the ACCC will look closely at acquisitions of certain:
- blockchain start-ups by big banks; and
- online retail start-ups by large bricks and mortar retailers.
ACCC guidance for sharing economy participants released
Today, the ACCC has released the following publications:
- Platform Operators in the Sharing Economy: A guide for complying with the competition and consumer law in Australia;
- The Sharing Economy: A guide for private traders; and
- a new sharing economy page on its website focussed on consumer rights.
Sharing economy guidance for Platform Operators
In its guide for digital platform operators, the ACCC establishes four key principles relating to the ACCC’s expectations about compliance and best practice for platform operators:
- transparency (including disclosure of the full price that consumers will pay and the avoidance of fine print);
- accuracy and honesty (including processes to manage member conduct such as ‘phoenixing’);*
- effective review processes (including moderation policies and avoiding soliciting or incentivising positive reviews); and
- fairness in dealing with consumers and traders (including not engaging in third line forcing or exclusive dealing).
In addition, in a press release accompanying the release of the guidance, ACCC Deputy Chair Delia Rickard said:
“It is imperative that platform operators help to educate and assist them (traders) in complying with their obligations.”
This comment may be seen as an implied acknowledgement that platform operators themselves are unlikely to be liable under the Australian Consumer Law (ACL) for the quality of the goods or services provided by traders through their platform (for example, Freelancer.com is unlikely to be liable if data entry work by one of its freelancers is done incorrectly). However, what this comment and the guidelines make clear is that the ACCC does not consider platform operators absolved of responsibility when it comes to educating traders and consumers about ACL compliance. It is our experience that the ACCC will seek to use its position of influence to get platform operators to educate their traders and consumers about the ACL.
Sharing economy guidance for private traders
The ACCC recognises that a significant number of sharing economy traders are small or micro businesses (or indeed individuals) who may not have much or any understanding of the ACL. In its guide, the ACCC therefore steps private traders (ie, a host, driver or other supplier of goods or services on a platform) through the obligations they owe to consumers:
- private traders must take care not to contravene the ACL by making false or misleading statements or engaging in misleading or deceptive conduct by leaving fake or inaccurate reviews on the platforms they use; and
- private traders must ensure their compliance with consumer guarantees and their compliance with product safety standards.
The ACCC’s guidance also emphasises that private traders will themselves also be consumers when interacting with a share economy platform and therefore have rights when dealing with platform operators:
- as a consumer, a private trader has the right not to be misled, forced into an agreement containing unfair contract terms or have a platform operator attempt to exclude or limit their liability in respect of any of the mandatory consumer guarantees;**
- a platform operator cannot force a private trader to buy goods or services from a third party as a precondition for trading on its platform (eg, a ride sharing platform cannot force a driver to obtain insurance from a particular insurance provider before it gives access to the platform); and
- a platform operator must not refuse to supply a private trader because they have also used or are using services provided by competitor platform if doing so would lead to a ‘substantial lessening of competition’.
Guidance for consumers in the sharing economy
The ACCC’s new webpage reminds consumers engaged in the sharing economy that for all the potential benefits offered by online platforms that there are also risks in the form of scams, incomplete or false information about a product or service or unfamiliar pricing structures (such as surge pricing).
The ACCC encourages consumers to think of buying products or services over online platforms the same as they would buying in a store, and that they should therefore expect the same rights.
Nonetheless, the ACCC does note that the rights conferred by the ACL may not apply if goods or services are purchased from a person on an online platform who is just making a one-off or infrequent transaction. In this situation, the seller may not be acting in ‘trade or commerce’ – a requirement before some aspects of the ACL will apply.
Acquisition of blockchain start-ups by big banks
The disruptive potential of blockchain technology is now widely acknowledged throughout the financial services sector. This week, Mr Sims made clear that the ACCC would be closely monitoring any moves by the ‘Big Four’ banks seeking to buy up smaller fintech competitors, including those pioneering the use of nascent blockchain technology. Acknowledging the increasing speed of digital innovation, Mr Sims said:
"I think we need to, as an organisation, take a really close look at these things. This means making a forward-looking judgment. Will these things be disruptive in the future? They may be small now. What can they unlock in the future?"
These comments followed a speech by Mr Sims at an economics conference in October, during which he addressed what commentators have described as a global trend of “superstar” companies acquiring promising start-ups in many areas of the digital and traditional economy, and the impact this trend may be having upon competition:
“We recognise that such acquisitions can bring innovative ideas to the market sooner. However, in some circumstances, such acquisitions, or a pattern of such acquisitions, can have the adverse effect of entrenching the market power of large incumbents. It is a challenging task to predict and assess the impact such acquisitions may have on competition in dynamic markets. It is even more challenging to establish that there is likely to be a substantial lessening of competition on the basis of the removal of one potential competitor.”
Mr Sims has also suggested recently that legislative amendments may be required before the ACCC could intervene in such small transactions on the basis of their cumulative and long-term effect on competition alone, though he has emphasised that he is not advocating for any immediate change:
“We need to take a view on whether this sort of activity is taking out future competition and entrenching the incumbent … if we see three or four acquisitions over three or four years that are problematic, and we can’t get at them individually then maybe we need law change, but that is very difficult stuff to achieve.”
Acquisition of online retail start-ups by large bricks-and-mortar retailers
The ACCC has also affirmed its position that acquisitions of competitive online retailers by established bricks-and-mortar firms would be subject to heightened scrutiny by the competition regulator. At a retail summit in September, Mr Sims said:
“Going forward, our main competition role in retail will be to ensure new entrants are not prevented from competing on their merits. While this is important across all sectors, the rise of online retail makes this particularly important in this sector. We will, therefore, be alert to the consequences of large firms acquiring promising start-ups …”
Final thoughts on the Digital Economy
Like all competition around the world, the ACCC is being forced to reconsider some traditional analysis when it comes to matters involving the digital economy. While each matter will need to be considered by the ACCC on its merits, the release of the sharing economy guidelines, as well as the ACCC’s public statements on the acquisition of blockchain and retail start-ups provide an early indication of the ACCC’s thinking.
*The ACCC defines ‘phoenixing’ as when a person or business closes their platform account, or has their account cancelled, and opens a new account, appearing to be a new member or user of the platform. This may be because they have built up a bad reputation or engaged in misconduct.
**After 12 November 2016, small businesses employing less than 20 people and entering into contracts worth less than $300,000 (or $1 million if a multi-year contract) will also be protected from unfair contract terms.