Published on the 04/12/2024 | Written by Heather Wright

Digital competition regime and whole-of-economy AI regulation…

Just days after introducing a ‘world first’ ban on social media for under-16s, Australia has continued its big tech crackdown, proposing a new digital competition regime which could see tech companies fined up to AU$50 million if they suppress competition and prevent consumers from switching between services.

The plans follow competition concerns raised by the Australian Competition and Consumer Commission, but go further than the legally binding, service-specific codes of conduct recommended by the ACCC in 2022 and proposes imposing upfront rules on large digital platforms.

“These tech giants aren’t pioneers, they’re pirates.”

Stephen Jones, assistant treasurer and minister for financial services, says digital competition laws are ‘the missing piece’ in a push for consumer protection for the digital economy and would target anti-competitive behaviours including self-preferencing, forcing consumers to buy one of their products to use another product, and preventing consumers from switching to other alternatives, including alternative payment methods.

He says existing competition rules are no longer effective in addressing the control a handful of global tech companies have over key services including search engines, app stores and social media.

While in the past, he says we have relied on rules being enforced after the fact, waiting for investigations can take years to resolve and remedy, and by the time regulators have cracked down on one practice, the harm has been done, and the big digital platform simply adapts and moves on.

Under the proposal the minister will have the power to designate platforms, which pose the greatest risk of competition harms to consumers and businesses, based on advice from ACCC. Once designated, the platform will be required to comply with obligations for that service, with both general obligations, and service-specific obligations.

App stores and ad tech are the first two targets, though Jones says the government is also seeking views on whether social media should also be prioritised.

He says currently, app store platforms owned by Google and Apple can preference their own apps in search results making it difficult for consumers to compare products. They can also require businesses to use their payment systems, increasing prices for businesses and consumers, he adds.

Similarly the vast majority of digital ad tech services in Australia are facilitated by Google, driving up prices for advertisers and reducing profits for publishers who display ads.

“The dominant platforms can charge higher costs, reduce choice and use sneaky tactics to lock consumers into using certain products,” Jones says. “Innovation outside the established players becomes almost impossible. It also makes it difficult for small businesses which are required to submit to the terms of the big players.”

Jones says the proposed regime, which is similar to the European Union’s Digital Markets Act legislation, would impose upfront rules on large digital platforms, with maximum penalties of $50 million or up to 30 percent of turnover for failure to comply.

The European Union’s Digital Markets Act (DMA) has become something of a default in digital competition policy.

The European Commission says the DMA, which came into force for the most part in May 2023, is one of the centrepieces of the European digital strategy and establishes clearly defined, objective criteria to qualify a large online platform as a ‘gatekeeper’ and ensure they behave in a fair way and leave room for contestability.

Companies designated as ‘gatekeepers’ must meet certain criteria, including having at least 45 million monthly active end users and at least 10,000 yearly active business users in the EU, along with financial criteria, and have an entrenched position.

In September 2023, the European Commission designated Google parent Alphabet, Amazon, Apple, TikTok owner ByteDance, Meta and Microsoft as ‘gatekeepers’, with 22 of their core platform services designated.

Companies found to be not complying face fines of up to 10 percent of their total worldwide annual turnover, or up to 20 percent for repeated infringements, with additional remedies also threatened for cases of systematic infringement. As a ‘last resort’ option, the European Commission says non-financial remedies, including the divestiture of parts of a business, could be imposed.

The UK has similar legislation via the Digital Markets, Competition and Consumers Act, with a number of other countries, including Japan, Mexico, Brazil, South Korea and India, also floating the idea of similar legislation.

In other news signalling Australia’s toughened stance against big tech, an Australian Senate select committee has hit out at the likes of Amazon, Google and Meta over their lack of transparency around AI models and how Australian data is being used to train the models and says some popular large language models (LLMs), such as OpenAI’s GPT, Meta’s Llama and Google’s Gemini, should be automatically be delegated to the ‘high risk’ category under dedicated AI laws.

The Senate Select Committee on Adopting Artificial Intelligence has made 13 recommendations in its report, which follows an eight-month investigation into the opportunities and impacts of AI technology adoption for Australia.

Among those recommendations is the introduction of new, whole-of-economy, dedicated legislation to regulate ‘high-risk’ uses of AI, with general-purpose AI models such as LLMs ‘explicitly’ included in the list of high-risk AI uses.

The suggestion of an ‘AI Act’ has been criticised by tech companies and Australian banks, who have urged against blanked regulation, but the committee says without a whole-of-economy approach to AI regulation there is a risk of fragmentation and, as specific areas of law or uses of AI are prioritised for reform, there is a risk that certain rights and protections fall through the cracks.

The report also recommends AI developers be forced to reveal if copyrighted works are used in training datasets, with appropriate licensing and payment made.

Inquiry chair Tony Sheldon expressed frustration at platforms’ refusal to answer direct questions about their use of Australians’ personal information for training the models, saying watching Amazon, Meta and Google ‘dodge questions during the hearings was like sitting through a cheap magic trick – plenty of hand-waving, a puff of smoke and nothing to show for it in the end’.

“These tech giants aren’t pioneers, they’re pirates – pillaging our culture, data and creativity for their gain while leaving Australians empty-handed’.

ust days after introducing a ‘world first’ ban on social media for under-16s, Australia has continued its big tech crackdown, proposing a new digital competition regime which could see tech companies fined up to AU$50 million if they suppress competition and prevent consumers from switching between services.

The plans follow competition concerns raised by the Australian Competition and Consumer Commission, but go further than the legally binding, service-specific codes of conduct recommended by the ACCC in 2022 and proposes imposing upfront rules on large digital platforms.

Stephen Jones, assistant treasurer and minister for financial services, says digital competition laws are ‘the missing piece’ in a push for consumer protection for the digital economy and would target anti-competitive behaviours including self-preferencing, forcing consumers to buy one of their products to use another product, and preventing consumers from switching to other alternatives, including alternative payment methods.

He says existing competition rules are no longer effective in addressing the control a handful of global tech companies have over key services including search engines, app stores and social media.

While in the past, he says we have relied on rules being enforced after the fact, waiting for investigations can take years to resolve and remedy, and by the time regulators have cracked down on one practice, the harm has been done, and the big digital platform simply adapts and moves on.

Under the proposal the minister will have the power to designate platforms, which pose the greatest risk of competition harms to consumers and businesses, based on advice from ACCC. Once designated, the platform will be required to comply with obligations for that service, with both general obligations, and service-specific obligations.

App stores and ad tech are the first two targets, though Jones says the government is also seeking views on whether social media should also be prioritised.

He says currently, app store platforms owned by Google and Apple can preference their own apps in search results making it difficult for consumers to compare products. They can also require businesses to use their payment systems, increasing prices for businesses and consumers, he adds.

Similarly the vast majority of digital ad tech services in Australia are facilitated by Google, driving up prices for advertisers and reducing profits for publishers who display ads.

“The dominant platforms can charge higher costs, reduce choice and use sneaky tactics to lock consumers into using certain products,” Jones says. “Innovation outside the established players becomes almost impossible. It also makes it difficult for small businesses which are required to submit to the terms of the big players.”

Jones says the proposed regime, which is similar to the European Union’s Digital Markets Act legislation, would impose upfront rules on large digital platforms, with maximum penalties of $50 million or up to 30 percent of turnover for failure to comply.

The European Union’s Digital Markets Act (DMA) has become something of a default in digital competition policy.

The European Commission says the DMA, which came into force for the most part in May 2023, is one of the centrepieces of the European digital strategy and establishes clearly defined, objective criteria to qualify a large online platform as a ‘gatekeeper’ and ensure they behave in a fair way and leave room for contestability.

Companies designated as ‘gatekeepers’ must meet certain criteria, including having at least 45 million monthly active end users and at least 10,000 yearly active business users in the EU, along with financial criteria, and have an entrenched position.

In September 2023, the European Commission designated Google parent Alphabet, Amazon, Apple, TikTok owner ByteDance, Meta and Microsoft as ‘gatekeepers’, with 22 of their core platform services designated.

Companies found to be not complying face fines of up to 10 percent of their total worldwide annual turnover, or up to 20 percent for repeated infringements, with additional remedies also threatened for cases of systematic infringement. As a ‘last resort’ option, the European Commission says non-financial remedies, including the divestiture of parts of a business, could be imposed.

The UK has similar legislation via the Digital Markets, Competition and Consumers Act, with a number of other countries, including Japan, Mexico, Brazil, South Korea and India, also floating the idea of similar legislation.

In other news signalling Australia’s toughened stance against big tech, an Australian Senate select committee has hit out at the likes of Amazon, Google and Meta over their lack of transparency around AI models and how Australian data is being used to train the models and says some popular large language models (LLMs), such as OpenAI’s GPT, Meta’s Llama and Google’s Gemini, should be automatically be delegated to the ‘high risk’ category under dedicated AI laws.

The Senate Select Committee on Adopting Artificial Intelligence has made 13 recommendations in its report, which follows an eight-month investigation into the opportunities and impacts of AI technology adoption for Australia.

Among those recommendations is the introduction of new, whole-of-economy, dedicated legislation to regulate ‘high-risk’ uses of AI, with general-purpose AI models such as LLMs ‘explicitly’ included in the list of high-risk AI uses.

The suggestion of an ‘AI Act’ has been criticised by tech companies and Australian banks, who have urged against blanked regulation, but the committee says without a whole-of-economy approach to AI regulation there is a risk of fragmentation and, as specific areas of law or uses of AI are prioritised for reform, there is a risk that certain rights and protections fall through the cracks.

The report also recommends AI developers be forced to reveal if copyrighted works are used in training datasets, with appropriate licensing and payment made.

Inquiry chair Tony Sheldon expressed frustration at platforms’ refusal to answer direct questions about their use of Australians’ personal information for training the models, saying watching Amazon, Meta and Google ‘dodge questions during the hearings was like sitting through a cheap magic trick – plenty of hand-waving, a puff of smoke and nothing to show for it in the end’.

“These tech giants aren’t pioneers, they’re pirates – pillaging our culture, data and creativity for their gain while leaving Australians empty-handed’.