An ACCC report examining general online retail marketplaces, such as Amazon Australia, Catch, eBay Australia and Kogan, has highlighted a range of concerns about how they operate as well as the significant benefits they provide to consumers and sellers.
Concerns include the use of algorithms to decide how products are ranked and displayed (including some marketplaces giving preference to their own products), the collection and use of consumer data, inadequate dispute resolution processes and a need for more consumer protections.
The ACCC’s fourth report in its Digital Platform Services Inquiry, released in April this year, examined whether online marketplaces are promoting fair and competitive markets for consumers and sellers. It found that online marketplaces have a high level of control and involvement in transactions between consumers and sellers on their platforms.
“Online marketplaces have an important role in connecting Australian consumers and sellers, and make up a growing share of consumer sales. But we are concerned about their impact on both consumers and third-party sellers who rely on online marketplaces to reach their customers,” ACCC Chair Gina Cass-Gottlieb said.
The report highlights consumers’ and sellers’ concerns about the way online marketplaces display and rank products to consumers on the platform.
“Online marketplaces need to be more transparent with consumers and sellers about how they operate. For example, they should explain to consumers and sellers why their search functions and other tools promote some products over others,” Ms Cass-Gottlieb said.
“We are particularly concerned about so-called hybrid marketplaces, which sell their own products in competition with third-party sellers that use their platform. Hybrid marketplaces, like other vertically-integrated digital platforms, face conflicts of interest and may act in ways that advantage their own products with potentially adverse effects for third-party sellers and consumers.”
Marketplaces have deployed ranking algorithms and other practices which have a significant impact on the purchasing decisions of consumers. These algorithms and practices can be used to provide preferential treatment to the hybrid marketplaces’ own products.
“We have concerns about particular examples of self-preferencing by hybrid marketplaces in Australia, which mirror similar concerns raised by overseas regulators,” Ms Cass-Gottlieb said.
The report highlights the large amounts of consumer data collected and used by online marketplaces, which may not align with the privacy preferences or expectations of many consumers.
“We believe consumers should be given more information about, and control over, how online marketplaces collect and use their data,” Ms Cass-Gottlieb said.
“Given the important intermediary role performed by online marketplaces between consumers and sellers, it is also important that marketplaces have protections in place for consumers using their services.”
For example, some marketplaces have joined the voluntary Product Safety Pledge which provides consumers with additional protections including commitments from signatories to remove listings of unsafe products within two business days. The ACCC encourages other online marketplaces to join the Product Safety Pledge to further strengthen online marketplace safety.
The report also raised concerns about the lack of dispute resolution mechanisms.
“We continue to support a minimum internal dispute resolution requirement for digital platforms and the establishment of an ombudsman scheme to resolve consumer and business complaints, as recommended by our original Digital platforms inquiry final report,” Ms Cass-Gottlieb said.
“Other measures supported by the ACCC, including a prohibition on certain unfair trading practices, introducing a general safety provision, and making unfair contract terms illegal, could help address other issues identified in this report.”
The report notes that none of the online marketplaces has reached a dominant position in Australia, unlike in other countries, but that there is potential for the market to ‘tip’ in favour of a single dominant marketplace. The ACCC would have significant concerns if tipping leads to a dominant marketplace behaving anti-competitively or reducing the benefits consumers and sellers would otherwise gain from competition.
The report notes that Amazon Australia’s sales remains significantly lower than eBay Australia’s and also well below the sales of many large Australian online retailers such as Big W, David Jones, Kmart, Myer or Target. But while sales through all four leading online marketplaces in Australia are growing, Amazon Australia’s sales are growing faster than the other platforms. In its fifth Digital Platform Services Inquiry report, the ACCC is considering whether Australia needs a new regulatory framework to address competition and consumer concerns with digital platform services more broadly.
“Any such framework should be able to be applied to an online marketplace if it reaches a position where it is could exercise a certain level of market power or, potentially, act as a gatekeeper between businesses and consumers,” Ms Cass-Gottlieb said.
The full report is available at Digital platform service inquiry 2020-2025 – March 2022 interim report.
