On 4 December 2024, the ACCC published its penultimate and ninth interim report for the Digital Platform Services Inquiry (DPSI) on competition and consumer issues within general search services in Australia. While the ACCC has examined general search services in the past, this report considers some more recent developments particularly in generative AI.
Overall, the ACCC does not move from its recommendations made in previous DPSI reports. It concludes that “Google has maintained its dominance in general search, with little substantive change to its market share, or to its commercial arrangements that advantage Google Search as the default on the vast majority of Australian devices”.
There has been a broader focus on search services globally. In August 2024, the US District Court for the District of Columbia found that Google maintained an illegal monopoly in internet search and advertising markets in contravention of US antitrust laws. The ACCC has also publicly acknowledged its ongoing investigation into Google’s search services and its acceptance of court enforceable undertakings from Telstra, Optus and TPG in that context. See Law Council Annual Competition and Consumer Law Workshop speech 2024 | ACCC.
In this ninth report, the ACCC maintains the recommendations made in its fifth DPSI report in September 2022 (reported on here) for service-specific codes for ‘designated’ digital platforms, supporting targeted obligations to:
prevent anti-competitive self-preferencing, tying and exclusive pre-installation
address data advantages
ensure fair treatment of business users
improve switching, interoperability and transparency.
These recommendations were agreed to in principle by the government. Consistent with the ACCC’s recommendations, only a few days prior to the release of the report, the government announced its proposed new digital competition regime on 2 December 2024, which we covered here.
What you need to know
Google has maintained its dominance
The ACCC considers that Google has continued to maintain dominance in general search in Australia since the September 2021 DPSI report. Despite expansion attempts and new innovations from a range of general search services providers, Google has maintained the same share of 94%, as compared to Bing which the ACCC estimates to have a 4.7% share as at August 2024. The ACCC also observes:
Other existing search providers have not materially gained share and new entrants have achieved limited success in attracting users, with branding being a significant barrier to expansion.
Google has maintained its position as the major default search engine for browsers. A combination of vertical integration with Google’s Chrome browser and commercial arrangements it has with Apple’s Safari browser means Google Search is the default for more than 91% of mobile browsers and 77% of desktop browsers in Australia as at August 2024. Other regulators have considered potential competition concerns with these default agreements, including in the US and in Australia (discussed below).
Is generative AI disrupting competition in general search?
The ACCC observes the increasing use of generative AI has the potential to disrupt general search competition. Since OpenAI’s ChatGPT launched in November 2022, there has been increasing use of generative AI in consumer-focused products, particularly general search. Generative AI can drive innovation and by integrating with general search services, enable different features, such as AI-generated summaries, conversational search interfaces and AI-assisted ranking of results.
In addition to potentially making searches easier and more efficient, the ACCC considers that generative AI provides opportunities for new entrants to find innovative ways to compete in the market and may drive changes to search business models which traditionally relied on monetisation via advertising. The ACCC notes that new entrants (including Perplexity and SearchGPT), as well as established digital platforms have introduced generative search type functions or integrated AI functions into their existing search services. However, the ACCC also observes that generative AI requires high level of investment, which may reduce the likelihood of innovations in AI-powered search disrupting through expanding or entering general search.
The ACCC ultimately concludes that generative AI appears to have had limited impact on the competitive dynamics in general search in Australia so far, and it’s too early to say with any certainty what effect generative AI will have on those dynamics going forward.
What are the markers of quality of search?
The ACCC considers there needs to be more work to understand whether ‘markers’ of search quality are changing over time and across different search engines. Given Australians routinely use general search services, the ACCC identifies that any changes in the quality of general search services could considerably affect Australian consumers, even if impacts are not always easily discerned.
The ACCC recognises that search engines are an important part of the information environment for consumers, shaping how they access and engage with information.
While search engines have incentives to quickly provide consumers with the answers they need, the ACCC has identified that competitive dynamics and competing incentives, including the increase in AI, will affect quality of search.
Personalisation of search: Some emerging competitors in both standard search and generative AI are experimenting with new ways to enable consumers to personalise their search experience.
Search optimisation: Website owners may be incentivised to optimise their content in ways that materially change its usability (for example, in order to feature prominently in search results irrespective of their websites’ relevance to user queries) despite efforts by search engines to limit the effectiveness of these practices.
Narrower view of search results: There is a trend towards providing answers on the results page without requiring users to click through to another website. This has implications on the diversity of material presented to users. While in many cases, users are often best served by a single result or a small set of results in response to their quality, users can also benefit from receiving a diverse set of results for some types of searches.
What’s next
As we covered here, consultation on the government’s proposed new digital competition regime closes on 14 February 2025.
As noted above, the ACCC has indicated its investigation into Google’s default agreements is ongoing. Meanwhile, the U.S. Department of Justice’s case against Google’s default agreements is due for a hearing on relief in early 2025. In August 2024, Judge Mehta of the U.S. District Court for the District of Columbia found that Google violated section 2 of the Sherman Act “by maintaining its monopoly in two product markets in the United States — general search services and general text advertising — through its exclusive distribution agreements”.
The Department of Justice recently filed a submission seeking an order that Google divests Google Chrome, Google be barred from transacting for default positions with other browsers, Google be effectively restrained from growth in future search segments such as query-based AI solutions (including through acquisitions) and Google must share search data with rival search engines. The outcome of this case will also be significant for general search in Australia.
The ACCC’s tenth and final DPSI report which, as we reported here, will focus on the following three topics and is due to be provided to the Australian Government by 31 March 2025:
Recent international legislative and regulatory developments in markets for digital platform services and their impact on competition and consumers.
Major developments and key trends in certain markets for digital platform services.
Potential and emerging competition and consumer issues which relate to digital platform services.