In December 2019, following the ACCC’s recommendation in its Digital Platforms Inquiry Final Report (DPI Final Report) the Australian Government directed the Australian Competition and Consumer Commission (ACCC) to conduct an inquiry into markets for the supply of digital platform services over five years, producing a report every 6 months.
The ACCC’s First Digital Platform Services Inquiry Interim Report (First DPSI Interim Report) focussed on online private messaging services and, to a lesser extent, social media and search services, and the Second Digital Platform Services Inquiry Interim Report focussed on app marketplaces.
Third Interim Report on web browsers and search services
On 28 October 2021 the ACCC released its Third Digital Platform Services Inquiry Interim Report , examining the provision of web browsers and general search services to Australian consumers (Third Interim Report).
The ACCC considers enforcement action alone is insufficient to address what it sees as systemic issues arising in these markets. Consistent with the findings in its Digital Advertising Services Inquiry Final Report (Ad Tech Report), the ACCC proposes that it be given specific rule making powers to address identified issues.
The ACCC is concerned about the lack of competition between search engines which play a critical role in the digital economy, acting as “gateways” to other websites and internet content. The ACCC found that Google is the dominant search engine in Australia with a market share of 94%, and is the pre-set default search engine on the majority of browsers including Google Chrome and Apple Safari which have a combined market share of over 80% on desktop devices and almost 90% on mobile devices. The ACCC also raised concerns about the impact for competition and consumers of setting default search engines on browsers, whether as a result of vertical integration across device ecosystems (such as Google Search on Google Chrome and Bing on Microsoft Edge) or commercial arrangements (such as Google’s arrangements with Apple and other browser suppliers).
The ACCC’s proposals align with international regulatory reform proposals being considered in the UK, EU, USA and recent legislative changes in Germany aimed to address systemic competition and consumer issues in digital platforms markets.
The ACCC’s conclusions and proposals at a glance
| ACCC’s concern | ACCC’s proposal |
|---|---|
| Recommendations | |
| Lack of competition in search The ACCC is concerned that Google’s dominance and the low levels of competition in the supply of search engine services reduces the likelihood that innovative services are developed, is likely to result in lower quality search services or search services with undesirable features, and results in less diversity in search engine business models offered to consumers. As directed in the Government’s response to the DPI Final Report recommendations, the ACCC considered the search engine choice screen voluntarily implemented by Google in 2019 on new Android devices in the European Economic Area and the UK. While the ACCC observed that this choice screen has had a limited impact on the supply of search services to date, it notes that Google’s changes to the choice screen implemented in September 2021 may have a greater effect. | Recommendation 1: The ACCC be given the power to mandate, develop and implement a mandatory choice screen for search services providing users with a selection of search engine options rather than a pre-determined default. While the exact criteria is yet to be determined, the ACCC considers the criteria to determine which search service providers would need to implement a choice screen should be linked to the provider’s market power and / or strategic position, and at this stage the mandatory choice screen should apply to both new and existing Android mobile devices. Recommendation 2: The ACCC be given powers to implement further potential measures beyond choice screens to address competition and consumer issues in the supply of search engine services. |
| Potential measures | |
| Google’s control of the Android operating system and the Google Play Store lessens competition from rival search providers The Android operating system is open source and provided free of charge to original equipment manufacturers (OEMs) of mobile devices such as Samsung, Huawei and Xiaomi. The majority of OEMs licence Google Mobile Services, including apps such as Google Play Store, Google Maps, Chrome and Search, which must be installed as a bundle. The ACCC considers Google is able to leverage its market power in mobile operating systems and mobile app distribution to foreclose important entry points for rival search engines. | Potential measure: The ACCC considers that, as part of a broader regulatory framework, dominant search engine services, or search engine services that meet some other pre-defined criteria, should be prevented from tying the supply of that good or service to another good or service supplied by the same platform. |
| Google’s arrangements with Apple and other suppliers of browsers further limit competition from rival search providers The ACCC considers the arrangements between Google and Apple for Google Search to be the default search service on Safari and specified search access points on Apple devices are a significant barrier to entry, effectively foreclosing rival search engines from reaching consumers, including those that conduct search on Apple devices which make up over half of all mobile device users and a third of desktop device users in Australia. The ACCC considers Google’s arrangement with other browser suppliers may similarly foreclose rival search engine providers. | Potential measure: The ACCC recommends further consideration be given to whether there should be limitations on the ability for dominant search engine services, or search engine services that meet some other pre-defined criteria, to pay to be the default search engine service provider on browsers or to be pre-installed by OEMs. |
| Google’s position as the default search engine limits rivals’ access to data The ACCC is concerned that Google’s position as the default search engine for the majority of consumers and searches forecloses access, impacting rivals’ ability to access click-and-query data and achieve economies of scale. This has flow on effects for the ability of rival search engines to monetise their services, effectively self-reinforcing Google’s dominance in search. | Potential measure: The ACCC recommends further consideration be given to the requirement that dominant search engines provide click-and-query data, or other datasets, to competing search engines. The ACCC considers such a measure must first be subject to extensive consideration of privacy impacts and would require careful design and ongoing monitoring to ensure there are no adverse impacts on consumers. |
| Consumers are likely to remain with the status quo and may not always know how to change their browser or search engine or be aware of alternative services The ACCC is concerned that while there are other avenues for reaching customers, in practice many consumers stick with default services, with the effect of extending and entrenching Google’s market power. Pre-installation and defaults can have the effect of encouraging consumers to remain with the status quo, known as default bias. Even where consumers have the technical knowledge to change their browser or search engine, being able to do so requires awareness of alternative suppliers. A lack of awareness of alternative suppliers may be further hampered by a lack of digital literacy. | Potential measure: The ACCC continues to support the DPI Final Report’s recommendations 12 and 13 for improved digital media literacy in the community and in schools. The ACCC considers that these recommendations should be expanded to include digital literacy of platforms, including information about how platforms operate and use consumer data, information about alternative service providers and the ability to switch to alternative browsers and search engines, and how to use platforms safely such as how to avoid scams occurring on platforms. |
| The choice architecture of device ecosystems can exacerbate default biases and harm consumer choice The ACCC found that the strong tendency of consumers to remain with a default or pre-installed service, and the information asymmetry between consumers and providers, is heightened by the choice architecture of search engines and browsers (i.e. the design of user interfaces, which can influence consumer choices by appealing to certain psychological or behavioural biases). The ACCC is concerned that conduct of this nature can significantly impede consumer choice and cause harm but may not be captured by existing Australian law. | Potential measure: Platforms should design user interfaces in a way that facilitates consumer choice and respects individual autonomy. For example, platforms should have an obligation to refrain from using dark patterns (elements of user interfaces which have been designed to make it difficult for users to express their actual preferences or nudge users to take certain action) or designing user interfaces in a way that exploits consumers’ behavioural biases and vulnerabilities. The ACCC considers this principles-based obligation should apply to all digital platform services operating in Australia and should be subject to oversight by an external body. Further support for Recommendation 21 of the DPI Final Report: The ACCC reiterates its support for the amendment of the Competition and Consumer Act 2010 (Cth) to include a prohibition on certain unfair trading practices. |
| Contractual restrictions can limit downstream suppliers of search engine services The ACCC is concerned that competition between downstream and upstream suppliers of search engine services may be limited by contractual restrictions on downstream suppliers’ ability to determine aspects of their competitive offering. | Potential measure: The ACCC recommends further consideration be given to requiring search engine service providers who syndicate search results to downstream search engine services to do so on fair, reasonable and non-discriminatory (FRAND) terms. |
What next?
The ACCC's proposals in the Third Interim Report form part of the growing push domestically and internationally for greater sector-specific regulation in digital platforms markets.
The ACCC intends the measures proposed in the Third Interim Report to sit alongside the rules and powers proposed in the Ad Tech Report. The framework for these rules and powers will be considered as part of the fifth interim report under the Digital Platform Services Inquiry, which will also involve a broader assessment of the need for digital platform ex-ante regulation to address common competition and consumer concerns identified across digital platform markets.
The ACCC will release a concepts paper in the first quarter of 2022 seeking feedback to inform its fifth interim report due in September 2022.