Good news for consumers? New Digital Platform laws to combat fake reviews, scams and unfair practices proposed

16 November 2022
Sinead Lynch, Partner, Sydney Adam Walker, Partner, Melbourne David Smith, Consultant, Melbourne

Last Friday the Australian Competition & Consumer Commission (ACCC) released its 5th report of the Digital Platform Services Inquiry. The much anticipated report deals with the competition and consumer issues raised in the Digital Platform Services Inquiry, the Digital Advertising Services Inquiry (2020-2021) and the Digital Platform Inquiry (2017-2019).

Digital platforms are online spaces for the exchange of information, goods and services between the producers, its customers and the larger community (Digital Platforms). Digital Platforms range from social media platforms like Instagram, e-commerce marketplaces like Alibaba and Airbnb and discussion threads like Reddit. While the report clearly acknowledges the value that Digital Platforms bring to consumers and businesses, the focus of this report is on the significant consumer and competition harm associated with the use of digital platforms and the protections needed to prevent them. The approach suggested by the ACCC is multifaceted – it builds on the existing consumer protections and competition laws, but further pushes for industry specific codes and safeguards to address the complexity of the Digital Platforms market.

The ACCC makes five key proposals:

  1. Fake reviews – Consumers should be able to easily report fake reviews and Digital Platforms must respond to these reports. Digital Platforms should further be required to disclose what measures they take to verify reviews.
  2. Minimum standard for dispute resolution – At a minimum, users should have the option to speak to a human representative and be given the ability to escalate disputes to an independent ombudsman.
  3. Unfair contract terms & penalties – Unfair trading practices not currently covered by Australian Consumer Law (ACL) should be banned (e.g. subscription traps). The enforcement of unfair contract term laws should be strengthened, including financial penalties for breaches. This aligns with recent legislative changes to increase the maximum penalty by five-fold for breaches of certain provisions of the Competition and Consumer Act including the ACL and the introduction of penalties for businesses who include unfair contract terms in standard form contracts.
  4. Scam protections – Users should be able to report a scam or harmful app and Digital Platforms should be required to action reports. Further, Digital Platforms should verify users like advertisers and merchants to prevent scams. The management and regulation of scams and the mitigation of losses arising, have been a material focus for the ACCC and other regulators (e.g. APRA) this year alone.
  5. Mandatory codes of conduct – The report proposes to introduce legally binding codes of conduct for designated Digital Platforms (applied service-by-service, e.g. to app store providers) to combat industry intrinsic anti-competitive behaviour like self-preferencing and exclusive pre-installation agreements.

From a regulatory perspective, the ACCC is clearly seeking to align the Digital Platform services industry with other Australian industries and is renewing its push for an economy wide ban on unfair trade practices. On a global scale, the proposed consumer protection and competition measures would align the Australian Digital Platforms industry with laws already in place in other jurisdictions, including the most recently introduced EU Digital Services Act and Digital Markets Act. The proposals also clearly evidence the ACCC’s frustration with having to test the somewhat broadly drafted ACL in the Courts against the nuances of complex algorithms, and reflects its desire to get on the front-foot with prospectively drafted legislation to address the specific characteristics of various Digital Platforms.

While the proposed laws should not come as a surprise for the global players, Australian businesses operating in the industry may also be impacted (either directly or by way of a trickledown effect), and should take note of the changes. In our view, protecting users from scams, fake reviews and unfair trade practices may soon be mandatorily regulated, but nonetheless, the output from this Digital Platforms Inquiry to date confirms that a review of all aspects of user interactions, business conduct and service contracts in Australia is warranted and arguably overdue.

Authored by:

David Smith, Partner
Sinead Lynch, Partner (Foreign Qualified, not admitted to practice in Australia)
Adam Walker, Special Counsel
Freya vom Bauer, Associate

This update does not constitute legal advice and should not be relied upon as such. It is intended only to provide a summary and general overview on matters of interest and it is not intended to be comprehensive. You should seek legal or other professional advice before acting or relying on any of the content.

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