The Australian government plans to join the list of jurisdictions that have implemented (or are proposing) 'ex ante' (ie 'before the event') regimes directed at regulating digital platforms. The Government plans to introduce a new digital competition regime – initially targeted at app stores and ad tech platforms.

The Government is positioning Australia as a 'fast follower' in the targeted regulation of digital platforms which builds on the Australian Competition and Consumer Commission's (ACCC) Digital Platform Services Inquiry. The Government is also drawing on lessons from regimes that have been either implemented or proposed in a number of key jurisdictions including the EU, UK, Germany, Japan and India.

The objective of the proposed regime is to address perceived competition law harms (current and future) presented by digital platforms in areas where the ACCC has concluded that the current framework of general 'ex post' (ie after the event') prohibitions is inadequate. The new digital platforms regime is one plank of a broader Government strategy that includes privacy reforms, scam prevention measures and work related to AI and consumer law.

The scope of the proposed regime

While Treasury is consulting on specific features of the regime, it will involve several key features:

• First, there will be a designation process to identify platforms to which the regime will apply. Initially, the government has identified app marketplaces and ad tech services as priorities. It is consulting on whether social media platforms should be included, similar to the approach in the EU and in Germany.
• Second, a hybrid regulatory approach that will provide flexibility via general and service-specific obligations.

Elements of the proposed new regime include:

1. Designation and duration – The regime would provide for the ACCC to conduct a 'designation investigation'. The relevant minister could either direct the ACCC to investigate a specific category of digital platform services or the ACCC could initiate an investigation. The investigation process would then assess whether it is appropriate to designate a digital platform that offers a particular category of services based on both quantitative criteria (e.g., service-specific revenue in Australia, globally, or firm-wide; number of Australian or business users; market capitalisation) and qualitative factors (e.g., market position, degree of market power, or the platform's role as a key intermediary). This would be a public process, with the ACCC informing relevant entities about the investigation and consulting stakeholders.

Designation investigations would need to be completed within six months, with the possibility of a brief extension if necessary. On completing its investigation, the ACCC would submit its findings to the relevant minister, who would then make the final decision. Once a digital platform is designated for a particular service, it would be subject to the proposed regime's obligations for a specified period. The proposal is that this would be for a period of five years, with scope for review if circumstances change.

2. Potential obligations (broad and service-specific) – The proposed framework would set out general obligations for all regulated digital platforms, including prohibitions on anti-competitive practices (e.g., tying and self-preferencing) and requirements for transparency and data portability. In addition, the Government has proposed a hybrid approach that would also allow for service-specific obligations via regulation. The general obligations would ensure consistent regulation across different platforms, while the flexibility to implement specific obligations would address the unique characteristics of each service.

Designated platforms would be required to comply with both the general and service-specific obligations. For example, service-specific obligations for app marketplaces may include requirements regarding prioritisation, payment system restrictions, and transparency regarding app review processes. A failure to meet the service-specific obligations would automatically constitute a breach of the general obligations.
Treasury is also consulting on a range of process-related issues including, for example, whether the regulatory regime should operate on a cost recovery basis. In this respect, Treasury is considering the practical operation of the regulatory regimes in the EU and the UK.

3. Exemptions – The framework would allow the ACCC to grant exemptions based on specific grounds for conduct that might otherwise breach the regime. Treasury has proposed that the threshold for a ‘countervailing benefits’ exemption under this framework should be higher than the current ‘net public benefit’ test that is applied as part of the ACCC's authorisation process. A designated digital platform seeking an exemption from a specific obligation would need to apply to the ACCC. The ACCC would then have a set period to evaluate the application and could use its information-gathering powers and consultation processes to inform its decision.

4. Enforcement and compliance – The ACCC would be responsible for monitoring compliance, investigating violations, and enforcement. The ACCC’s compulsory information-gathering powers would be extended to the digital competition regime. Treasury has highlighted that additional tools might be necessary to manage the regime, including mandatory reporting requirements for designated platforms and record-keeping rules to monitor compliance. Significantly, subject to ACCC approval, the regime would include a mechanism for platforms to submit compliance proposals, outlining measures adopted in international regimes and committing to implement those processes in Australia.

5. Penalties – Penalties for non-compliance would align with the maximum penalties under the Competition and Consumer Act – being the maximum of A$50 million, three times the value of the benefit gained, or if the benefit cannot be calculated, then 30% of the adjusted turnover during the period of the breach. Treasury is also considering whether the ACCC should have the power to issue infringement notices for non-compliance. At this stage, no structural remedies are proposed (i.e. divestment powers). However, Treasury is considering if the regime should include a mechanism for the ACCC to require that where a structural remedy has been implemented under an equivalent regime, then it also be applied in Australia.

Striving for international coherence

The Government's proposal recognises the need to avoid excessive regulatory divergence. . The intention is for the model to be fit-for-purpose in an Australian context and complementary to other local regulatory requirements, but also cohesive and coherent with the approach in other jurisdictions. Accordingly:

• The government is considering a model that would minimise regulatory compliance obligations by recognising compliance measures undertaken overseas. Specifically, this would include a mechanism to allow platforms to provide compliance proposals to the ACCC based on measures adopted elsewhere.
• While the government is not proposing a structural remedy regime, it is considering the suitability of model where Australia would piggy-back off remedies offered up under equivalent regimes.

Treasury and the ACCC are carefully monitoring regulatory developments overseas with the stated objective of Australia becoming a 'fast follower' that draws selectively from bespoke ex ante regimes being developed in other leading competition jurisdictions.

Intended outcomes and next steps

Treasury is consulting on a range of substantive issues regarding the framework with feedback due by 14 February 2025. The ACCC is working closely with Treasury in relation to the reform package.

Platform providers and their advisers (not only the 'first wave' targets of app stores and ad tech platforms) will need to carefully monitor the evolving regulatory landscape in Australia including the proposed digital competition regime.

The Treasury consultation process will be open until 14 February 2025. Please contact MinterEllison's national Competition Team if you have questions about the proposed digital competition regime or other regulatory developments impacting digital platforms and online businesses.