The Australian Competition and Consumer Commission (ACCC) has announced that the next digital sector it will investigate as part of its five year Digital Platform Services Inquiry is the provision of online retail marketplaces.

Focus of the ACCC

Unless the Government decides to extend his appointment, Rod Sims, the Chair of the ACCC, has only 12 months left in that role. It has been reported in the media that one of the key goals he wants to achieve in that period is to reform digital markets. Following on from the success over the past year of the Mandatory News Media Bargaining Code, which has led to Google and Facebook, for the first time, agreeing to pay Australian media companies for use of their news content, the ACCC Chair has stated that he believes reform is required in relation to, at least, app marketplaces, the online search market and the advertising technology (or adtech) market.[1]

In late July 2021 the ACCC announced that, over the next six months, it will look at potential competition and consumer issues in the provision of general online retail marketplaces under the broad scope of the ACCC’s 2020-2025 Digital Platform Services Inquiry. The findings of this six month Inquiry may mean that online retail marketplaces are added to Mr Sims’ list of digital markets where competition and consumer protection reform is considered to be required.

What are general online retail marketplaces?

The ACCC is not looking at online retail sales generally – that is, the sale by traditional retailers from their own websites is outside the scope of the ACCC’s investigation. The ACCC will also not look at specialist marketplaces that sell only a particular type of goods, such as clothing or classified sites, such as Gumtree. Instead what the ACCC is looking at is websites that offer a broad range of products from a large range of different brands. Like a “real world” department store, these websites provide consumers with the ability to browse a range of different products, at different price points. Third party sellers, particularly smaller retailers, benefit from these marketplaces as they obtain access to a broader range of consumers than would visit a retailer’s own website, for which those retailers pay a fee to the marketplace equal to a percentage of their sales. The online retail marketplace may also offer retailers other services, such as logistics services relating to the delivery of their products, for which those retailers pay additional fees.

Unsurprisingly, during pandemic lockdowns in Australia, there has been a surge in online shopping. The ACCC’s Issues Paper for the online retail marketplaces Inquiry notes that non-food online sales comprised 14.2% of total non-food sales in May 2021 compared to 10.9% in February 2020.[2]

In Australia, the most popular examples of general online retail marketplaces are:

  • eBay Australia: eBay has operated in Australia since 1999 and is the largest online retail marketplace, with estimated gross sales in 2020 of $6.5 billion. It does not sell its own goods on its marketplace.
  • Amazon: Amazon is a relative newcomer to Australia as it commenced operations here in December 2017. In 2020 its gross sales were estimated at $2.6 billion. It is clear Amazon’s sales have grown rapidly in the short period it has operated in Australia.
  • Kogan: Kogan has operated in Australia since 2006 and commenced operating “Kogan Marketplace” in 2019 which allows third party sellers to sell from is platform. It is in third place with estimated sales of just under $1.1 billion in 2020.
  • Catch.com.au: Catch.com.au rounds out the “top 4” marketplaces, with estimated gross sales in 2020 of $610 million. Although it is the fourth largest marketplace, its gross sales are less than one tenth of eBay Australia’s.[3]

Of course, these are not the only general online retail marketplaces in Australia and other marketplaces, such as MyDeal, will also be considered in this six month Inquiry.

Scope of the Inquiry

Broadly the areas of concern to the ACCC that will be considered in the Inquiry may be placed in three different categories:

  • Level of competition: Although it has not raised any particular concerns that the Australian market for general online retail marketplaces is not competitive, the ACCC is seeking views on the intensity of competition, including the barriers to entry and expansion, competition with the stores operated directly by retailers, whether sellers make their products available across multiple online retail marketplaces and whether the changing habits of consumers are affecting the competitive landscape. In looking at competition issues, it should not be forgotten that there is competition between online and physical stores. The ACCC may ultimately make findings that will impact consideration of competition issues that arise in the physical world, for example, when it looks at potential mergers in the “bricks and mortar” retail sector.
  • The relationship between online retail marketplaces and third-party sellers:Internationally, competition regulators have investigated concerns regarding the interactions between marketplaces and third-party sellers and accordingly it is unsurprising that this is an area the ACCC will focus on. The issues to be considered include questions regarding how easy (or not) it is for third-party sellers to have products listed, the level of fees charged to third-party sellers and questions regarding prominence, that is, the impact the display of products has on the success of those products, and how transparent marketplaces are in notifying sellers as to how prominence is determined. The ACCC will look at data usage, such as whether platforms use data obtained regarding sales of the products of third-party sellers to advantage their own products. The ACCC appears to be particularly interested in investigating marketplaces that sell both third-party goods and their own goods.
  • Consumer protection: An ongoing key area of the concern to the ACCC relates to its consumer protection role in ensuring the safety of consumer products sold online. It has already taken action in this area, for example, by launching a voluntary safety initiative for products sold online in 2020. The ACCC is, in addition to examining whether these marketplaces protect consumers, seeking views on the ability of consumers to make complaints and return items that they are not satisfied with. Other issues to be considered include whether consumer data may be used by marketplaces in a way that harms individuals, such as through price discrimination and targeted advertising.

International focus

In the area of digital services, the ACCC has worked very closely with regulators in other jurisdictions, including the UK’s Competition & Markets Authority and the German Bundeskartellamt. For example in April 2021, these three regulators released a joint statement in relation to merger enforcement, which had a particular focus on concerns regarding the competition impacts of acquisitions of nascent competitors in highly concentrated markets, such as digital markets.[4]

However, in looking at online retail marketplaces, the ACCC is one step behind regulators in other jurisdictions. For example:

  • In late 2020, the European Commission (EC) commenced proceedings against Amazon alleging that Amazon, given its dual role as both the provider of its marketplace and a seller on it, is using the information that it receives from smaller retailers to unfairly compete with those retailers. The EC alleges that Amazon monitors sales by such retailers on its platform and then copies and sells popular products under its own brand.
  • The EC also announced in 2020 an investigation into Amazon’s so called “buy box”, which enables consumers to quickly complete transactions. The EC is examining whether this provides preferential treatment for Amazon’s own products and those of sellers who use Amazon’s logistics services.
  • Action has been taken in the US, with the Attorney-General for the District of Columbia commencing proceedings against Amazon in May 2021. That case is based on claims by sellers that Amazon takes adverse action, by limiting prominence of products, in the event that products are listed on a seller’s website or any other site at a lower price than on Amazon’s site.

The reason why the ACCC has been slower to consider online retail marketplaces is likely to be that the ACCC has focussed to date on other digital markets issues seen as of critical importance. In turning attention to marketplaces, the ACCC has recognised the benefits to consumers that online retail marketplaces provide. Nonetheless, Mr Sims has noted that the ACCC “… would expect the marketplace to operate fairly for businesses and consumers alike and comply with consumer laws and competition laws”.[5]

The ACCC is seeking stakeholder input on its Issues Paper by 19 August 2021.