The Australian competition watchdog has put online retail marketplaces on notice.
An inquiry by the Australian Competition and Consumer Commission has raised a number of concerns about how Amazon, Catch, eBay Australia and Kogan treat their customers.
In the fourth report released by the ACCC’s Digital Platform Services Inquiry on Thursday, the competition watchdog scrutinised whether online retail marketplaces are providing strong protections for buyers and promoting fair and competitive markets for sellers.
“Online marketplaces have an important role in connecting Australian consumers and sellers, and make up a growing share of consumer sales”, ACCC Chair Gina Cass-Gottlieb said.
What is an online retail marketplace?
An online retail marketplace connects with and offers services to consumers and sellers.
There are two different types of online retail marketplaces.
The first purely enables trade between buyers and sellers on their platform like EBay Australia.
The second is a ‘hybrid marketplace’ which retails their own goods while enabling trade between third-party sellers and buyers. Examples of a ‘hybrid marketplace’ are Amazon, Catch and Kogan.
The ACCC’s report noted that no online retail marketplaces dominated in Australia but that it was possible for the market to ‘tip’ in favour of one of them.
In 2020-21, Amazon, Catch, eBay Australia and Kogan jointly had sales of $8.4 billion. Compared to 2019-20, this figure increased by 21 percent.
What could online retail marketplaces do better according to the ACCC?
One of the ACCC’s key concerns was how online retail marketplaces use algorithms and other measures to decide how products are ranked and displayed, including how they give preferential treatment to their own products.
“We are concerned about their impact on both consumers and third-party sellers who rely on online marketplaces to reach their customers,” Ms Cass-Gottlieb said.
“We are particularly concerned about so-called hybrid marketplaces, which sell their own products in competition with third-party sellers that use their platform.
“Hybrid marketplaces, like other vertically-integrated digital platforms, face conflicts of interest and may act in ways that advantage their own products with potentially adverse effects for third-party sellers and consumers.”
Other issues that the consumer watchdog identified were how the data of consumers was being used and collected by online retail marketplaces and the need for better dispute resolution mechanisms and additional consumer protections (for example, companies are currently not obliged to provide safe products under Australian law).
“We believe consumers should be given more information about, and control over, how online marketplaces collect and use their data,” Ms Cass-Gottlieb said.
“Given the important intermediary role performed by online marketplaces between consumers and sellers, it is also important that marketplaces have protections in place for consumers using their services.”
The way forward
In November 2020, the ACCC launched a voluntary Australian Product Safety Pledge that commits its signatories to numerous safety related responsibilities that go beyond what is legally required of them.
The current signatories to the pledge include AliExpress, Amazon Australia, Catch, eBay Australi and MyDeal.
In the Digital Platform Services Inquiry’s next report, the ACCC will be determining whether Australia needs a new regulatory framework to address competition and consumer concerns with digital platform services more broadly.
“Any such framework should be able to be applied to an online marketplace if it reaches a position where it could exercise a certain level of market power or, potentially, act as a gatekeeper between businesses and consumers,” Ms Cass-Gottlieb said.