ACCC flags concern over how online retail marketplaces use algorithms and data

The watchdog wants to see more consumer protection and dispute mechanisms introduced.

After putting online retail marketplaces such as Amazon Australia, Catch, eBay Australia, and Kogan under the microscope as part of its Digital Platform Services Inquiry, the Australian Competition and Consumer Commission (ACCC) has raised a number of concerns over how these sites operate and the impact it has on sellers and consumers.

In releasing its fourth report [PDF] as part of the inquiry on Thursday, the ACCC acknowledged that while there is a small number of relevant products on an online marketplace that can help consumers make purchasing decisions, it also found examples where online marketplaces used algorithms to decide how products are ranked and displayed, including self-preferencing their own products.

"Online marketplaces need to be more transparent with consumers and sellers about how they operate. For example, they should explain to consumers and sellers why their search functions and other tools promote some products over others," ACCC chair Gina Cass-Gottlieb said.

Catch and Kogan were named in the report as examples of "hybrid marketplaces" -- retail marketplaces which sell both third-party and their own products -- that were found to have used algorithms to give an additional search results "boost" to their own products sold on their marketplace.

"We are particularly concerned about so-called hybrid marketplaces, which sell their own products in competition with third-party sellers that use their platform," Cass-Gottlieb said.

"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."

Another concern the ACCC made note of was around data collection and the use of consumer data, believing that more consumer protections are necessary, such as agreeing to the voluntary Product Safety Pledge, which commits signatories to removing listings of products deemed unsafe within two business days.

"We believe consumers should be given more information about, and control over, how online marketplaces collect and use their data," 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 report also raised concerns about the lack of dispute resolution mechanisms available to sellers and consumers. The ACCC reinforced the need for online marketplaces to introduce minimum internal dispute resolution requirements and an ombudsman scheme to resolve complaints and disputes. This was a recommendation the ACCC put forward as part of the Digital Platforms Inquiry Final Report.

"Other measures supported by the ACCC, including a prohibition on certain unfair trading practices, introducing a general safety provision, and making unfair contract terms illegal, could help address other issues identified in this report," Cass-Gottlieb added.

Moreover, the reported noted even though Amazon Australia's sales remain significantly lower than eBay Australia and other Australian retailers, such as David Jones, Myer, Kmart, and Target, it is growing the fastest out of all the online platforms that were examined.

According to the ACCC, eBay Australia's current share of overall online sales in Australia is approximately 10% while Amazon Australia's share is approximately 2.5%.

As next steps, the ACCC said it is currently consulting on whether a new regulatory framework or tools are required to address the competition and consumer concerns identified with regard to digital platform services. The findings will be delivered in the ACCC's fifth Digital Platform Services Inquiry report, due September 2022.

"Any such framework should be able to be applied to an online marketplace if it reaches a position where it is could exercise a certain level of market power or, potentially, act as a gatekeeper between businesses and consumers," Cass-Gottlieb said.

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