Online marketplaces under fire for influencing buyer behaviour

The Australian Competition and Consumer watchdog, the ACCC, has its eye on Australia’s four largest marketplaces, Catch, Amazon Australia, eBay and Kogan for using algorithms to influence their customers’ buying behaviour.

The big four marketplaces have come under fire in the ACCC’s Digital Platform Services Inquiry report, which suggests that online marketplaces have a high level of control and influence on consumer transactions on their platforms.

The Inquiry examined whether online marketplaces promote fair and competitive markets for consumers and sellers. The report found there are potential competition and consumer issues in providing online retail marketplaces in Australia including:

the intensity of competition in the relevant markets
trends in online shopping and general online retail
relationships between marketplaces and third party sellers
relationships between marketplaces and consumers, as well as between third party sellers and consumers.

“Online marketplaces have an important role in connecting Australian consumers and sellers, and make up a growing share of consumer sales. But we are concerned about their impact on both consumers and third-party sellers who rely on online marketplaces to reach their customers,” ACCC Chair Gina Cass-Gottlieb said.

Hybrid marketplaces under fire

Cass-Gottlieb said the ACCC is particularly concerned with the way these retail giants display and rank products, particularly where they sell their own product in competition with third party sellers – which may be a conflict of interest.

“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,” 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.”

Cass Gottlieb said algorithms on the platforms that give preferential treatment to a marketplace’s own products were of deep concern.

“We have concerns about particular examples of self-preferencing by hybrid marketplaces in Australia, which mirror similar concerns raised by overseas regulators,” Cass-Gottlieb said.

Privacy issues raised

The report also highlighted the large amounts of consumer data collected and used by online platforms, which may not align with the privacy preferences or expectations of many consumers.

Cass-Gottlieb said consumers should have more control over how platforms are collecting and using their data.

“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.”

Safety and dispute concerns

Cass Gottlieb said some platforms have joined the voluntary Product Safety Pledge which provides consumers with additional protections including commitments from signatories to remove listings of unsafe products within two business days.

“The ACCC encourages other online marketplaces to join the Product Safety Pledge to further strengthen online marketplace safety,” she said.

The report also raised concerns about the lack of dispute resolution mechanisms and the need to establish an ombudsman scheme to resolve consumer complaints.

“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,” Gottleib said.

Download the full Digital platform services inquiry – March 2022 interim report

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