An Australian Competition and Consumer Commission (ACCC) report has flagged a range of concerns about how retail marketplaces - such as Amazon Australia, Catch, eBay Australia and Kogan – operate.
Concerns included the use of algorithms to decide how products are ranked and displayed, with some marketplaces giving preference to their own products.
The collection and use of consumer data was also cited, as well as inadequate dispute resolution processes and a need for more consumer protections.
The ACCC’s fourth report in its Digital Platform Services Inquiry examined whether online marketplaces are promoting fair and competitive markets for consumers and sellers.
It found that online marketplaces have a high level of control and involvement in transactions between consumers and sellers on their platforms.
“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.
The report highlights consumers’ and sellers’ concerns about the way online marketplaces display and rank products to consumers on the platform.
“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.
“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.”
Marketplaces have deployed ranking algorithms and other practices which have a significant impact on the purchasing decisions of consumers. These algorithms and practices can be used to provide preferential treatment to the hybrid marketplaces’ own products.
“We have concerns about particular examples of self-preferencing by hybrid marketplaces in Australia, which mirror similar concerns raised by overseas regulators.
“We believe consumers should be given more information about, and control over, how online marketplaces collect and use 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.”
The report highlights the large amounts of consumer data collected and used by online marketplaces, which may not align with the privacy preferences or expectations of many consumers.
For example, some marketplaces 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.
The report also raised concerns about the lack of dispute resolution mechanisms.
“We continue to support a minimum internal dispute resolution requirement for digital platforms and the establishment of an ombudsman scheme to resolve consumer and business complaints, as recommended by our original Digital platforms inquiry final report,” Cass-Gottlieb said.
“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.”
The report notes that Amazon Australia’s sales remains significantly lower than eBay Australia’s and well below those of many large Australian online retailers such as Big W, David Jones, Kmart, Myer or Target.
But while sales through all four leading online marketplaces in Australia are growing, Amazon Australia’s sales are growing faster than the other platforms.
The report focuses on the four major online retail marketplaces in Australia: Amazon Australia, Catch, eBay Australia and Kogan. In 2020–21, they jointly had total of $8.4 billion, an increase of 21 per cent compared to 2019–20.
On February 10, 2020, the Government directed the ACCC to conduct a five-year inquiry into markets for the supply of digital platform services in Australia and their impacts on competition and consumers.
This inquiry will report to the Treasurer every six months and will examine digital platform services including their advertising services and data brokers until the conclusion of the inquiry in March 2025.
The report focuses on general online retail marketplaces and is the fourth report produced under this direction. Online marketplaces are those that display a broad range of products to consumers.
ACCC says for the purposes of the report, a distinction was made between online marketplaces and physical retailers that operate online (like Big W, David Jones, Kmart, Myer and Target).
“Online marketplaces facilitate transactions between third-party sellers and consumers on a common platform,” the ACCC says, “while physical retailers operating online act as a seller.
“There is also a distinction between online marketplaces and online classified ad platforms (like Gumtree or Facebook Marketplace).
“This is because online classified ad platforms do not allow transactions to be completed through their platform, while online marketplaces require this.”