Katarina Klaric, Principal, Stephens Lawyers & Consultants
Australia’s competition law is complex. Because of its “opacity and unwieldiness” when considering its application, it is important to understand the object of the law – which is to “enhance the welfare of Australians through the promotion of competition and fair trading and the provision of consumer protection”[i]. Competition law risk assessments should be undertaken before doing business in Australia to ensure compliance with the law and minimise the risk of significant penalties.
Metaverse platforms that are registered as a business, company or foreign entity in Australia or are carrying on business within Australia will have to comply with the Competition and Consumer Act[ii]. Determining whether a Metaverse platform is carrying on business within Australia for the purpose of Australian competition law requires analysis of all the relevant facts. Valve Corporation, the American operator of the Steam on-line video game platform, was found by the Australian Federal Court to be carrying on business in Australia because it was supplying on-line video games to users located in Australia and derived a substantial amount of revenue from this activity. Valve Corporation was not a foreign registered entity in Australia, did not have any subsidiaries in Australia and supplied its on-line games from servers located in the United States[iii].
The Australian competition law prohibits anti-competitive conduct including:
- Cartel conduct involving price fixing, restrictions on outputs in production and supply chains, allocation of customers, suppliers or territories or bid rigging by parties that are, or would otherwise be competitive with each other[iv];
- Anti-competitive contracts, arrangements or understandings[v];
- Misuse of market power by corporations having a substantial degree of market power[vi];
- Anti-competitive mergers and acquisitions[vii].
- Exclusive dealings[viii];
- Resale price maintenance[ix]:
- Boycotts affecting trade or commerce[x];
The Competition and Consumer Act includes a legislative framework, which enables a company/organisation or a class of companies/organisations to apply to the regulator, the Australian Competition and Consumer Commission (ACCC), for authorisation to engage in conduct, which may or would contravene the provisions of the Act[xi]. The application for authorisation must be made, before engaging in the conduct, as the ACCC does not have power to grant retrospective authorisation in respect of anti-competitive conduct engaged in before the authorisation is granted[xii].
The applications are assessed, case-by-case, having regard to proposed anti-competitive conduct in the relevant market and information received from submissions or consultations. If the conduct is likely to have an anti-competitive effect, the party seeking authorisation must be able to show that there will be sufficient public benefit to outweigh any likely anti-competitive detriment[xiii].
In the case of mergers and acquisitions, until 31 December 2025, parties can enter into conditional agreements with the ACCC subject to clearance authorisation for the merger or acquisition[xiv]. However, from 1 January 2026, the Australian Government’s new merger control laws and regime come into effect. These laws will also apply to mergers of digital platforms and businesses in the digital eco-system. Businesses can use the new regime voluntarily from 1 July 2025 and it will be mandatory from 1 January 2026. The merger control laws introduce a new regime for notifying and assessing “acquisitions of shares, assets, or of any other type as described in Part IVA of the Competition and Consumer Act 2010”[xv] (‘notifiable acquisitions’) with the ACCC responsible for the regime’s implementation and being the first instance decision maker on each notified acquisition[xvi]. The new regime’s requirement for merger assessments of data will also enable the ACCC to better assess, identify and prevent anti-competitive transactions including serial acquisitions that remove potential competition or entrench, materially increase or materially extend a position of substantial market power over time. The ACCC has published guidance – ‘Transition to a new merger control regime’[xvii] – to inform and guide businesses about how the ACCC proposes to manage the transition to the new regime.
The ACCC can take court action seeking injunctive relief and imposition of pecuniary penalties for breaches of the consumer law. Businesses and consumers affected by the conduct can also take court action seeking compensation for loss and damage suffered.
Proposed Reforms to Australia’s competition and consumer protection laws
Since 2017, the ACCC at the direction of the Australian government has been conducting inquiries into competition and consumer impact of digital platform, digital platform services and digital markets and regulatory reforms required. These inquiries have resulted in eight reports and recommendations for regulatory reforms to deal with anti-competitive practices and unfair trade practices of digital platforms. New Media and Digital Mandatory Bargaining Code came into effect on 3 March 2021 to address the issues identified in the first report relating to the bargaining power imbalance between digital platforms and news media and other content providers in respect of use of their content by digital platforms. The Code provides a mechanism of registered news media and other content providers to negotiate with digital platforms for payment for the use of their content. Digital platforms are also required to provide notification of planned changes to algorithms, where the dominant purpose of the change is to bring about identified alterations to distribution of content with a significant effect on traffic referral[xviii].
The recommendations for regulatory reform that have been accepted by the Australian government and are still to be implemented include: –
- Reforms to address the prevalence of scams, fake reviews and harmful applications (some of which originate from the use of AI technology), the establishment of mandatory processes including notice-and-action processes, reporting processes, verification of certain business users and dispute resolution processes.
- Establishment of a new independent Ombudsman Scheme to resolve disputes between digital platforms, consumers and small businesses.
- Amendments to the Australian Consumer Law to prohibit economy-wide unfair trading practices and strengthened unfair contract terms protection including those occurring on digital platforms and/or resulting from the use of Al systems[xix];
- A new competition regime with the introduction of service-specific codes of conduct to address anti-competitive conduct engaged by digital platforms through the use of AI algorithms. Such conduct includes – self-preferencing and tying, setting prices, determining bids, or market-sharing resulting in harmful algorithmic collusion – where competing algorithms simultaneously learn to set higher prices collectively maximizing profit. The code would impose targeted competition obligations, which would apply to designated digital platforms who have the ability and incentive to engage in anti-competitive conduct[xx].
Although these reforms are not specifically directed to metaverse platforms, the ACCC has indicated in its reports that codes of conduct will be used to impose specific obligations on gatekeeper platforms to deal with anti-competitive conduct including unfair licence or contract terms and to allow for interoperability of systems.
Disclaimer: This article is not intended to replace obtaining legal advice
© Stephens Lawyers & Consultants, May 2024- 2025; Authored by Katarina Klaric, Stephens Lawyers & Consultants. Contribution of Rochina Iannella acknowledged in update relating to new mergers and acquisition regime.
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Katarina Klaric
Principal
Stephens Lawyers & Consultants
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[i] Competition and Consumer Act 2010, s2. See: Visy Paper Pty Ltd v. ACCC [2003] HCA 59; (see Kirby J and McHugh J)
[ii] Competition and Consumer Act 2010 (Cth)
[iii] ACCC v Valve Corporation (No.3) [2016] FCA 196; [2017] FCAFC 258; [2018] HCASL 99
[iv] Competition and Consumer Act 2010, Part IV-Restrictive Trade Practices, Division 1-Cartel Conduct
[v] Competition and Consumer Act 2010, Part IV-Restrictive Trade Practices, Division 2- Other Provisions, s45-s45EA;
[vi] Competition and Consumer Act 2010, Part IV-Restrictive Trade Practices, Division 2- Other Provisions, s46-46A;
[vii] Competition and Consumer Act 2010, Part IV-Restrictive Trade Practices, Division 2- Other Provisions, s50
[viii] Competition and Consumer Act 2010, Part IV-Restrictive Trade Practices, Division 2- Other Provisions, s47
[ix] Competition and Consumer Act 2010, Part IV-Restrictive Trade Practices, Division 2- Other Provisions, s48
[x] Competition and Consumer Act 2010, Part IV-Restrictive Trade Practices, Division 2- Other Provisions, s45D
[xi] Competition and Consumer Act 2010, Part VII –Authorisations and notifications, Division 1 – Authorisations. S88;
[xii] Ibid, s88(6)
[xiii] Competition and Consumer Act 2010, Part VII –Authorisations and notifications, Division 1 – Authorisations. s90(6A) and (7)
[xiv] s50(4)
[xv] ACCC, ‘Transition to a new merger control regime’, 4 March 2025 – at page 2 – https://www.accc.gov.au/system/files/merger-reform-transition-to-new-merger-control-regime-4-March-2025_0.pdf
[xvi] ACCC Chair Ms Gina Cass-Gottlieb, ACCC’s Compliance and Enforcement Priorities Update 2025-26 address, 20 February 2025 – ‘Australia’s new merger regime’
[xvii] ACCC, ‘Transition to a new merger control regime’, 4 March 2025 – Op cit.
[xviii] News media and digital platforms mandatory bargaining code, s52S
[xix] ACCC, Digital platform services enquiry- September 2022 Interim report –Regulatory reform. Chapter 4. September 2022.
[xx]Ibid; https://www.accc.gov.au/media-release/consumers-and-small-businesses-to-benefit-from-proposed-new-regulation-of-digital-platforms