Katarina Klaric, Principal, Stephens Lawyers & Consultants
The dynamic nature of the digital environment with its lack of transparency and market complexity continues to challenge regulators, often making it difficult to detect issues and take enforcement action to deal with unfair trade practices, anti-competitive conduct and privacy and cybersecurity breaches. The Australian Competition and Consumer Commission (ACCC) compliance and enforcement priorities for 2023-2024 continue to focus on competition, fair trading and consumer protection issues in the digital economy including digital platforms and on-line market places[1].
The Office of the Australian Information Commissioner (OAIC), the regulator responsible for the Australian Privacy Act 1988 (Cth) compliance regulatory focus for 2023 includes online platforms, social media and high privacy impact technologies and the security of personal information. The OAIC is prioritising its regulatory activities to deal with the harm arising from “practices of online platforms and services which impact on individual’s choice and control, through opaque information practices or terms and conditions of service”. In this area, the OAIC is specifically looking at “technologies and business practices that record, monitor, track and enable surveillance, and the use of algorithms to profile individuals” in ways which may not be understood or expected, with adverse consequences[2].
Increasingly the ACCC is involved in technology disputes, either taking court enforcement proceedings against digital platforms and technology companies or intervening in private litigation commenced by affected parties.
A review of recent Australian technology cases show a number of emerging trends:
- The ACCC is taking an increasing number of court proceedings against global technology companies for unfair trade practices and misleading advertising in contravention of Australian Consumer Law.
- Australian courts are imposing significant penalties on global technology companies for breaches of Australian consumer laws – with the highest penalty of $60 million being imposed on Google LLC in 2022.
- Global technology companies are challenging the jurisdiction of Australian courts to determine disputes where owner and operator of the digital platform is not a company registered in Australia and all the servers are located outside Australia, although the affected users are located in Australia.
- Arbitration clauses which are commonly used in the Terms of Use of on-line platforms supplying goods and services in multiple jurisdictions with different laws, are being challenged in Australian courts as being unfair contract terms or unconscionable terms where they require the arbitration to take place outside the jurisdiction of the country of the party who is making claims against the tech companies.
- Technology companies are relying on “exclusive jurisdiction” clauses in licence agreements and other contracts to shut down competition law court proceedings commenced by the complainant in a jurisdiction other than the jurisdiction specified in the agreement
This Update provides a review of recent technology cases and provides useful insights into:
- Some of the issues that should be considered when drafting or reviewing terms and conditions for on-line platforms, digital market places and technology agreements for compliance;
- the importance of monitoring and review of on-line platforms and digital market places for accuracy of information displayed;
- the importance of monitoring algorithms for accuracy;
- the importance of review of all advertising and marketing material for compliance with Australian Consumer Law and relevant Advertising Codes of Conduct;
An understanding of these issues and the implications for businesses and consumers can minimise the risk of enforcement action or court proceedings by regulators or parties affected.
Review of Australian Technology Cases: 2022 – March 2023
A. The courts are imposing significant penalties on global technology companies for contravention of the Australian Consumer Law.
Case Examples
Australian Competition and Consumer Commission v Google LLC (N0. 4) [2022] FCA 942 (12 August 2022)
The Federal Court of Australia ordered Google LLC to pay penalties totalling $60,000 million for making misleading representations to consumers about the collection and use of their personal location data on Android phones, during the period of January 2017 and December 2018. The amount of the penalty was agreed to by the parties and sanctioned by the court, following the court finding on 16 April 2021 that Google LLC and Google Australia Pty Ltd had contravened sections 18, 29(1)(g) and 34 of the Australian Consumer Law. This case was the first public ACCC enforcement outcome arising out of ACCC’s Digital Platform’s enquiry.
Australian Competition and Consumer Commission v. Uber B.V. [2022] FCA 1466 (7 December 2022)
The Federal Court of Australia ordered Uber B.V to pay penalties totalling $21 million for breaches of s29(1)(i) of the Australian Consumer Law in respect of false or misleading representations made in trade or commerce:
- during the period from about 20 June 2018 to 31 August 2020 with respect to the price for an Uber taxi by displaying on the Uber app and Uber website an estimated price range for the ride at the time of the booking, when the actual price for the ride was not likely to be the price range displayed;
- during the period from approximately 8 December 2017 and 20 September 2021 with respect to the price that would apply when the “Cancel Trip” option had been selected for ride booked for UberX, Uber Premier, Uber Comfort or UberPool using the Uber platform by displaying on the Uber app and Uber website a message stating that they may be charged a small fee when in fact such consumers would not be charged a fee if they cancelled their trip during the free cancellation period stated in the terms and conditions.
The court also granted an injunction restraining Uber B.V for a period of three years from the date of court orders (7 December 2022) in trade or commerce in connection with the supply or possible supply or promotion of rideshare services, from making any representation to the effect that a consumer may be charged a cancellation fee in circumstances where the relevant terms and conditions or cancellation policies applicable in Australia to the rideshare services stipulate that the consumer would not be charged a cancellation fee. Uber was also ordered to make a contribution towards the ACCC’s costs.
The price range calculations of fares displayed on the Uber platform were dependent on the accuracy of pricing algorithms used by Uber. The court accepted that consumers do not have visibility over algorithm inputs and relied on Uber to provide fare estimates based on accurate pricing information. Consumers also relied on Uber to provide truthful information regarding when a fee might in fact be imposed for the cancellation of a trip. The court in considering the appropriate penalty took into account the fact the employees of the Uber group were aware that there were limitations as to the accuracy of the algorithm for calculating fare range estimates, however did not monitor the workings of the algorithm for accuracy of calculation of price ranges. Uber was required to provide the court with further evidence concerning the nature and extent of employee’s knowledge of the accuracy limitations of the algorithm[3].
In relation to cancellation representations, certain employees and senior management of the Uber group know that the cancellation warnings were being incorrectly displayed during the free cancellation period and that Uber would be profiting from this. Senior Management were aware that more accurate cancellation messaging would have a negative financial impact on Uber and drivers. The court took these factors into account in determining the appropriate penalty to impose[4].
B. Global technology companies are challenging the jurisdiction of local courts to determine disputes.
Case Examples
Facebook Inc. v Australian Information Commissioner [2022] FCAFC 9 (7 February 2022)
(Appeal from the Australian Information Commissioner v Facebook Inc. (N0. 2) FCA 307)
This case involved an appeal by Facebook Inc. against the decision of the trial judge who refused Facebook Inc.’s application to set aside service of court proceeding that had been commenced by the Australian Privacy Commissioner for breaches of the Australian Privacy Act involving use of Facebook users’ personal information by Cambridge Analytics for political campaigns. Facebook Inc., the US parent company, contended that it was not subject to the Australian Privacy Act because it was not carrying on business in Australia and it had not collected or held personal information in Australia. The Appeal Court found that the trial judge was correct in concluding that an inference was available that Facebook Inc. was carrying on business and that it collected personal information which is the subject of the Commissioner’s case. The evidence before the Appeal Court was that Facebook Inc. was engaged in the provision of data processing services to Facebook Ireland, who was doing business in Australia and sending data collected in Australia to be processed by Facebook Inc.
Facebook Inc. has appealed the decision to the High Court of Australia.
C. Arbitration clauses for dispute resolution in global technologies companies’ on-line platforms “Terms of Use” are being challenged in courts as being unfair contract terms or unconscionable terms.
This challenge is occurring where the arbitration clause requires the arbitration to take place outside the jurisdiction of the country of the party who is making claims against the tech companies. Arbitration clauses are commonly found in the Terms of Use of on-line platforms supplying goods and services in multiple jurisdictions with different laws.
However, there can be numerous benefits having Arbitration clauses in technology contracts or terms. These include – the confidentiality of the proceedings, considerable costs saving, allowing the disputes to be resolved in one country where a company operates in multiple jurisdictions with different laws. Arbitral awards are also enforceable in countries which are parties to the New York Convention on Enforcement of Arbitral Awards.
Case Examples
Instagram Inc. v Dialogue Consulting Pty Ltd [2022] FCAFC 7
(Appeal from Dialogue Consulting Pty Ltd v Instagram Inc. [2020] FCA 1846)
Dialogue Consulting, an Australian company, had developed software – “Sked Social” which interfaced with Instagram and enabled content to be automatically uploaded to and published on a client’s Instagram account utilising the client’s login information. Dialogue Consulting utilised the software to provide marketing services to its clients and required its clients to provide user login information and to agree to the Terms of Use of Instagram.
In January 2014, Instagram first raised with Dialogue Consulting that by collecting users’ (i.e. its clients’) login information Dialogue Consulting was in breach of the 2013 Terms of Use. Dialogue Consulting denied any wrongdoing, and lengthy correspondence ensued.
Ultimately, on 12 February 2019, Meta Platforms took what the trial judge described as self-help action and terminated Dialogue Consulting’s access to Instagram, banned the domain names used for Sked Social from Facebook and Instagram also deactivated the personal Facebook account of Mr Stephens who was the sole director and shareholder of Dialogue Consulting. These actions were taken without any prior warning and formed the basis of Dialogue Consulting complaints in the court proceedings which it commenced on 11 April 2019 against the Meta parties, seeking injunctive and declaratory relief and alternatively, damages. [14]-[15]
Dialogue Consulting claimed that the Meta parties had breached various provisions of the Australian Consumer Law (ACL) and had engaged in anti-competitive conduct contravening s 45 (arrangements substantially lessening competition) and s 47 (exclusive dealing) of the Competition and Consumer Act 2010 (Cth). Dialogue Consulting also filed an interlocutory application seeking interim and interlocutory injunctions restraining the Meta parties from terminating its access to Facebook and Instagram. [15] Instagram’s Terms of Use applicable to the dispute contained an opt-out abitration clause for the resolution of disputes between the parties. [11]
Twelve months after the court proceedings had been commenced by Dialogue Consulting, the Meta parties sought orders to stay the court proceeding relying on the arbitration clause in the Terms of Use. Although the trial judge found that there was an agreement to arbitrate and the arbitration clause was not an unfair contract term, he refused to stay the proceedings as the Meta parties had waived any reliance on the arbitration agreement by their participation in the court proceedings.
The Appeal Court confirmed the decision of the trial judge that a stay of the proceedings should not be granted as the Meta parties had waived any reliance on the arbitration agreement in the Terms of Use – Meta Parties had submitted to the jurisdiction of the Federal Court of Australia by filing an unconditional appearance, defending the claim and participating in the discovery process including utilising notices to produce documents to obtain production of documents from Dialogue Consulting. The Meta parties sought the stay of the proceedings and for the dispute to be referred to arbitration in California under the Terms of Use, some 12 months after the proceedings had been commenced by Dialogue Consulting. The Appeal Court confirmed that Dialogue Consulting would be prejudiced if the stay were granted because it had already incurred significant legal costs in prosecuting the proceedings and responding to the Meta parties’ discovery and production of documents requests.
The Appeal Court did not make any determination in relation to the finding of the trial judge that the arbitration clause was not an unfair contract term where – the clauses allow the parties to opt out of arbitration and the arbitration clause has been included in a standard form contract to protect the legitimate interest of a party – that is avoidance of litigation in multiple jurisdictions.
Compare with – Uber Technologies Inc. v Heller; 2020 SCC 16 [referred and distinguished by the trial Judge in Dialogue Consulting Pty Ltd v Instagram Inc. [2020] FCA 1846 at [392]]
In that case the Canadian Supreme Court held that the arbitration clause providing for arbitration in Uber’s home jurisdiction, Amsterdam, Netherlands under Dutch law in a standard form contact between Uber and a Canadian driver was an unfair contract term and unconscionable and therefore invalid. The arbitration clause had no opt-out provision, and required the arbitration to take place in a country where the claimant was not a resident and required the claimant to pay arbitration costs. The Court considered the effective bargaining positions of the parties in this case, the contract was presented on a take it or leave it basis, with the driver not being in a position to negotiate with a multi-national company. Further, any substantive rights which the driver had under the contract could not be enforced because of the arbitration clause.
D. Technology companies are relying on “exclusive jurisdiction” clauses in licence agreements and other contracts to shut down competition law suits commenced by the complainant in a jurisdiction other than the jurisdiction specified in the agreement.
Case Examples
Epic Games Inc. v Apple Inc [2021] FCAFC 122 (9 July 2021)
(Appeal from Epic Games, Inc v Apple Inc (Stay Application) [2021] FCA 33)
Apple Inc & Anor v Epic Games Inc. & Anor [2021] HCASL 234 (4 December 2021)
The Appeal Court of the Federal Court of Australia overturned the decision of the trial judge granting a stay to Apple of the Australian proceeding commenced by Epic Games Inc. Apple Inc, in seeking a stay of the Australian proceedings which relied on the “exclusive jurisdiction” clause in the Apple Developer Program Licence Agreement (DPLA) which required all litigation and dispute resolution between the parties to be exclusively conducted in the Northern District of California. The Appeal Court considered that the enforcement of the “exclusive jurisdiction” clause in the DPLA would offend the public policy of the forum. Apple sought special leave to appeal the Appeal Court decision to the High Court of Australia, which was refused.
Epic Games, a global developer of on-line video games and gaming apps (including,“Fortnite”) , including for use on Apple’s iOS devices (iPhone and iPad), alleged that Apple engaged in anti-competitive conduct and unconscionable conduct in contravention of the Australian Competition and Consumer Act. The conduct complained of included Apple’s requirement under its DPLA that:
- developers of apps for use on Australian iOS devices only distribute those apps through Apple’s Australian App Store, and
- any app developer use only Apple’s in-app payment processing system for the purchase of in-app content. Typically, Apple deducted as commission 30% of any such payment which results in a very substantial flow of revenue to Apple from its Australian users.
Apple excluded Epic’s “Fortnite” game from Apple’s app store when Epic Games made its own payment system available to players of the game.
If Epic Games is successful in its suit, users in Australia of iOS devices would be able to download apps to their devices from locations other than Apple’s Australian App store and other firms would be able to provide payment processing systems for in-app content within the environment of iOS apps.
Before commencing proceedings in the Federal Court of Australia, Epic Games had also commenced proceedings against Apple Inc. in United States District Court for the Northern District of California. In the US proceedings, Epic Games alleged that the effect of the DPLA is to maintain Apple’s monopolisation of certain markets contrary requirement of US competition laws.
The regulator, Australian Competition and Consumer Commission (ACCC), and Google Inc. intervened in the Appeal Court proceedings as a non-parties and made submissions.
Epic Games Inc v Google LLC (Stay Application) [2022] FCA 66 (4 February 2022)
This is a similar case to Epic Games Inc v Apple Inc. In this case, Epic’s game “Fortnite” was excluded from Google’s Android platform on 13 August 2020 when, on the same day, Epic Games made its own in-game payment system available to players of the game.
Epic Games commenced proceedings in the Federal Court of Australia on 8 March 2021 alleging that Google’s conduct was in breach of Pt IV of the Competition and Consumer Act 2010 (Cth) (‘CCA’) and that it was unconscionable within the meaning of s 21 of the Australian Consumer Law. There are parallel proceedings in the United States before the District Court for the Northern District of California (Oakland Division) concerning the same events.
Google parties applied to the Court for an injunction to stay the proceedings in Australia, so that the proceedings before the state or federal courts sitting in Santa Clara County in California could be pursed. The Google parties relied upon the “exclusive jurisdiction” clause in the ‘Google Play Developer Distribution Agreement’ (DDA) between Epic Games and two of the Google parties who were parties to the agreement or, alternatively, on forum non-conveniens grounds.
The “exclusive jurisdiction” clause in the DDA stated –
“All claims arising out of or relating to this Agreement or Your relationship with Google under this Agreement will be governed by the laws of the State of California, excluding California’s conflict of laws provisions. You and Google further agree to submit to the exclusive jurisdiction of the federal or state courts located within the county of Santa Clara, California to resolve any legal matter arising from or relating to this Agreement or your relationship with Google under this Agreement, except that you agree that Google will be allowed to apply for injunctive relief in any jurisdiction…”
The court refused the stay application.
Epic Games’ Australian anti-competitive court proceedings against Apple and Google are now proceeding concurrently and have been listed for concurrent hearing for trial on 4 March 2024 with an estimated duration of 18 weeks.
It is to be noted that in the United States. on 5 February 2021, the United States Judicial Panel on Multidistrict Litigation created a centralised action of In re Google Play Store Antitrust Litigation, No 3:21-md-02981 (‘the MDL Action’) which comprised of:
- The Epic Games v Google complaint (i.e. the US version of the Australian proceedings);
- Two developer class actions which were previously consolidated (Pure Sweat Basketball v Google LLC and Peekya App Services v Google LLC);
- 14 consumer class actions; and
- A complaint made by 37 State Attorneys-General against Google.
Media reports on 1 July 2022 referred to the settlement of one of the anti-trust class actions in the United States with Google, in In re Google Play Store Antitrust litigation on behalf of developer plaintiff with annual sales of $2million or less for a sum of $90millon. As a part of the settlement, Google has agreed to maintain the reduced service fee of 15% on the first $1million in annual revenues and agreed to maintain that reduced fee for at least three years. Google agreed to a number of structure reforms in respect of its Google Play Store including the publication of an annual transparency report. (Washington, July 01, 2022, Globe Newswire)
As a follow on to the Epic Games Australian proceedings, two separate class actions were filed in the Federal Court of Australia on 20 June 2022 alleging anti-competitive conduct by Google in relation to Google Play Store and against Apple in relation to the Apple Store. [See: Brett McDonald v Google LLC & Ors; David Anthony v. Apple Inc. 20 June 2022.]
Disclaimer: This update is not intended to replace obtaining legal advice
Authored by Katarina Klaric, Principal, Stephens Lawyers & Consultants, 20 March 2023.
© 20 March 2023 — Stephens Lawyers & Consultants
For Further Information contact:
Katarina Klaric
Principal
Stephens Lawyers & Consultants
Suite 205, 546 Collins Street
Melbourne VIC 3000
Phone: +61 3 8636 9100
Fax: +61 3 8636 9199
Email: [email protected]
Website: www.stephens.com.au
All Correspondence to:
PO Box 16010
Collins Street West
Melbourne VIC 8007
* This Article is based on a paper presented by Katarina Klaric at the IBA Annual Conference 2022- Miami – session – Around the Table – A taste of hot topics in intellectual property, communications and technology – 2022 Tech and IP Disputes Update.
[1] https://www.accc.gov.au/about-us/australian-competition-and-consumer-commission/our-priorities/compliance-and-enforcement-policy-and-priorities
[2] https://www.oaic.gov.au/about-us/our-regulatory-approach/oaic-priorities-for-regulatory-action-2022-23
[3] ACCC v. Uber B.V [20220 FCA 1466, [100]-[103]
[4] Ibid, [104]-[109]