ACCC warns of ‘dark patterns’ used by tech giants to lock in consumers

The five largest tech giants may be using ‘dark patterns’ to prevent consumers from adopting online services from competitors, the ACCC has warned as it solicits feedback on a new issues paper exploring the companies’ entrance into a diverse range of markets.

Recent years have seen Amazon, Apple, Facebook parent company Meta, Microsoft, and Google parent company Alphabet dramatically expanding the scope of their services, expanding from basic search, productivity, and entertainment options to play in markets as varied as AI, education, health and fitness, financial technology, media streaming, connected home devices, virtual reality, and more.

Although significant investments have fast-tracked development of important new technologies, cross-promotion and bundling risk weakening competition and producing anti-consumer outcomes, the ACCC warned as its issues paper raises concerns that the companies are using anti-competitive strategies to leapfrog between key markets.

“Australian consumers and businesses are increasingly reliant on the products and services offered by digital platforms, so it’s crucial we examine how these companies are expanding their reach,” ACCC chair Gina Cass-Gottlieb said in launching the new investigation – the seventh phase in the agency’s long-running Digital Platform Services Inquiry.

Through 5 April, consumers and businesses can lodge submissions sharing their experiences using digital platform “ecosystems”; their concerns about mass data collection and sharing; how digital giants’ expansion strategies have affected the interoperability of products and services between ecosystems; and whether those practices have “increased consumer lock-in”.

The ACCC is worried that tech giants are locking in consumers using bundling, self-preferencing, tying, and ‘dark patterns’ – user interfaces that are intended to confuse users, manipulate them into taking certain actions, or make it difficult for them to express their preferences or cancel subscriptions.

Dark patterns can exacerbate what the report calls “consumer inertia”, making it so hard for users to switch providers, or integrate services from different providers, that they give in and buy more services from a single provider.

Hoovering up the world’s innovation

Tech giants’ intense rivalry and interest in leading innovation have seen them expanding dramatically in recent years, often dipping into their deep pockets to hoover up smaller innovators.

Apple, for one, has acquired around 40 companies since the beginning of 2017 – giving its products access to innovative capabilities in areas such as computer vision, AI, automation, augmented reality, data analytics, speech technology, autonomous vehicles, virtual reality, and more.

Microsoft has purchased over 60 companies during the same period – including innovators in areas such as productivity, cyber security, IoT, 5G networking, AI, education, and software development as well as major investments like its $11 billion ($US7.5 billion) purchase of software development platform GitHub, $30 billion ($US19.7 billion) acquisition of speech synthesis giant Nuance Communications, and $100 billion ($US68.7 billion) purchase of gaming giant Activision Blizzard.

This year, Microsoft’s $15 billion (US$10 billion) investment in generative AI trailblazer OpenAI has revived interest in its Bing search engine and reshaped the agenda of a software industry that has seen ChatGPT and similar generative AI tools embraced by companies like SalesForce, Slack, Pega, and others.

The amplifying effect of tech giants’ investments will rapidly drive industries to new heights: GlobalData, for one, has predicted that computer vision, generative AI, and robotics applications will drive global AI revenues to $580 billion ($US383 billion) by the end of the decade.

Yet with even the smallest of the five tech giants raking in nearly double the annual sales of Australia’s largest company, BHP Group, the ACCC remains focused on ensuring that industry consolidation doesn’t run roughshod over consumer interests.

“These acquisitions have enabled digital platforms to expand into related markets, often accelerating their entry and expansion,” the issues paper notes, warning that while “new entrants may consider entering by initially offering a complementary or differentiated product…. large providers of digital platform services can replicate their rivals’ innovative features by testing those features with an established user base.”

Increasing horizontal integration across tech giant ecosystems “can provide consumers with a seamless experience that simplifies everyday tasks,” Cass-Gottlieb explained, “but it’s important that competition and consumers are not harmed as digital platforms invest across different sectors and technologies and expand their reach.”