The Business Council of Australia (BCA) welcomes the opportunity to make a submission to Treasury's consultation on a new digital competition regime. A well-designed competition regime has the potential to complement the government's plans set out in the Treasurer's five pillar productivity agenda, including harnessing data and digital technology. A strong and innovative digital economy will be integral to increasing productivity across the range of areas tagged for renewed productivity focus. Attracting investment and encouraging innovation will be vital.

The BCA acknowledges the government's plan for a digital competition regime and welcomes the chance to collaborate on its development. However, from a principled perspective, Treasury's proposed model raises several concerns. This BCA submission highlights key shortcomings of the proposal and suggests constructive changes to reduce potential risks.

Policymakers should ensure any competition regulation is properly targeted and designed, and has regard to supporting Australia's opportunity to foster technological progress and increase our attractiveness as a hub for digital innovation. The proposed digital competition regime-if implemented in its current form-would run counter to the government's wider productivity agenda. The proposed regulation is likely to impose prescriptive outcomes without appropriate regard for consumer material benefit and provides highly limited procedural safeguards for  affected companies.

In looking at approaches internationally, there remains doubt about the effectiveness of the EU's Digital Markets Act. The UK regime is difficult to assess as it has been operational for only 56 days at the time of this submission. It is too soon to determine these regimes' effectiveness or whether their benefits outweigh the risks, particularly regarding potential over-regulation and negative productivity impacts.

By contrast, incremental and targeted approaches, such as Japan's, offer a more proven and adaptable model. Japan's method involves implementing narrow, service-specific rules and assessing their effectiveness before expanding regulation. This ensures clarity and minimises industry distortion.

The US has taken a different approach and has not implemented an ex-ante regime and instead utilises its existing laws to address competition issues.

This BCA submission offers principles to underpin a more effective approach to regulation by seeking to sharpen the focus of the regulatory task and design considerations (see Section 2). Crucially, the BCA is concerned that existing laws have not been robustly tested to demonstrate an enforcement weakness that warrants the regulatory intervention proposed.

The BCA submission also responds to key elements of Treasury's proposed model and proposes changes to mitigate the risks posed by Treasury's proposal (see Section 3). Of particular concern is that the current proposal does not include a clear statutory objects clause for the regime and that the proposal lacks reasonable procedural safeguards proportionate to the types of interventions proposed. The reliance on disallowable instruments as a safeguard is a concern noting that such regulations are rarely disallowed in practice.

More generally, the absence of strong procedural safeguards throughout the regime sets a concerning precedent about government's willingness to regulate the redesign of private sector business models based on their size alone rather than on a specific finding of unlawful economic conduct or even a determination that the relevant firm possesses a position of substantial market power (noting the discussion of competition issues in Treasury's proposal paper lacks definition and are merely a 'factor' in the current proposal).

The BCA welcomes the proposal to streamline some obligations with other jurisdictions in an attempt to reduce regulatory burden. However, this will probably not have a meaningful effect if the comparable regime, for example that in the EU, disproportionately diminishes access to innovations and is at the expense of consumer and business benefits.

The BCA represents around 130 of the largest companies operating in Australia. Our members recognise that robust legal and institutional settings underpin a competitive economy and are critical to supporting Australia's prosperity.

Read our full submission here.