‘Fight the fight themselves’: Aussie start-up Unlockd’s lonely battle against Google
That there’s no love lost between Matt Berriman and Australia’s competition regulator isn’t surprising. It was the beginning of 2019 when the Australian Competition and Consumer Commission began to examine how and why Google kicked Unlockd off its platforms; since then, the founder of the Melbourne-based advertising start-up has been waiting for — even expecting — the enforcement action to begin.
But Berriman has heard nothing but crickets — despite the ACCC’s stated concerns about Big Tech’s often fraught relationship with third-party companies using their platforms. Then, this year, the ACCC quietly shut down its Unlockd investigation, putting an end to any hope that it would pursue Google over the matter, leaving administrators of the now defunct start-up to focus on legal action of their own in the US.
Unlockd founder Matt Berriman.Credit:Simon Schluter
The ACCC’s hard pass on this enforcement opportunity is the most recent setback for a company that had been ready to revolutionise global digital advertising and had attracted $60 million in commitments from high-profile investors led by Lachlan Murdoch. And now, Berriman believes the regulator’s caution in taking on Google could harm the prospects of other Australian tech start-ups.
“For what was a pretty clear case, it was disappointing [the ACCC] took so long and then didn’t take action”, Berriman said in a recent interview, adding that the probe had been a “long, slow and cumbersome process”, despite the antitrust regulator’s wealth of knowledge on how digital platforms can squeeze out rivals.
The ACCC had become a “toothless tiger” whose enforcement timidity will allow Google to “continue to unlawfully destroy or affect businesses … without any repercussions,” Berriman said.
But close observers believe the ACCC’s decision not to get involved in the Unlockd case doesn’t mean the regulator has lost interest in allegations that tech giants — whether Amazon, Google or Meta platforms — may be denying start-ups access to their services in a bid to harm real or potential competitors.
‘Investigation and court proceedings are lengthy and necessarily retrospective, seeking to address harms after they have occurred.’
Gina Cass-Gottlieb, ACCC chair
Instead, the ACCC appears to be keeping its powder dry, allowing for the aggrieved start-ups to file their own court actions and watching how things shake out. This means the ACCC could avoid investing its limited resources in enforcement that may ultimately not be significant enough to put the fear of God into tech giants planning to place nascent start-ups in a headlock.
And if there was any doubt about this enforcement strategy, ACCC chair Gina Cass-Gottlieb used a speech at a conference in Berlin this month to hammer home the point.
“Investigation and court proceedings are lengthy and necessarily retrospective, seeking to address harms after they have occurred”, Cass-Gottlieb said. “To successfully prosecute a case, we often must narrow allegations and ignore broader concerns with conduct. This is particularly problematic in digital platform cases where market power is multifaceted, needs to be assessed across multiple markets and produces consumer as well as competition harms.”
According to some observers, competition enforcement of digital platforms has become a game of chicken. The ACCC appears determined to hold back until it’s certain of getting deterrence bang for its buck, while limiting its lawsuits to privacy-based concerns under consumer law. As Cass-Gottlieb has said, competition cases are simply a lot harder for the ACCC to win.
That’s why attention in Australia is now shifting towards court action involving tech companies claiming to have been treated unfairly — and in violation of competition law — by the platforms.
The move by Unlockd against Google in a US federal court in California, along with the Australian lawsuit filed against Meta by local tech start-up Dialogue Consulting, has now become the pitch on which the competition regulatory game is being played. Unlockd’s claim against Google, alongside Dialogue’s lawsuit targeting both Meta’s Facebook and Instagram platforms, boils down to basic provisions contained in both US and Australian competition law.
Watchdog lurking
Before Google wrote to Berriman in 2018 to announce it was barring Unlockd from its app store, things had been looking up for the Australian start-up. By availing itself of the Google Play store and Google’s AdMob services, it had built a business model around allowing users of handsets using the Android operating system to receive advertising on their locked phone screens, in return for vouchers and other promotional offers.
But just as Unlockd and Berriman had been preparing to go public, Google pulled the plug, saying the company hadn’t met the terms and conditions for access to its app store; despite a successful attempt to obtain an injunction in a UK court, Unlockd was brought to its knees and is now considered unlikely to ever be revived.
Unlockd has never accepted Google’s contractual arguments and is telling the US Northern District Court of California that it was kicked off the platform because the search giant had its own plans to set up an advertising service; Google’s 2020 investment in Indian start-up Glance, which provided the same ad-tech services as Unlockd, was all part of the platform’s masterplan, according to the lawsuit. The case had been facing a Google motion to dismiss on July 14, but just this week that date was pushed back to September.
Meanwhile, Melbourne-based Dialogue was experiencing comparable problems with Meta. The start-up’s Sked Social service had been designed to help companies schedule their social-media postings on both Facebook and Instagram; and, again, things were going very well, until they weren’t.
ACCC chair Gina Cass-Gottlieb.Credit:Michael Quelch
Despite years of dealing successfully with Meta and the Meta-owned Instagram, the platform suddenly changed tack. Citing contractual violations, Meta banned all Dialogue employees from its platforms — a move that could have destroyed the business, had it not been for a Federal Court of Australia injunction forcing Meta to suspend the ban.
In both cases, the competition law logic of the start-up’s claims was clear. Unlockd alleges Google shut it down because the tech giant intended to launch an advertising app of its own; Dialogue claims that Meta, which at the time had no comparable social-media scheduling service, also wanted to sink a future rival. Both cases are predicated on the assumption that the tech giants should operate their platforms as neutral venues on which all players — including the platforms’ parent companies — should compete on an equal footing. Neither Meta nor Google responded to requests for comment.
Dialogue has chosen to pursue the matter in Australia and has already secured something of a breakthrough, with the Federal Court rejecting Meta’s claim that the dispute was a contractual matter that should be resolved in a California arbitration court. The Australian judges appear adamant that any allegation that the 2010 Competition and Consumer law had been violated should be resolved in Australia.
With all antitrust cases involving digital platforms, the ACCC appears to be lurking in the background, contemplating its next move. In the Australian lawsuit brought by Epic Games, the US company behind Fortnite, against what it alleges are Google’s restrictive policies in its App Store, the ACCC reared its head, filing an “amicus” brief against Google’s ultimately unsuccessful attempt to have the case moved to a court in California.
Uphill battle
Both the Unlockd and Dialogue challenges, as well as the lawsuit filed by the better-resourced Epic, can be read as companies feeling forced to take legal action, when Big Tech either decided to flick the switch on their access to the platforms or threatens to do so.
It’s an odd situation for start-ups to find themselves in. On the one hand, they are pitted against the business practices of the tech giants — in Epic’s case, the grievance is with Apple and Google’s app stores; but on the other they still have access to a user base and a profitable business model.
This is where the game of chicken comes into play. The smaller tech companies need to ask themselves whether legal action is worth it — and in the case of both Unlockd and Dialogue, either pushed to the curb entirely or facing closure because of the platforms’ behaviour, the answer is clearly “yes”. But for other companies feeling aggrieved but not facing an existential crisis, keeping their heads down and waiting for either ACCC enforcement or even new tech-focused antitrust legislation may be a preferable option.
As to why Australian tech start-ups would fight these battles in the US, one explanation is that only US courts can provide them with the significant payout they deserve. Unlockd’s administrators, for example, had commenced legal action in both the UK and in Australia’s Federal Court, only to discontinue it and focus on the US, where the start-up’s revenue streams had been greater.
The problem with the ACCC’s wait-and-see approach is that no matter where the civil lawsuits against the platforms are lodged, start-ups taking on the world’s largest and most powerful technology companies face enormous challenges. The platforms play for time wherever possible, relying on seemingly unlimited resources to fight the competition law allegations every step of the way. This could dampen the willingness of cash-strapped start-ups to take on tech giants — something that may ultimately force Cass-Gottlieb to scrap the game of chicken and get directly involved both in the courtroom and through new regulatory measures. The ACCC declined to comment.
Meanwhile, Berriman appears to have given up on the ACCC, saying the antitrust enforcer had earlier indicated to him that it wanted to take action but “baulked at the last moment, [noting] we were using resources in US to pursue civil proceedings”.
“[The ACCC] had more than enough evidence,” Berriman said. “Unfortunately, it appears there were wider considerations other than just the merit of Unlockd’s case at play and they decided to prioritise other matters... It appears they decided to leave it up to us to fight the fight.”
TheAge - 11 Jun 2022
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