The ACCC gives
advice to small and medium business selling on online retail
Small and medium business selling on online retail
marketplaces are concerned with fees payable, price setting,
product prominence, sales data and customer data.
The Australian Competition & Consumer Commission (ACCC)
has examined seller concerns and has issued a report:
Interim report No. 4 – General online retail marketplaces,
as part of its Digital platform services enquiry.
In the ACCC Media Release – Concerning issues for
consumers and sellers on online marketplaces, ACCC Chair
Gina Cass-Gottlieb said:
“Online marketplaces have an important role in
connecting Australian consumers and sellers and make up
a growing share of consumer sales. But we are concerned
about their impact on both consumers and third-party
sellers who rely on online marketplaces to reach their
This is a summary of Section 3 of the report, which deals
with the concerns of small and medium businesses selling
online on online retail marketplaces.
Online marketplaces provide significant advantages for
sellers. They provide access to a large number of consumers,
particularly consumers who are actively looking to purchase
Sellers on online retail marketplaces are diverse,
consisting of individuals, small businesses, large
marketplace-only sellers and well-known bricks and mortar
Amazon states that more than 50% of units sold globally
in its online stores are by small and medium businesses.
They display a broad range of products to consumers, such as
books, toys, clothing, sporting goods and camping equipment.
They provide services to sellers such as advertisements.
Online marketplaces are particularly attractive to small
and medium businesses because they provide additional
services such as warehousing and distribution. And they have
much lower setup costs than reaching consumers directly
through a seller’s own website, or via a traditional bricks
and mortar store.
At the same time, online marketplaces derive value from
having a large number of sellers because they are attractive
to consumers due to the wide range and large number of
The ACCC report focusses on the four major online retail
marketplaces in Australia, Amazon Australia, Catch, eBay
Australia and Kogan. In 2020–21, they jointly had total of
$8.4 billion in revenue, an increase of 21 per cent compared
to 2019–20. See this bar chart:
How and why sellers select
an online marketplace to sell on
While many sellers use only one marketplace, sellers with
strong brand recognition and a large number of customers use
multiple online marketplaces to reach different consumers
(“multi-homing”). This is because online marketplaces have
different characteristics and entry requirements and attract
different consumer demographics.
Each marketplace sets fees payable in their terms and
conditions for sellers to access the marketplace. The ACCC
notes that while larger sellers may have some bargaining
power to negotiate the terms of agreement with an online
marketplace, smaller sellers typically do not have this
level of bargaining power which may limit their ability to
Some online marketplaces charge a monthly subscription or
store fee. Sometimes a commission – a per-item sold fee is
also taken. Sellers complain about the limited and delayed
transparency with which online marketplaces set and change
their fees. Specific concerns were raised in relation to
online marketplaces managing payments and automatic
deductions for fees and commissions.
While third-party sellers set the price of the products
they sell, some online marketplaces impose restrictions on
third-party sellers’ ability to set prices., such as price
The ACCC advises it will monitor the prevalence and
effect of these restrictions.
Getting products before
Product prominence – appearing in the highest listed
products on search results or becoming the featured offer or
‘winning the buy box’ (on Amazon and Catch) is crucial to
The ACCC has found that online marketplaces are opaque
and not transparent about how their algorithms operate to
decide how products are displayed to consumers. Each
marketplace has different policies and processes in relation
to how products are displayed and provides different
information to third-party sellers about how their products
can achieve greater prominence on the marketplace.
The ACCC recognises that these online marketplaces, like
other digital platforms, have legitimate incentives to
maintain a degree of opacity over their search algorithms.
Not only does opacity protect the significant investment and
resources in developing the algorithms, but it prevents
sellers and potential competitors from misusing, gaming or
copying the algorithms to their benefit.
The ACCC’s concerns are that any changes to algorithms
are communicated clearly and in a timely manner to sellers
particularly where this relates to product visibility or
charges. The ACCC is also concerned where an online
marketplace’s favouring of its own products means that
products from third-party sellers (which may be more
relevant to the consumer’s search) are given less prominence
without the consumer realising this is the case. It may also
reduce the incentives to third-party sellers to participate
on online marketplaces.
The ACCC looked at ‘Participating in Fulfilment by
Amazon’ and found very strong incentives for using it
compared with products offered by other competing fulfilment
services, such as participation in lucrative Amazon sales
events. The ACCC considers there may be risks to competition
in fulfilment services should Amazon’s market position
Consumer data and control
over the seller-consumer relationship
The online marketplace provides not only the platform for
a consumer and seller to find each other, but also control
over the transfer of money.
Online marketplaces control the data or insights
available to sellers, and do not provide the full extent of
consumer data collected. Even where sellers are provided
with consumer contact details on a per-order basis, sellers
may be prohibited from contacting consumers directly in an
attempt to prevent off-platform transactions from occurring.
The ACCC sees complexities in sharing consumer data with
sellers, such as ‘ownership’ of the consumer relationship,
the prevalence of multichannel listing software and
reservations consumers may have about marketplaces sharing
their data with sellers particularly for direct marketing
The ACCC notes that digital pricing algorithms have
significant advantages over manual application of pricing
rules by reducing labour costs to better compete on price.
The ACCC notes that dynamic pricing algorithms can be
sourced from a variety of places: the seller developing
their own, the seller selecting an in-built pricing
algorithm on an online marketplace or using a third-party
The ACCC considers that these risks are associated with
the use of dynamic pricing algorithms, namely:
algorithmic-assisted collusion, price gouging and the
application of personalised pricing.
‘Algorithmic collusion’ can involve competitors agreeing
to work together and engage in illegal price fixing cartel
conduct, with the purpose, effect or likely effect of
substantially lessening competition in a market.
‘Price gouging’ can involve charging significantly
inflated or unfair prices where demand outweighs supply. The
ACCC notes that this may breach the Australian Consumer Law
of deceptive or misleading conduct about prices.
‘Personalised pricing’ may have the effect of making
consumers better off if they are charged lower prices, but
disadvantage consumers by making them less willing to seek
better offers from alternative suppliers.
When things go wrong
Sellers dissatisfied with the transaction or issues
relating to the marketplace are reliant on the policies and
practices that each marketplace has in mind.
Misleading reviews (fake reviews in particular) can harm
sellers. The ACCC has taken action on fake reviews. The ACCC
notes that some online marketplaces have processes in place
to combat fake reviews and to provide ways for sellers to
report customers to revise inaccurate or unfair feedback.
There are concerns about marketplace specific guarantees
which are imposed on sellers by a marketplace in addition to
the consumer guarantees under the Australian Consumer Law
being geared towards the consumer’s favour.
Marketplaces may also penalise sellers for their lack of
adherence to performance metrics such as cancellation rate,
late shipment rates, and response to consumer queries.
The ACCC considers that dispute resolution mechanisms
should be available to sellers to challenge, or amend,
decisions, in the same way as straightforward and fair
mechanisms are available to consumers. The ACCC also
considers that some unfair contract terms should be made
illegal, not just voidable, to assist small business
sellers, as well as consumer concerns in their interaction
with online marketplaces.
For information about seller compliance with the
Australian Consumer Law see my article
The ACCC Guide to doing business
Marketing Commentary by
What is the Secret Sauce to Selling Successfully on Online
According to the Australia Post 2022 Inside Australia
Online Shopping Ecommerce Industry report, Australian
shoppers spent $62.3 billion online for physical goods in
2021 - an increase of 23.4 per cent over the previous year.
Online commerce represents approximately 19 per cent of
all retail trade in the Australian market. 5.4 million
households buy online each month – an increase of 39 per
cent from 2019.
The market dominance of online marketplaces such as
Amazon, Catch, eBay and Kogan creates a paradox for sellers.
If the seller decides to not sell their products on third
party online marketplaces, they will miss out on the
opportunity to reach millions of potential customers.
If they decide to sell their products on online
marketplaces, they are bound by the constraints, contractual
requirements, and potential risks of each platform. This can
include loss of access to, and control of customer data, and
the very real risk of the platform using the customer and
sales data to develop their own similar products, and then
offering those products to customers at a lower price.
The issue is compounded when the seller does not have
control over how and where their product may be promoted.
The platform can potentially manipulate the algorithm to
preference their own ‘home brand’ product. The ACCC has its
eye on this behaviour, as detailed in the ACCC Digital
Platform Services Inquiry report.
Sellers should develop their own secret sauce to
counter this behaviour including:
- Building and maintaining a high-profile brand
that occupies a unique position in the mind of the
- Creating direct communication channels and
engagement with customers through apps, custom
platforms, social media, and special events
- Investing in product R&D and innovation
including proprietary ingredients and protected
properties such as brand and trademarks
- Investing in digital and online marketing and
developing expertise in Search Engine Optimisation (SEO)
and Search Engine Marketing (SEM) to both attract and
defend market share online
- Curate the range of products available on
online marketplaces and retain selected products for
distribution through owned channels, including
- Monitor online marketplaces for counterfeit
products and ‘home brand’ products being offered by