Peter Kell, Deputy Chairman of the Australian Competition and Consumer Commission (ACCC) delivered the following presentation at the Global Access Partners Workshop on Cloud Computing on 24 June 2011.
Cloud Computing offers clear benefits and opportunities for consumers. However, it will be important for regulators to facilitate appropriate market conduct to ensure that these benefits are achieved. In this context cloud computing poses some new regulatory challenges for all stakeholders to ensure consumers remain adequately protected.
The ACCC will be closely watching key areas of interest as Cloud computing becomes more widespread. The ACCC’s aim in consumer protection regulation is to ensure that consumers can benefit from innovation and competition through minimising the impact of market failures, information problems and rogue traders.
Today I want to briefly highlight three areas where the ACCC will focus its consumer protection efforts in relation to cloud computing:
- unfair and potentially anti-competitive contract terms;
- advertising and marketing practices; and
- cross-jurisdictional complaints resolution and enforcement.
Contract terms
The services offered to consumers in this area are likely to be set out in standard form ‘take it or leave it’ contracts. This is an efficient way of providing such services to many small users. However, given the imbalance in bargaining power in such contracts between the supplier and the consumer, there is a risk of unfair and potentially anti-competitive terms in such market environments. The recent introduction into the national consumer law of prohibitions against unfair contract terms (UCTs) helps to address these issues.
For example, consumers face costs when switching between products or services in many industries. If these costs are unreasonable, lock-in can both harm consumers and inhibit competition. This issue is potentially more significant in a cloud environment, because the data may be very important for consumers.
The ACCC is interested in how the Cloud computing sector will deal with this risk within the terms and conditions of contractual arrangements. For example, how easily will consumers be able to move from one Cloud provider to another? What costs will be involved? How quickly can this occur? What happens to their data- is it retained or safely removed? How this will be appropriately reflected in contract provisions?
In the longer term, high levels of consumer lock-in can only harm the industry. The ACCC will be watching Cloud providers to see whether they can responsibly manage this risk, or whether regulatory intervention is required.
Similarly, other contract terms may also require consideration to ensure this market sector works to the benefit of consumers. For example, in what circumstances will suppliers be able to change the terms of the contract, and what rights will consumers have in these cases? Will there be artificial restrictions on where and how consumers can have complaints dealt with? Under the UCT provisions, if there is not a defensible business rationale for contract terms then suppliers run the risk of breaching the law.
Advertising practices
As Cloud computing in Australia is still in its early stages, and wide-scale adoption is really just getting underway now, the ACCC considers there are both risks and opportunities for the industry in relation to advertising and marketing practices.
As this audience is fully aware, capturing the trust of consumers is vital and this is particularly true in a Cloud context. Trust would be undermined if we saw some of the problematic advertising practices emerge that have taken place in other parts of the communications and ICT sector, which have required ACCC enforcement action.
As with any new technology, product or service, ensuring consumers are fully aware of what they are signing up to is crucial. Unlike some other areas in the telecommunications and computing sectors, Cloud computing service providers have a unique opportunity to adopt and establish best practice from the outset.
Cross jurisdictional enforcement
Cloud computing raises important challenges in relation to cross-jurisdictional matters.
Ensuring consumers have adequate avenues for redress when required must be a priority. Within Australia this may be relatively uncontentious, but as we know Cloud computing does not operate neatly within national borders.
Cloud computing will raise the bar and require a much stronger cooperative effort across jurisdictions to ensure consumers, and the industry, is protected from unscrupulous market elements. When cross jurisdictional enforcement and cooperation is possible, ensuring it is achieved in an efficient and effective manner is equally important.
A supplier offering services to Australian consumers must comply with Australian consumer protection laws. These laws have recently been reformed to provide greater power to regulators and a more consistent approach to consumer protection. However, while this requirement to adhere to Australia law applies to suppliers, it is not always easy to enforce across borders.
The ACCC currently participates in a range of international enforcement fora, including the International Consumer Protection and Enforcement Network and the International Competition Network. These organisations are designed to facilitate international cooperation, including in the area of consumer dispute resolution.
International cooperation in addressing multi-jurisdictional matters is vital in ensuring Australian consumer rights remain adequately protected. The ACCC will be continuing to work to strengthen its existing international ties as well as collaborate domestically with relevant industry and government stakeholders.
Concluding thoughts
The ACCC looks forward to continuing its engagement with industry, consumer organisations and Government in the area of Cloud computing. As we transition to the National Broadband Network Australia will be moving into a new era for telecommunications that will facilitate the delivery of services such as Cloud computing. If Cloud computing is going to be part of that paradigm, then service providers must be on the front foot, aware of and responsive to the potential consumer and competitive pitfalls.
The ACCC see this workshop as an important first step that industry can take. We look forward to working with industry as Cloud computing continues to grow, and I hope that some useful ideas can emerge from our discussions today about the best ways to ensure consumers and small business are treated fairly when taking up the wide range of cloud services that are quickly becoming available.
Peter Kell was appointed a deputy chair of the ACCC in July 2008 for a five-year term. Kell chairs the Adjudication Committee and is a member of the Enforcement Committee. He serves on the Consumer Policy Committee of the Organisation for Economic Cooperation and Development and the International Consumer Protection and Enforcement Network. He is also a member of the Advisory Board of the federal government’s Financial Literacy Foundation.
