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Apple, Google, Meta's Australian legal war points to Big Tech's contractual revamp
23 February 2022 01:42 by Laurel Henning, James Panichi
Meta Platforms fought hard to have an antitrust lawsuit it was facing in a Melbourne court thrown out. The social-media giant’s strategy was to argue that its dispute with local startup Dialogue was purely contractual and, as such, a matter that could only be resolved by a court in Silicon Valley.
The Federal Court of Australia’s judges weren’t buying those arguments. Firstly, they ruled that Australian competition laws trumped any terms of service that Dialogue may have signed up to; secondly, they rejected Meta’s claims that its services were provided in the US, not in Australia.
The decision by the court’s appeal panel came as a relief to Dialogue, with the company seeking to end Meta’s attempts to prevent it from providing its own service, Sked Social, to the users of Facebook and Instagram — platforms owned by Meta.
But the ruling wasn’t a bolt out of the blue. The Dialogue decision was the fourth time in recent months that the Federal Court had rejected attempts by US-based tech giants to shut down local lawsuits by invoking jurisdictional arguments.
In early February, Meta failed in its attempt to extricate itself from a lawsuit brought by Australia’s privacy watchdog over the Cambridge Analytica data breach, with a judge ruling that the platform did indeed “carry on” business in Australia — the definition that allows Australian privacy law to kick in.
Also this month, the court rejected a move by Google to have an Australian competition lawsuit lodged by Epic Games, the company behind the hit videogame Fortnite, moved to California; last July, Epic won the right to have its parallel lawsuit against Apple heard in Australia.
These four rulings suggest that the court’s position on Big Tech’s jurisdictional challenges is solidifying. Lawsuits raising questions under Australian laws — be they competition, consumer or privacy — won’t be dumped on California, no matter how airtight the platforms’ terms of service.
That’s not to say that cases that are purely contractual can’t be transferred to the US in the future — the court rulings have allowed for that possibility. But when contractual arrangements bleed into allegations of market abuse, or consumer harm, then the Australian courts won’t pass the buck.
But why has Big Tech been so determined to fight these jurisdictional battles? And why is the willingness of federal courts to assert the sovereignty of Australian law, despite clearly worded contracts voluntarily signed by the platforms’ users, creating concern in the US?
The answer to this question has two strands.
First, Australian competition lawyers believe the platforms are lodging jurisdictional challenges simply because they can. Big Tech is keen to hammer home the message that legal action against these companies in any jurisdiction can be costly and might not be worth the effort.
But even more important, almost all US-based tech giants have put in place a legal strategy designed to limit damages for breaching contracts with third-party users and to focus all legal action on courthouses in San Jose, California — in the heart of Silicon Valley.
As reported by MLex in January, Google’s revamp of its terms of service with users is designed to cap its own liability for contractual violations at $200, in most cases. Apple, Amazon, Microsoft, Twitter, Yelp, TikTok and Meta have all adopted similar contracts.
These changes have been accompanied by wording on where disputes should be resolved — something designed to avoid the very jurisdictional clashes underway in Australia. The platforms’ hope is that contractual disputes will be seen as just that — disagreements over the terms of a contract, rather than matters to be dealt with under competition, consumer or privacy law.
Google’s terms of service now say that “California law will govern disputes” and that these are to be resolved “exclusively in the federal or state courts of Santa Clara County, California, USA” — a clause that appears to rule out the involvement of foreign courts.
It’s in this context that the rulings of Australian judges need to be read. The Federal Court of Australia’s insistence that local laws override Big Tech’s contracts with users — albeit for a variety of reasons — could pose a threat to the US platforms’ legal strategy; that, in turn, may explain why the platforms are so eager to fight this fight.
The verdicts also raise the prospect of Australia becoming the jurisdiction of choice for global companies wanting to challenge the platforms’ ascendancy — a prospect illustrated by Epic’s lawsuits against Facebook and Google.
The outcome of Dialogue’s lawsuit targeting Meta’s Facebook and Instagram will be key to defining the prospects of third-party companies — businesses that are intermediaries between users and platforms — under Australian competition law.
The Melbourne-based startup owns Sked Social, a social-media management and scheduling tool. Sked helps companies plan and schedule their posts and videos on Instagram and Facebook, a service not provided at a comparable level by the social-media platforms themselves.
Dialogue is alleging that the decision by Meta to deny it access to the platforms was designed to harm Sked's ability to compete with Instagram's Content Publishing software. Dialogue claims Meta breached Australia's 2010 Competition and Consumer Act.
The court action is a do-or-die battle for Dialogue, which for the past year has had to rely on court injunctions to force Meta to allow the company’s employees to use Facebook and Instagram on behalf of their clients.
Meta must now decide whether to challenge the ruling at the appeals panel of the Federal Court, which upheld a trial judge’s decision to deny the social-media giant’s request to shut down the local lawsuit and force Dialogue to pursue the matter in California. An appeal is seen as likely.
But whatever the outcome, the court’s ruling is being seen as a coming of age for platform lawsuits in Australia and is playing out against the backdrop of the influential Digital Platforms Inquiry, completed by the Australian Competition & Consumer Commission, or ACCC, in 2019. The regulator’s follow-up five-year probe of the industry runs through 2025 and is expected to prompt further enforcement.
While previously what happened on the internet was seen as outside Australian regulatory control, the courts’ insistence that the business practices of foreign-based platforms are firmly within the purview of local laws amounts to a significant development.
For its part, the digital platforms inquiry put forward the possibility that local laws could be successfully unleashed on the tech giants. Laws dealing with messaging encryption, “abhorrent” video content and payment for the use of news illustrated the belief in Australia’s legal sovereignty.
War of attrition
Yet the Dialogue lawsuit remains atypical. Unlike the US, Australia doesn’t have a strong tradition of private companies pursuing civil claims under competition law against global giants — if for no other reason than the crippling expense of such lawsuits.
This goes some way to explaining Meta’s assertive legal strategy against Dialogue. Whatever the outcome, the relatively small Melbourne-based company may struggle to go the distance, particularly if the jurisdictional matter is challenged in the High Court. It’s a war of attrition.
Other businesses planning to take on the might of global companies in an Australian court may be discouraged by the fear of retribution — a threat that competition lawyers believe is real. Will you be knocked off the platform for speaking up? How much will it cost you to get a court injunction?
It remains unclear why Epic would choose Australia for its global campaign against app stores; but the company has deep pockets and knows that allowing Australian courts to build up competition case law will, in the long run, benefit other developers and harm tech giants in the process.
So far, things have gone Epic’s way.
On July 9, the Federal Court’s appeals panel overturned a trial judge’s ruling that the lawsuit against Apple should be heard in the US; then, on Feb. 3 this year, the panel again took Epic’s side, ruling to allow the lawsuit against Google to proceed.
Although not directly involved, the ACCC is paying close attention to these legal clashes because they’re based on competition law — an ACCC key enforcement priority, as outlined in the digital platforms’ inquiry.
Notably, the ACCC made an appearance for Apple’s appeal in the Epic lawsuit, making written submissions that argued the case needed to remain in Australia on public-interest grounds.
Class action law firms are also expected to keep a close watch on the lawsuits, given the high number of individuals that may have been affected by Apple and Google’s stranglehold on their app stores.
But even if Epic and Dialogue were to fail, the courts have already resolved a key question. It doesn’t matter if digital platforms have their head offices in Silicon Valley, nor does it matter where their data is stored or whether they have a tightly worded contract in place with clients.
If the lawsuit goes beyond a contractual dispute and touches on Australian competition or privacy law, there’s now a strong precedent for keeping any lawsuit before a local judge.
The Australian courts’ initial success in rejecting Big Tech’s terms of service and asserting their right to have local matters resolved in Australia has been watched in other jurisdictions.
When MLex asked Lina Khan, the chair of the US Federal Trade Commission, about the Australian court rulings, she said that while it was difficult to comment on how things were unfolding in other jurisdictions, institutional reluctance to cede control over cases was significant.
“Overall, it's important for enforcers around the world to be able to assert their law enforcement over their jurisdictions,” Khan said, referring to her recent conversations with outgoing ACCC Chairman Rod Sims.
“As much as these companies have global presence, advancing coordination is paramount,” Khan said, raising as an example the need for close coordination among regulators when grappling with deals that require approval in multiple jurisdictions that are on different timelines.
As to whether Epic’s twin legal challenges targeting Apple and Google will succeed once they are brought to court in Australia, there appears to be little consensus among competition-law practitioners in the country. The same can be said about Dialogue’s lawsuit against Meta.
Some lawyers believe that even if the Epic and Dialogue cases against Apple, Google and Meta were to succeed, that wouldn’t offer comfort to other companies planning to challenge the platforms in an Australian court.
Platform inquiry’s legacy
The lawsuit targeting Meta’s Facebook brought by the Office of the Australian Information Commissioner, or OAIC, over the Cambridge Analytica data breach is being closely watched for the enforcement precedent it may set.
Now that the Federal Court has decided that the lawsuit can proceed in Australia, the question turns to whether Australian laws are strong enough to tackle the other jurisdictional challenges that lie ahead, and whether the notoriously underfunded OAIC is up to the task.
As for Meta, the Australian Cambridge Analytica lawsuit is likely to rankle, given that a similar lawsuit is already underway and could go to trial in California next year.
Meta is now facing the real prospect of having to defend itself for the same alleged violations in multiple jurisdictions around the world — something that will ratchet up pressure on the company and the legal expenses of the case.
Even more significant, though, is the prospect that investigations conducted in Australia and the US will cross-pollinate — as occurred in the recent Google-Android data-location lawsuit, which saw the ACCC and prosecutors in the US state of Arizona sharing information and documents.
Indeed, Australian legal experts believe the Cambridge Analytica lawsuit represents an evolution in the way enforcers are dealing with international challenges that may have once ended up in the too-hard basket. And this may be a cultural legacy of the ACCC’s digital platforms’ inquiry.
“In the mid-teens, say 2014 or 2015, there was as perception by the bureaucracy of government, and probably by regulators, that if it happened on the Internet, then it couldn’t be regulated,” a privacy lawyer told MLex.
“I think the ACCC digital platform inquiry led to a change in perception by governments and regulators as to what the role of government is,” the lawyer said.
But whatever insight may have been gleaned from the digital platforms’ inquiry won’t stop the platforms unleashing their limitless budgets to push back on every new legal avenue that may be explored in an Australian court.
“Litigation is like warfare,” an antitrust lawyer said. “When people are attacked in war, they will respond with whatever means they can.”
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